The FAA has determined that notice and opportunity for prior public comment hereon are impracticable because these procedures would significantly delay issuance of the approval design and thus delivery of the affected aircraft. In addition, the substance of these special conditions has been subject to the public comment process in several prior instances with no substantive comments received. The FAA, therefore, finds that good cause exists for making these special conditions effective upon issuance.

Interested persons are invited to submit such written data, views, or arguments as they may desire. Communications should identify the regulatory docket or notice number and be submitted in duplicate to the address specified above. All communications received on or before the closing date for comments will be considered by the Administrator. The special conditions may be changed in light of the comments received. All comments received will be available in the Rules Docket for examination by interested persons, both before and after the closing date for comments. A report summarizing each substantive public contact with FAA personnel concerning this rulemaking will be filed in the docket. Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this notice must include a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. CE192.” The postcard will be date stamped and returned to the commenter.

On June 6, 2002, S-TEC Corporation, One S-TEC Way, Mineral Wells Airport, Mineral Wells, Texas 76067, made an application to the FAA for a new Supplemental Type Certificate for the Cessna Model 441 (Conquest) airplanes. The Conquest is currently approved under Type Certificate No. A28CE. The proposed modification incorporates a novel or unusual design feature, such as digital avionics consisting of an EFIS, that is vulnerable to HIRF external to the airplane.

Under the provisions of 14 CFR part 21, § 21.101, S-TEC Corporation must show that the Cessna Model 441 airplanes meets the following provisions, or the applicable regulations in effect on the date of application for the modification to reference airplanes.

The Certification Basis that is incorporated by reference for the Cessna Model 441 airplane is listed under the Type Certificate Data Sheet No. A28CE with the exception of FAR Part 23.1301 as amended by Amendment 23-20; 23.1309, 23.1311, and 23.1321 as amended by Amendment 23-49; and the special conditions adopted by this rulemaking action. Noise requirements are not an issue because there is no change to the engine or aircraft fuselage.

If the Administrator finds that the applicable airworthiness standards do not contain adequate or appropriate safety standards because of novel or unusual design features of an airplane, special conditions are prescribed under the provisions of § 21.16.

Special conditions, as appropriate, as defined in § 11.19, are issued in accordance with § 11.38 after public notice and become a part of the type certification basis in accordance with § 21.101(b)(2).

Special conditions are initially applicable to the model for which they are issued. Should the applicant apply for a supplemental type certificate to modify any other model already included on the same type certificate to incorporate the same novel or unusual design feature, the special conditions would also apply to the other model under the provisions of § 21.101.

S-TEC Corporation plans to incorporate certain novel and unusual design features into an airplane for which the airworthiness standards do not contain adequate or appropriate safety standards for protection from the effects of HIRF. These features include EFIS, which are susceptible to the HIRF environment, that were not envisaged by the existing regulations for this type of airplane.

Protection of Systems from HIRF: Recent advances in technology have given rise to the application in aircraft designs of advanced electrical and electronic systems that perform functions required for continued safe flight and landing. Due to the use of sensitive solid state advanced components in analog and digital electronics circuits, these advanced systems are readily responsive to the transient effects of induced electrical current and voltage caused by the HIRF. The HIRF can degrade electronic systems performance by damaging components or upsetting system functions.

Furthermore, the HIRF environment has undergone a transformation that was not foreseen when the current requirements were developed. Higher energy levels are radiated from transmitters that are used for radar, radio, and television. Also, the number of transmitters has increased significantly. There is also uncertainty concerning the effectiveness of airframe shielding for HIRF. Furthermore, coupling to cockpit-installed equipment through the cockpit window apertures is undefined.

The combined effect of the technological advances in airplane design and the changing environment has resulted in an increased level of vulnerability of electrical and electronic systems required for the continued safe flight and landing of the airplane. Effective measures against the effects of exposure to HIRF must be provided by the design and installation of these systems. The accepted maximum energy levels in which civilian airplane system installations must be capable of operating safely are based on surveys and analysis of existing radio frequency emitters. These special conditions require that the airplane be evaluated under these energy levels for the protection of the electronic system and its associated wiring harness. These external threat levels, which are lower than previous required values, are believed to represent the worst case to which an airplane would be exposed in the operating environment.

These special conditions require qualification of systems that perform critical functions, as installed in aircraft, to the defined HIRF environment in paragraph 1 or, as an option to a fixed value using laboratory tests, in paragraph 2, as follows:

(1) The applicant may demonstrate that the operation and operational capability of the installed electrical and electronic systems that perform critical functions are not adversely affected when the aircraft is exposed to the HIRF environment defined below:

(2) The applicant may demonstrate by a system test and analysis that the electrical and electronic systems that perform critical functions can withstand a minimum threat of 100 volts per meter peak electrical field strength from 10 kHz to 18 GHz. When using this test to show compliance with the HIRF requirements, no credit is given for signal attenuation due to installation.

A preliminary hazard analysis must be performed by the applicant, for approval by the FAA, to identify either electrical or electronic systems that perform critical functions. The term “critical” means those functions whose failure would contribute to, or cause, a failure condition that would prevent the continued safe flight and landing of the airplane. The systems identified by the hazard analysis that perform critical functions are candidates for the application of HIRF requirements. A system may perform both critical and non-critical functions. Primary electronic flight display systems, and their associated components, perform critical functions such as attitude, altitude, and airspeed indication. The HIRF requirements apply only to critical functions.

Compliance with HIRF requirements may be demonstrated either by tests, analysis, models, similarity with existing systems, or by any combination of these. Service experience alone is not acceptable since normal flight operations may not include an exposure to the HIRF environment. Reliance on a system with similar design features for redundancy as a means of protection against the effects of external HIRF is generally insufficient since all elements of a redundant system are likely to be exposed to the fields concurrently.

As discussed above, these special conditions are applicable to the Cessna Model 441 airplanes. Should S-TEC Corporation apply at a later date for a supplemental type certificate to modify any other model on the same type certificate to incorporate the same novel or unusual design feature, the special conditions would apply to that model as well under the provisions of § 21.101.

This action affects only certain novel or unusual design features on one model of airplane. It is not a rule of general applicability and affects only the applicant who applied to the FAA for approval of these features on the airplane.

The substance of these special conditions has been subjected to the notice and comment period in several prior instances and has been derived without substantive change from those previously issued. It is unlikely that prior public comment would result in a significant change from the substance contained herein. For this reason, and because a delay would significantly affect the certification of the airplane, which is imminent, the FAA has determined that prior public notice and comment are unnecessary and impracticable, and good cause exists for adopting these special conditions upon issuance. The FAA is requesting comments to allow interested persons to submit views that may not have been submitted in response to the prior opportunities for comment described above.

On October 17, 2002, the FAA issued Emergency AD 2002-21-51 for the specified ECF helicopters, which requires checking the chip detector for metal particles and the MGB oil-sight glass for dark oil and taking an oil sample if dark oil is observed. If you find metal particles on the chip detector or if an oil sample confirms that the oil is dark or dark purple, the AD requires further inspection of the pump and, if necessary, replacing the MGB and the pump with an airworthy MGB and pump. Also, the AD requires that a different MGB or pump with any TIS must meet the requirements of this AD before being installed. The AD was prompted by four reports of malfunction of the MGB pump. The bearings of the driven pinion inside the pump can deteriorate resulting in pump failure and loss of oil pressure in the MGB. This condition, if not corrected, could result in seizure of the MGB, loss of drive to an engine and main rotor, and subsequent loss of control of the helicopter.

The FAA has reviewed ECF Alert Telex No. 05.00.40, dated June 6, 2002 (Telex), which describes procedures for inspecting the MGB magnetic plug for sludge and the MGB for very dark oil and inspecting the pump. The Telex specifies overhauling the MGB if you find any of the following in the pump: Bearing crank pin play, bronze bushing out-of-round, offset of the driven gear pinion, certain wear, or metal chips. Pending the results of various investigations and to prevent loss of the drive train of the main transmission linkage for one or both engines, ECF specifies these procedures for all pumps.

The Direction Generale De L'Aviation Civile (DGAC), the airworthiness authority for France, notified the FAA that an unsafe condition may exist on these helicopter models. The DGAC advises of four reports of pump deterioration. The DGAC advises that, in time, the insufficiently lubricated power transmission assembly deteriorates resulting in loss of the drive train for one or both engines (deterioration of the combiner gearbox gears). The DGAC classified the Telex as mandatory and issued AD No. 2002-331-071(A) dated July 10, 2002, to ensure the continued airworthiness of these helicopters.

This unsafe condition is likely to exist or develop on other helicopters of the same type design. Therefore, this AD requires the following:

• Before the first flight of the day and at intervals not to exceed 10 hours TIS, check the chip detector for metal particles and the MGB oil-sight glass for dark oil.

• If you find metal particles on the chip detector, before further flight, inspect the pump.

• If you observe dark oil through the MGB oil sight glass, before further flight, take an oil sample to confirm that the oil is dark or dark purple.

• If the oil sample is dark or dark purple, before further flight, inspect the pump, part number 355A32-0700-00, -01, or -01M.

• If you find crank pin play, out-of-round bronze bushing, offset of the driven gear pinion, metal chips, or certain wear, replace the MGB and the pump with an airworthy MGB and pump before further flight.

• A different MGB or pump with any TIS must meet the requirements of this AD before installation.

An owner/operator (pilot) may perform the visual checks for metal particles on the magnetic chip detector plug and for dark oil in the MGB oil-sight glass and must enter compliance with those requirements into the helicopter maintenance records in accordance with 14 CFR 43.11 and 91.417(a)(2)(v). A pilot may perform these checks because they only involve visual checks for magnetic particles on the magnetic plug, which can be removed without the use of tools, and the MGB oil-sight glass for dark-colored oil and can be performed equally well by a pilot or a mechanic.

The short compliance time involved is required because the previously described critical unsafe condition can adversely affect the controllability and structural integrity of the helicopter. The checks of the MGB and pump are required in a very short period of time, specifically, before the first flight of each day and at intervals not to exceed 10 hours TIS. Also, if necessary, the inspections and replacement of the pump and MGB are required before further flight. Therefore, this AD must be issued immediately.

Since it was found that immediate corrective action was required, notice and opportunity for prior public comment thereon were impracticable and contrary to the public interest, and good cause existed to make the AD effective immediately by individual letters issued on October 17, 2002, to all known U.S. owners and operators of the specified ECF helicopters. These conditions still exist, and the AD is hereby published in the Federal Register as an amendment to 14 CFR 39.13 to make it effective to all persons.

The FAA estimates that this AD will affect approximately 105 helicopters of U.S. registry. The FAA also estimates that it will take approximately 10 minutes to check the magnetic plug and the MGB oil sight glass, 4 work hours to remove the MGB and pump, 1 work hour to inspect the pump, and 4 work hours to install a serviceable MGB and pump. The average labor rate is $60 per work hour. Required parts will cost approximately $4000 for an overhauled pump and up to $60,000 for an overhauled MGB per helicopter. The manufacturer has represented to the FAA that the standard warranty applies if failure occurs within the first 2 years and operating time is less than 1000 hours. Based on these figures, the FAA estimates a total cost impact of the AD on U.S. operators to be $337,540 per year, assuming replacement of one MGB and pump on one helicopter per year and a daily check on all helicopters for 260 days per year.

Although this action is in the form of a final rule that involves requirements affecting flight safety and, thus, was not preceded by notice and an opportunity for public comment, comments are invited on this rule. Interested persons are invited to comment on this rule by submitting such written data, views, or arguments as they may desire. Communications should identify the Rules Docket number and be submitted in triplicate to the address specified under the caption ADDRESSES . All communications received on or before the closing date for comments will be considered, and this rule may be amended in light of the comments received. Factual information that supports the commenter's ideas and suggestions is extremely helpful in evaluating the effectiveness of the AD action and determining whether additional rulemaking action would be needed.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify the rule. All comments submitted will be available in the Rules Docket for examination by interested persons. A report that summarizes each FAA-public contact concerned with the substance of this AD will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their mailed comments submitted in response to this rule must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. 2002-SW-48-AD.” The postcard will be date stamped and returned to the commenter.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

The FAA has determined that this regulation is an emergency regulation that must be issued immediately to correct an unsafe condition in aircraft, and that it is not a “significant regulatory action” under Executive Order 12866. It has been determined further that this action involves an emergency regulation under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979). If it is determined that this emergency regulation otherwise would be significant under DOT Regulatory Policies and Procedures, a final regulatory evaluation will be prepared and placed in the Rules Docket. A copy of it, if filed, may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

A proposal to amend 14 CFR part 39 to include an AD for ECF Model AS332C, AS332L, AS332L1, SA330F, SA330G, and SA330J helicopters, was published in the Federal Register on July 19, 2002 (67 FR 47488). That action proposed to require the following inspections initially, repetitively, and before installing any tail rotor gearbox that has been previously installed on another helicopter and has not been inspected:

• Inspect the tail rotor spider for end play. Remove the change rod bearing if the tail rotor spider is not within allowable tolerances.

• Inspect each bearing for spalling, friction, grinding, damaged bearing sealing flanges, overheating at the bearing inner and outer races and the flanges, deposits of corrosion, and shearing or wear marks on the lockwasher, and remove any unairworthy bearing.

• If a bearing is removed, before replacing the bearing, inspect the change rod for visible wear marks or scoring on the bearing journal circumference. If wear marks or circular scoring is found, repair or replace the bearing housing.

The Direction Generale De L'Aviation Civile (DGAC), the airworthiness authority for France, notified the FAA that an unsafe condition may exist on ECF Model AS332C, AS332C1, AS332L, AS332L1, SA330F, SA330G, and SA330J helicopters. The DGAC advises that the pitch change rod bearing seized on a Model SA330 helicopter.

ECF has issued Eurocopter France Alert Service Bulletin (ASB) Nos. 05.81, Revision 2, and 05.00.29, Revision 3, both dated January 18, 2001, which specify modifying the operational and bearing check procedure for the change rod equipped with bearing, part number (P/N) 330A33-9903-20. The DGAC classified ASB No. 05.00.29, Revision 3, dated January 18, 2001, as mandatory and issued AD No. 1990-230-041(A) R4, dated February 21, 2001, to ensure the continued airworthiness of the ECF Model AS332 helicopters in France.

Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were received on the proposal or the FAA's determination of the cost to the public. The FAA has determined that air safety and the public interest require the adoption of the rule as proposed.

The FAA estimates that 3 helicopters of U.S. registry will be affected by this AD, that it will take approximately 4 work hours per helicopter to inspect and replace a bearing, and that the average labor rate is $60 per work hour. Required parts will cost approximately $120 per helicopter. Based on these figures, the total cost impact of the AD on U.S. operators is estimated to be $1,080, assuming one bearing is replaced on each helicopter.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (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) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

The Civil Aviation Authority (CAA), which is the airworthiness authority for the United Kingdom (UK), notified the FAA that an unsafe condition may exist on BAe/SNIAS Concorde Type 1 airplanes with Olympus 593 Mk. 610-14-28 turbojet engines installed. The CAA advises that BAe/SNIAS Concorde Type 1 airplanes that have been modified in accordance with Airbus Concorde service bulletins No.'s SST 57-078, SST 57-079, SST 57-080, and SST 57-082, have undergone mandatory modification to install Viton and Kevlar liner materials to the fuel tanks. This mandatory modification action resulted from an airplane crash. The modification is necessary, and will minimize a fuel leak from the airframe in case of puncture of the airframe skin. After one of the airplanes re-entered service, a Kevlar fiber was found in one of the engine fuel systems during fuel filter inspection. This fiber came from one of the modified fuel tanks, and was positioned partially through the fuel filter mesh. The CAA and RR advise that additional kevlar fibers could wash away from tank liners into all four engine fuel systems on the airplane. That condition, if not corrected, could cause contamination of any or all of the four airplane engine fuel control units, causing power loss or one or more engines to shutdown.

RR has issued Olympus 593 Mandatory Service Bulletin (MSB) No. OL.593-73-9093-109, Revision 1, dated November 23, 2001, that specifies instructions for initial and repetitive engine fuel filter inspections and fuel sample analysis. The CAA classified this service bulletin as mandatory and issued AD 004-11-2001 in order to ensure the airworthiness of these RR engines in the UK.

This engine model is manufactured in the UK and is type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the CAA has kept the FAA informed of the situation described above. The FAA has examined the findings of the CAA, reviewed all available information, and determined that AD action is necessary for products of this type design that are certificated for operation in the United States.

Although none of these affected engines are used on any airplanes that are registered in the United States, the possibility exists that these engines could be used on airplanes that are registered in the United States in the future. Since an unsafe condition has been identified that is likely to exist or develop on other RR Olympus 593 Mk. 610-14-28 turbojet engines of the same type design, this AD is being issued to prevent contamination of any or all of the four airplane engine fuel control units, causing power loss or one or more engines to shutdown. This AD requires initial and repetitive engine fuel filter inspections and fuel sample analysis. The actions must be done in accordance with the service bulletin described previously.

Since there are currently no domestic operators of this engine model, notice and opportunity for prior public comment are unnecessary. Therefore, a situation exists that allows the immediate adoption of this regulation.

Although this action is in the form of a final rule that involves requirements affecting flight safety and, thus, was not preceded by notice and an opportunity for public comment, comments are invited on this rule. Interested persons are invited to comment on this rule by submitting such written data, views, or arguments as they may desire. Communications should identify the Rules Docket number and be submitted in triplicate to the address specified under the caption ADDRESSES. All communications received on or before the closing date for comments will be considered, and this rule may be amended in light of the comments received. Factual information that supports the commenter's ideas and suggestions is extremely helpful in evaluating the effectiveness of the AD action and determining whether additional rulemaking action would be needed.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify the rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report that summarizes each FAA-public contact concerned with the substance of this AD will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this action must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2002-NE-30-AD.” The postcard will be date stamped and returned to the commenter.

This final rule does not have federalism implications, as defined in Executive Order 13132, because it would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, the FAA has not consulted with state authorities prior to publication of this final rule.

The FAA has determined that this regulation is an emergency regulation that must be issued immediately to correct an unsafe condition in aircraft, and is not a “significant regulatory action” under Executive Order 12866. It has been determined further that this action involves an emergency regulation under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979). If it is determined that this emergency regulation otherwise would be significant under DOT Regulatory Policies and Procedures, a final regulatory evaluation will be prepared and placed in the Rules Docket. A copy of it, if filed, may be obtained from the Rules Docket at the location provided under the caption “ADDRESSES.”

We published proposed regulatory revisions on August 29, 2002 (67 FR 55375). We received a letter from one commenter. The commenter stated that a definition for “permanent resident” is probably unnecessary but that, if there must be a definition, it should afford greater flexibility, particularly with respect to the 183 day per year residency requirement.

The commenter also pointed out that management employees at program companies who are responsible for administrative, sales and marketing activities are frequently required to travel outside the insular possessions and, therefore, may not be able to meet the 183 day residency requirement even though they permanently reside in the insular possessions. The Departments find this argument unpersuasive. It has been the Departments' experience in administering the program over the years that most program companies have related companies based in the United States which handle almost all of their sales and marketing functions. Indeed, we are aware that most managers in the insular possessions do not go to the United States even once a year. When they do come to the United States, we understand that few, if any, spend more than two weeks a year away from the insular possessions because of their primary responsibility to oversee day-to-day manufacturing operations, do related paperwork and make shipments. We are also aware that people who handle sales and marketing of the watches and jewelry have appropriately been from related companies located in the United States, because that is where the sales activity takes place.

The commenter also stated that the 183 day residency requirement could result in denial of program benefits if an employee moved permanently to the insular possessions with less than six months left in the calendar year; if the employee has been a lifelong resident and leaves or retires or dies prior to July; or if the employee quits or is fired and moves away from the insular possession after less than six months in the insular possession. Although the commenter's hypothetical scenarios could occur, we believe they reflect rare and exceptional circumstances. It is our opinion that rules having general applicability are most firmly grounded in, and should reflect an awareness of, the usual and unexceptional, not the exceptional. Were such hypothetical exceptions to occur, watch and jewelry companies may avail themselves of the Departments' appeal procedures which are provided for in 19 CFR 303.13 and 303.21. These appeal procedures are specifically designed to accommodate such unusual circumstances. As in the past, we will continue to give due consideration to any such appeals for relief in an expeditious manner in order to avoid inequitable outcomes.

In summary, we would like to point out that the vast majority of employees in the insular possessions watch and jewelry program have only one residence and work in the insular possessions for over 183 days a year. This rule merely clarifies the eligibility requirements for the few who have one residence in the insular possessions and one or more residences outside the insular possessions. The regulation is nothing more than a codification of the Departments' longstanding practice. The codification is necessary because of several recent inquiries and challenges regarding the Departments' practice in administering the “permanent resident” requirement. The six months (183 day) residency requirement has been a matter of administrative practice since the beginning of the program in 1967 and was more formally included in the Annual Application (Form ITA-334P) in 1982. This regulation is intended to clarify the term “permanent resident” in order to make the Departments” practice more predictable and less open to ambiguous interpretation.

Accordingly, we are adopting the proposed new definition in final form. The insular possessions watch industry provision in Sec. 110 of Pub. L. No. 97-446 (96 Stat. 2331) (1983), as amended by Sec. 602 of Pub. L. No. 103-465 (108 Stat. 4991) (1994); additional U.S. Note 5 to chapter 91 of the Harmonized Tariff Schedule of the United States (“HTSUS”), as amended by Pub. L. 94-241 (90 Stat. 263)(1976) requires the Secretary of Commerce and the Secretary of the Interior, acting jointly, to establish a limit on the quantity of watches and watch movements which may be entered free of duty during each calendar year. The law also requires the Secretaries to establish the shares of this limited quantity which may be entered from the Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands (“CNMI”). After the Departments have verified the data submitted on the annual application (Form ITA-334P), the producers' duty-exemption allocations are calculated from the territorial share in accordance with 15 CFR 303.14 and each producer is issued a duty-exemption license. The law further requires the Secretaries to issue duty-refund certificates to each territorial watch and watch movement producer based on the company's duty-free shipments and creditable wages paid during the previous calendar year.

Pub. L. 106-36 (113 Stat. 127) (1999) authorizes the issuance of a duty-refund certificate to each territorial jewelry producer for any article of jewelry provided for in heading 7113 of the HTSUS which is the product of any such territory. The value of the certificate is based on creditable wages paid and duty-free units shipped into the United States during the previous calendar year. Although the law specifically mentions the U.S. Virgin Islands, Guam and American Samoa, the issuance of the duty-refund certificate would also apply to the CNMI due to the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (Pub. L. 94-241), which states that goods from the CNMI are entitled to the same tariff treatment as imports from Guam. See also 19 CFR 7.2(a). In order to be considered a product of such territories, the jewelry must meet the U.S. Customs Service substantial transformation requirements (the jewelry must become a new and different article of commerce as a result of production or manufacture performed in the territory). To receive duty-free treatment, the jewelry must also satisfy the requirements of General Note 3(a)(iv) of the HTSUS and applicable Customs Regulations (19 CFR 7.3).

We amend Subpart A § 303.2(a) by adding paragraph (a)(16) and Subpart B § 303.16(a) by adding paragraph (a)(11) to provide a definition for “permanent resident” in order to clarify the meaning of the term solely for purposes of the insular possessions watch and jewelry program. The program was designed to spur local employment by giving producers benefits based on creditable wages paid to local people who were permanently domiciled in the insular possessions. Therefore, the Annual Application (Form ITA-334P) has always required each applicant to state the wages paid to employees who did not reside and work in the territory for at least six months during the calendar year so that the wages paid to non-residents could be deducted from the total wages before the creditable wages benefits were calculated. The program was not designed to give benefits based on creditable wages paid to program owners, shareholders or employees who are not domiciled in the insular possessions. The definition continues to provide producers with benefits based on creditable wages including the creditable wages paid to program workers who meet the permanent resident criteria which require a person with one or more residences outside the insular possessions to maintain his or her domicile in the insular possessions, to reside ( i.e. , be physically present for at least 183 days per year) and work in the territory at a program company, and to maintain his or her principal office for day-to-day work in the insular possessions. It is the responsibility of the party to provide documentation for the 183 day claim, if it is requested by the Departments. There will continue to be no benefits based on wages paid to persons who do not meet these permanent resident criteria.

Regulatory Flexibility Act. In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. , the Chief Counsel for Regulation at the Department of Commerce has certified to the Chief Counsel for Advocacy, Small Business Administration, that the rule will not have a significant economic impact on a substantial number of small entities. The factual basis for this certification was published with the proposed rule. No comments were received regarding the economic impact of this final rule. As a result, no final regulatory flexibility analysis was prepared.

Paperwork Reduction Act. This rulemaking does not involve new collection-of-information requirements subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995. Collection activities are currently approved by the Office of Management and Budget under control numbers 0625-0040 and 0625-0134.

Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information unless it displays a currently valid OMB Control Number.

E.O. 12866. It has been determined that this rulemaking is not significant for purposes of Executive Order 12866.

In a Notice and Order issued in 1997 (the “1997 Order”), the Commission, among other things, authorized NFA to process: (1) Notices of eligibility for exclusion for certain otherwise regulated persons from the definition of CPO, pursuant to Commission Rule 4.5;  1 (2) notices of claim for exemption from certain part 4 requirements with respect to commodity pools and CTAs whose participants or clients are qualified eligible persons, pursuant to Commission Rule 4.7; (3) claims of exemption from certain part 4 requirements for CPOs with respect to pools that principally trade securities, pursuant to Commission Rule 4.12(b); (4) statements of exemption from registration as a CPO, pursuant to Commission Rule 4.13; and (5) notices of exemption from registration as a CTA for certain persons registered as an investment adviser, pursuant to Rule 4.14(a)(8). 2 As part of the 1997 Order, the Commission also authorized NFA to receive and review Disclosure Documents required to be filed with the Commission by CPOs, pursuant to Commission Rule 4.26(d), with regard to “privately offered”  3 commodity pools, and CTAs, pursuant to Commission Rule 4.36(d). 4

In a separate notice published elsewhere today in the Federal Register , the Commission is authorizing NFA, with regard to commodity pool annual financial reports for fiscal years ending on December 31, 2002, and thereafter, to, among other things: (1) Rceive and review annual financial reports required to be filed by CPOs pursuant to Commission Rules 4.7(b)(3) and 4.22(c); (2) receive and grant or deny applications filed pursuant to Commission Rule 4.22(f)(1) for extensions of time to distribute annual financial reports; and (3) process notices of claims of extension of time to distribute and file annual financial reports filed pursuant to Commission Rule 4.22(f)(2).

In the 1997 notice and order and the notice and order published elsewhere in the Federal Register today, the Commission noted that NFA Compliance Rule 2-13  5 requires NFA members to file with NFA copies of any documents required to be filed with the Commission pursuant to part 4 of the Commission's Rules. Moreover, certain of the Commission rules that are the subject of the orders explicitly require that the document be filed with both NFA and the Commission. 6 As a result of the Commission authorizations, it is no longer necessary for the Commission to receive copies of these documents. As discussed more fully in the notice published elsewhere today in the Federal Register , the Commission will have immediate electronic access to all required pertinent information contained in these documents. Moreover, if the Commission or Commission staff requires a hard copy of any of the subject documents, NFA will make such copies available within 24 hours. Accordingly, it is not necessary for the Commission to impose upon the persons filing these documents the burden and cost of having to file the documents with both NFA and the Commission. The Commission is, therefore, amending the subject rules to make clear that the required documents need only be filed with NFA and need not also be filed with the Commission. 7

Generally, the amendments being adopted herein are simply removing the phrase “the Commission” and, where appropriate, adding in its place “the National Futures Association.”  8 In the 1997 Order, the Commission authorized NFA to review Disclosure Documents that CPOs are required to file, pursuant to Commission Rule 4.26(d), with regard to only those Disclosure Documents filed for “privately offered” pools. The Commission, therefore, continues to receive and review Disclosure Documents for pools that are not “privately offered.” Accordingly, Rule 4.26(d) is being amended by adding paragraph (d)(3) to make clear that Disclosure Documents for pools that are not “privately offered” must be filed with the Commission, as well as any subsequent amendments to such Disclosure Documents.

The amendments adopted by the Commission herein shall be effective January 1, 2003, except for the amendments to Commission Rules 4.7(b)(3) and 4.22, which involve the annual financial reports of commodity pools and extensions of time for filing such reports. As discussed in the notice published elsewhere today in the Federal Register , in order to avoid disruption of outstanding reviews of annual financial reports, this authorization is effective only with regard to commodity pool annual financial reports for fiscal years ending on December 31, 2002, and thereafter. Accordingly, the amendments to Rules 4.7(b)(3) and 4.22 are similarly effective only with regard to commodity pool annual financial reports for fiscal years ending on December 31, 2002, and thereafter. CPOs, therefore, must continue to file annual financial reports and extensions of time for such reports with both the Commission and NFA regarding any commodity pool annual financial reports for fiscal years ending prior to December 31, 2002.

The Paperwork Reduction Act of 1995 (“PRA”)  9 imposes certain requirements on federal agencies (including the Commission) in connection with their conducting or sponsoring any collection of information as defined by the PRA. The rule amendments do not require a new collection of information on the part of any entities subject to the proposed rule amendments. Accordingly, for purposes of the PRA, the Commission certifies that these rule amendments will not impose any new reporting or recordkeeping requirements.

Section 15(a) of the Act requires the Commission to consider the costs and benefits of its action before issuing a new regulation under the Act. By its terms, sction 15(a) does not require the Commission to quantify the costs and benefits of a new regulation or to determine whether the benefits of the proposed regulation outweigh its costs. Rather, section 15(a) simply requires the Commission to “consider the costs and benefits” of its action.

Section 15(a) further specifies that costs and benefits shall be evaluated in light of five broad areas of market and public concern: Protection of market participants and the public; efficiency, competitiveness, and financial integrity of futures markets; price discovery; sound risk management practices; and other public interest considerations. Accordingly, the Commission could in its discretion give greater weight to any one of the five enumerated areas and could in its discretion determine that, notwithstanding its costs, a particular rule was necessary or appropriate to protect the public interest or to effectuate any of the provisions or to accomplish any of the purposes of the Act.

These amendments are intended to minimize the filing burdens imposed upon CPOs and CTAs by making clear that the subject documents need only be filed with NFA and not also the Commission. The Commission is considering the costs and benefits of these rules in light of the specific provisions of section 15(a) of the Act:

1. Protection of market participants and the public. While the amendments are expected to lessen the filing burdens imposed upon CPOS and CTAs, they do not reduce the type of information and documents that must be provided to customers of CPOs and CTAs. Moreover, these documents will continue to be reviewed for compliance with the Act and Commission Rules. Accordingly, the amendments being adopted herein should have no effect on the Commission's ability to protect market participants and the public.

2. Efficiency and competition. The amendments, by requiring that the subject documents need only be filed with NFA and not also the Commission, should increase the efficiency with which CPOs and CTAs comply with the applicable regulations.

3. Financial integrity of futures markets and price discovery. The amendments should have no effect, from the standpoint of imposing costs or creating benefits, on the financial integrity or price discovery function of the futures and options markets.

4. Sound risk management practices. The amendments being adopted herein should have no effect on the risk management practices of the futures and options industry.

5. Other public interest considerations. The amendments should make compliance with the applicable Commission rules more efficient without imposing any costs to the regulatory oversight of commodity registrants.

After considering these factors, the Commission has determined to adopt the amendments discussed above.

The Commission has determined that the amendments discussed herein relate solely to agency organization, procedure, and practice. Accordingly, the provisions of the Administrative Procedure Act that generally require notice of proposed rulemaking and that provide other opportunities for public participation are not applicable. 10 The Commission further finds that, because the amendments relieve a restriction as to the required filing of documents and the amendments have no adverse effect upon a member of the public, there is good cause to make them effective less than thirty days after publication in the Federal Register. 11

We re-examined the “large position rules”  1 and on July 31, 2002, published proposed amendments to the rules that would improve the information available to Treasury to better understand the causes of market shortages in certain Treasury securities.  2 In this notice, we first provide background on the rules and why we are changing them. Next we discuss the public comments we received in response to the proposed rulemaking, and then we describe the final amendments. As explained below, we are adopting the proposed changes with one minor clarification.

In response to short squeezes in two-year Treasury notes that occurred in the government securities market in 1990-1991, Congress included in the GSAA  3 a provision granting Treasury new authority to prescribe rules requiring any person or entity holding, maintaining, or controlling large positions in to-be-issued or recently-issued Treasury securities to keep records and, when requested by Treasury, to file reports of such large positions. The provision was intended to improve the information available to Treasury, the Federal Reserve Bank of New York (as Treasury's agent), and the Securities and Exchange Commission (referred to as “regulators” in this document) regarding very large positions in Treasury securities held by market participants and to ensure that regulators have the tools necessary to understand unusual conditions in the Treasury securities market.

The rules provide for an “on-demand” reporting system rather than a regular, ongoing system of reporting. 4 Large position reports must be filed with the Federal Reserve Bank of New York (“FRBNY”) in response to a notice from us requesting large position information on a specific issue of a Treasury security by entities with positions that equal or exceed the reporting threshold specified in the notice (currently not less than $2 billion). The notice is in the form of a press release we issue and subsequently publish in the Federal Register . We also provide the press release to major news and financial publications and wire services for dissemination. An electronic mailing list for notification of calls for large position reports that was implemented in 1998 is also available at Public Debt's website at the address provided earlier in this rule. This provides market participants with information about calls for large position reports in the most timely and efficient manner. The reports must be received by the FRBNY before noon Eastern time on the fourth business day after the issuance of the Treasury press release calling for large position information.

A “reportable position” is the sum of the net trading position, the gross financing position and the net fails position in a specified issue of a Treasury security collectively controlled by a reporting entity. 5 All positions are required to be reported at par value on a trade date basis.

The recordkeeping requirements provide that any person or entity controlling at least a $2 billion position in a specific Treasury security must maintain and preserve certain records that enable the entity to compile, aggregate and report large position information. 6

Treasury's large position recordkeeping and reporting rules apply to all persons and entities, foreign and domestic, that control a reportable position in a Treasury security, such as: government securities brokers and dealers; registered investment companies; registered investment advisers; custodians, including depository institutions, that exercise investment discretion; hedge funds; pension funds; insurance companies; and foreign affiliates of U.S. entities. 7 The broad application of the rule to include both foreign and domestic entities is consistent with the statutory purpose of the GSAA. 8

We reiterate that large positions are not inherently harmful, and that there is no presumption of manipulative or illegal intent on the part of the controlling entity merely because its position is large enough to be subject to Treasury's rules.

Since the rules became effective in 1997, we have conducted annual calls for reports to test the accuracy and reliability of large position reporting systems. These tests have given us valuable experience and insight as we consider how to improve the information provided to regulators. This experience, in addition to our ongoing need to take into account the liquidity and efficiency of the Treasury securities market, caused us to re-examine the rules and issue a proposed rulemaking on July 31, 2002. 9 The modifications that were proposed reflected our continuing need for the ability to obtain useful information, while minimizing the costs and burdens on market participants.

The proposed rulemaking requested public comment on changes to the large position rules that would require:

• Separate reporting of the par amount of each of the five components of the “net trading position;”

• Separate reporting of the total par amount of securities received through reverse repurchase agreements by maturity classification in the “gross financing position” ( i.e. , either “overnight and open” or “term”);

• Separate reporting in the current memorandum item of the total par amount of securities delivered through repurchase agreements by maturity classification ( i.e. , either “overnight and open” or “term”);

• Reporting of the amount of “fails to deliver” in a new memorandum item; and

• Elimination of the optional exclusion in the calculation of the “gross financing position” for the amount of securities received through certain financing transactions. 10

We received one comment letter in response to the proposed rulemaking, from The Bond Market Association (TBMA). 11 Overall, TBMA was supportive of the proposed rule. The commenter noted that more detailed reporting of the net trading and gross financing positions would require many reporting entities to reconfigure their internal systems used to generate large position reports, thus increasing compliance costs. However, TBMA deemed the modifications appropriate because they should improve the depth of information available to Treasury and other regulators thereby enhancing transparency and enabling regulatory authorities to better understand the causes of market shortages of Treasury securities.”

TBMA suggested that we extend the current three and a half day reporting deadline to a full four business days. The commenter asserted that the broader reporting obligations could be “unduly burdensome” for entities that must consolidate information from global affiliates into a single report. The commenter also suggested that Treasury move the release time for the announcement of calls for large position reports to 8:00 a.m. (EST).

As noted above, TBMA was supportive of requiring more detailed reporting of the gross financing position. However, TBMA urged “Treasury to clarify in the final rule that the specific maturity date for a term repo transaction does not need to be reported.”

TBMA was fully supportive of eliminating the optional exclusion in the calculation of the gross financing position for certain transactions, including where the counterparty retains the right to substitute securities. The commenter stated that, “The proposed change would create a simpler and more unambiguous rule,” that would “reduce compliance costs” and “ensure consistent treatment of overnight reverse repurchase transactions and term repurchase transactions where the counterparty retains a technical right of substitution.”

After considering the one comment letter received, we are adopting the amendment essentially as proposed with a clarification recommended by the commenter. As recommended, we are clarifying in the rule amendment our intention that specific maturity dates for term repurchase agreements and term reverse repurchase agreements not be reported. That means that only the total dollar amount of the outstanding contracts for term repurchase agreements and term reverse repurchase agreements, respectively, are to be reported.

Accordingly, § 420.3(c)(1) and (c)(3), and Appendix B are revised to require that each of the five components in § 420.2(f)(1)-(5) that, together, comprise the “net trading position,” to be reported separately. As we stated in the proposed rulemaking, since entities already are collecting this information to calculate their total net trading position, we believe that the separation of these components should not prove to be very burdensome.

Section 420.3(c)(1) and (c)(3), and Appendix B are revised to require entities to separate the reverse repurchase agreement components by maturity classification ( i.e. , break out reverse repurchase agreements as either “overnight and open” or “term”) in the reporting of the gross financing position. Similarly, the current memorandum item is revised to require that the total gross par amounts of securities delivered through repurchase agreements be reported by maturity classification. As previously discussed, a clarification has been added that only the total dollar amount of term reverse repurchase agreements and term repurchase agreements, respectively, is to be reported. We believe the separate reporting of these individual components in the large position formula, as well as the separation of reverse repurchase agreements and repurchase agreements by maturity classification, will help us to better understand the reporting entity's degree of control and economic interest in the particular security.

Section 420.3(c)(2) and Appendix B are revised to add a second memorandum item to the large position information for the gross par amount of “fails to deliver.” This will help us to better understand a reporting entity's fails situation without increasing the burden on reporting entities since fails to deliver are already factored into the “net fails position” component.

Finally, the definition of “gross financing position” is revised at § 420.2(c) to eliminate in its entirety the optional exclusion for certain securities received through financing transactions. A conforming change is also made to item #2 “Gross Financing Position” in appendix B to part 420 (Sample Large Position Report) to reflect the elimination of the optional exclusion. This means that a reporting entity may no longer elect to reduce its gross financing position by the par amount of the securities received in transactions: in which the counterparty retains the right to substitute securities; that are subject to third party custodial relationships; or that are hold-in-custody agreements. We believe this change will enhance the usefulness of the large position reports to regulators. We agree with the commenter that this change will result in a simpler and more unambiguous rule.

Regarding the commenter's request that Treasury extend the current three and one-half day reporting deadline to a full four days, and also that Treasury move the release time for the announcement of calls for large position reports to 8 a.m. EST, we have decided not to change the current rule. We have given consideration to this comment and are sympathetic to market participants' concerns regarding the time needed for some reporting entities to coordinate with overseas affiliates, aggregate position totals and file a single consolidated large position report. However, to be balanced against these concerns is the need for reports to be filed quickly in order to accomplish the purpose of the rules. If unusual market conditions or a pricing anomaly exist, we believe three and one-half days is a significant amount of time for regulators to wait for the reports that will enable us to make better and more timely decisions to ensure the integrity, liquidity and efficiency of the Treasury market. Also, although we will attempt to release announcements of large position calls in the morning when possible, Treasury must retain the flexibility to announce a call at any time of the day due to market developments and our need to quickly obtain information on market shortages. Market participants with very large positions should be prepared for an announcement of a call for large position reports at any time.

We believe the notification of calls for large position reports e-mail list that has been available at Public Debt's Web site since 1998 has provided a valuable electronic service. Anyone signing up is promptly notified anytime Treasury announces a call for large position reports, with a link provided in the e-mail message to the actual Press Release announcing the call. We understand that market participants, including many affiliates, have found that this enhanced system for dissemination of call announcements has been very useful in providing them with the call information in a more timely and efficient manner.

To allow market participants sufficient time to make necessary preparations for compliance, we are providing for a 30-day delayed effective date from the date of publication in the Federal Register of the amendment to the rules.

The regulations are not a “significant regulatory action” pursuant to Executive Order 12866.

We certify under the Regulatory Flexibility Act (5 U.S.C. 601, et seq. ) that these amendments, if adopted, would not have a significant economic impact on a substantial number of small entities. We continue to believe that small entities will not control positions of $2 billion or greater in any particular Treasury security. The inapplicability of these amendments to small entities indicates there is no significant impact. As a result, a regulatory flexibility analysis is not required.

The collections of information contained in the final amendments have been reviewed and approved by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1995. 12 Under the Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number.

The collection of information in the final amendments is contained in § 420.3. The rules at § 420.3 continue to require a reporting entity whose position equals or exceeds the announced large position threshold for a specific issue of a Treasury security to report the information to FRBNY. We believe few reporting entities would actually have to file reports because the minimum reporting threshold ($2 billion) remains high. Moreover, we expect that our requests for information will be infrequent. We plan to continue testing the reporting and recordkeeping systems of market participants by requesting large position reports at least annually. The threshold limit will be determined based on market conditions at the time of the call.

We do not believe that market participants would find the additional “fails to deliver” memorandum item burdensome since they already determine this figure when calculating their “net fails position” on line 3 of the existing large position report. The “fails to deliver” memorandum item is simply a place for reporting entities to record a previously derived number.

We also do not anticipate that the elimination of the voluntary optional exclusion within the “gross financing position” would be a significant inconvenience for market participants. It is unlikely that removing this exclusion from the large position calculation would increase the time burden that entities face when calculating their positions, although it may result in more entities filing large position reports.

We believe the separate reporting of the “net trading position” components would not be very burdensome for market participants since they must already collect this information to calculate their net trading position. We also believe market participants would not find it very burdensome to separate their reporting of reverse repurchase agreements and repurchase agreements by maturity classification. Since the changes taking effect require more detailed information to be provided by reporting entities that file reports in response to a call for reports by Treasury, we increased the annual reporting burden in our submission to OMB by 40 hours, representing an increase from four to eight hours per large position report submitter.

The collection of information is intended to enable the Treasury and other regulators to better understand the possible causes of market shortages in certain Treasury securities. This information would help ensure that the Treasury securities market remains liquid and efficient.

Estimated total annual reporting burden: 40 hours.

Estimated annual number of respondents: 10.

Estimated annual frequency of response: On occasion.

Comments on the accuracy of the estimate for this collection of information or suggestions to reduce the burden should be sent to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for Department of the Treasury, Washington, DC, 20503; and to the Government Securities Regulations Staff, Bureau of the Public Debt, 999 E Street, NW., Room 315, Washington, DC 20239-0001.

This document contains final regulations amending the Procedure and Administration Regulations (26 CFR part 301) under section 6331 of the Internal Revenue Code (Code). The regulations reflect the amendment of section 6331 by section 3462 of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Public Law 105-206 (112 Stat. 685, 764). New section 6331(k) codifies the IRS practice of withholding collection during consideration of a taxpayer's offer to compromise and extends that practice to proposed installment agreements. These regulations deal principally with the effect of subsection 6331(k) when an installment agreement has been proposed and is pending, is in effect, or has been rejected or terminated. On April 17, 2002, a notice of proposed rulemaking (REG-104762-00; 67 FR 18839) reflecting these changes was published in the Federal Register . No written comments on the proposed regulations were received. No public hearing was scheduled or held.

The regulations provide that, subject to certain exceptions, the IRS may not levy to collect a liability while a taxpayer's proposal to enter into an installment agreement for payment of that liability is pending, for 30 days after rejection of such a proposal, while an installment agreement is in effect, for 30 days after termination of an installment agreement by the IRS, and during a timely filed appeal of a rejection or termination by the IRS. A proposed installment agreement is considered pending when it is accepted for processing by the IRS and remains pending until the IRS accepts or rejects it or the taxpayer withdraws the proposal. The final regulations clarify that the IRS may not accept a proposed installment agreement for processing if jurisdiction over the tax liability at issue has been transferred to the Department of Justice for prosecution or defense. If a proposed installment agreement does not contain sufficient information for the IRS to determine whether the proposal should be accepted, the IRS will request the additional necessary information from the taxpayer and provide a reasonable time period for the taxpayer to respond. The IRS may reject the proposed installment agreement if the requested information is not provided.

Collection by levy is not prohibited if the taxpayer waives the restriction on levy in writing, if the IRS determines that collection of the tax liability is in jeopardy, or if the IRS determines that the proposed installment agreement was submitted solely to delay collection. The exception for proposals submitted solely to delay collection is based on the legislative history accompanying RRA 1998, which explained that Congress did not intend that levy would be prohibited if the IRS determined that an offer to compromise was submitted solely to delay collection. H.R. Conf. Rep. No. 509, 105th Cong., 2d Sess. 288 (1998). Because the legislative history indicates that Congress intended the same restrictions on levy with respect to offers in compromise be applicable to installment agreements, these regulations adopt the same rule with respect to proposed installment agreements.

The regulations provide that the IRS may take actions other than levy to protect the interests of the United States with respect to collection of the liability to which an installment agreement or proposed installment agreement relates. Those actions include, but are not limited to: crediting an overpayment against the liability pursuant to section 6402, filing or refiling notices of Federal tax lien, and taking action to collect from persons liable for the tax but not named in the installment agreement.

The proposed regulations provided that the IRS cannot institute a court proceeding against the taxpayer named in the installment agreement to collect the tax covered by the installment agreement. In the final regulations, this provision has been clarified. It now states that the IRS may not refer a case to the Department of Justice to collect an unpaid tax through a judicial proceeding while levy is prohibited by these regulations. The IRS may, however, authorize the Department of Justice to file a counterclaim in any refund proceeding commenced by a taxpayer, participate in bankruptcy or insolvency cases commenced by or against the taxpayer, or join a taxpayer in any other proceeding in which liability for the tax at issue may be established or disputed. Such proceedings may involve taxes for which more than one person may be jointly and severally liable for the same tax, or may involve persons liable for related liabilities, such as a trust fund recovery penalty under section 6672 or a personal liability for excise tax under section 4103.

While an installment agreement allows the IRS to accept the payment of tax in installments, the agreement does not conclusively establish the taxpayer's liability. A taxpayer therefore is not prohibited from seeking a refund of taxes paid pursuant to an installment agreement. Allowing the IRS to join the taxpayer in a proceeding where the liability for the tax may be established or disputed will protect the Government from having to litigate the same tax in multiple forums only to face the argument in each separate case (including, potentially, from the taxpayer named in an installment agreement) that the person or persons not party to that suit were solely or principally liable for non-payment of the taxes at issue. The notice of proposed rulemaking stated that if a judgment was obtained against a taxpayer named in an installment agreement, collection would continue to occur pursuant to the terms of the installment agreement. The final regulations clarify that this statement applies only when the Department of Justice refers the case back to the IRS for collection after the judgment is obtained. Section 6331(k) does not limit the collection options of the Department of Justice once a case has been referred to the Department by the IRS.

The regulations provide that the statute of limitations for collection under section 6502 is suspended while a proposed installment agreement is pending, for 30 days after rejection or termination of an installment agreement, and during a timely filed appeal of the rejection or termination decision. The running of the collection statute resumes after an installment agreement takes effect. The statute of limitations for collection shall continue to run if an exception under this section applies and levy is not prohibited with respect to the taxpayer.

These regulations apply to installment agreements proposed or entered into on or after the date final regulations are published in the Federal Register . However, the rules set forth in these regulations mirror practices the IRS has been following administratively since the enactment of RRA 1998.

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

The principal author of these regulations is Frederick W. Schindler, Office of the Associate Chief Counsel (Procedure & Administration), Collection, Bankruptcy & Summonses Division.

This document contains amendments to the Regulations on Procedure and Administration (26 CFR part 301) relating to the definition of the term income tax return preparer under section 7701(a)(36) of the Internal Revenue Code (Code). On June 11, 2002, a notice of proposed rulemaking was published in the Federal Register (67 FR 39915). One comment was received in response to the notice of proposed rulemaking. No public hearing was requested or held. After consideration of the comment, the proposed regulations under section 7701(a)(36) are adopted.

These regulations have been promulgated in furtherance of the purposes of Section 3601(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105-206 (112 Stat. 685) (1998) (RRA 1998). Section 3601(a), which added section 7526 of the Code, provides grants to qualified LITCs. Qualified LITCs represent taxpayers in controversies with the IRS and operate programs to inform individuals for whom English is a second language (ESL taxpayers) about their rights and responsibilities as taxpayers (ESL outreach). Qualified LITCs are either clinical programs run by accredited educational institutions that allow students to represent low-income taxpayers, or tax-exempt organizations that provide representation to low-income taxpayers.

Section 7701(a)(36), defining the term income tax return preparer, was enacted by section 1203 of the Tax Reform Act of 1976, Public Law 94-455 (90 Stat. 1520) (1976) (TRA 1976). TRA 1976 also enacted many of the provisions of sections 6694 and 6695, which impose penalties for certain acts and omissions by income tax return preparers.

The preparer penalties enacted by TRA 1976 reflect the concern of Congress with improper practices within the commercial tax services industry. See H. Rep. No. 94-658, 94th Cong. 1st Sess. 274 (1976), 1976-3 (Vol. 2) C.B. 966. Consistent with the commercial focus of the legislative history, the definition of an income tax return preparer requires that the tax return or claim for refund be prepared “for compensation.” Persons who do not receive compensation are not income tax return preparers for purposes of section 7701(a)(36) regardless of the extent to which they are involved with the preparation of a return or claim for refund.

Under section 7526(b)(1)(A)(i), a qualified LITC may not charge more than a nominal fee for its authorized services (except for reimbursement of actual costs incurred). These final regulations, consistent with the notice of proposed rulemaking, specify the circumstances in which an LITC may receive a nominal fee that will not be considered compensation for purposes of section 7701(a)(36).

These final regulations adopt the proposed amendments without substantive change. Under these final regulations, qualified LITCs, as defined by section 7526, and employees and volunteers of such LITCs, that provide assistance with a tax return or claim for refund will not be treated as income tax return preparers if two requirements are satisfied.

First, any such return preparation assistance must be (i) directly related to a controversy with the IRS for which the LITC is providing assistance or (ii) an ancillary part of an LITC's ESL outreach program. Second, the LITC cannot charge a separate fee or vary a fee based on whether the LITC provides assistance with a return of tax or claim for refund, or charge more than a nominal fee for its services. The regulations apply to returns prepared on or after December 18, 2002.

The commentator focused on the scope of the direct relation requirement that applies to LITCs that represent taxpayers in controversies. The commentator observed that, for a nonfiler to obtain the benefits of an offer in compromise or installment agreement, it is sometimes necessary for an LITC to prepare a number of the nonfiler's returns for prior years. The commentator requested clarification as to whether preparation of the prior-year returns is directly related to the nonfiler's controversy with the IRS. As in the commentator's example, in cases where the preparation of a taxpayer's return is required to resolve a controversy for which an LITC is representing a taxpayer, such preparation would be treated under these final regulations as directly related to that controversy.

These regulations do not address the definition of a nominal fee. The Treasury Department and the IRS specifically requested comments on the need for a definition of a nominal fee and the factors that should be considered in defining a nominal fee. No comments were received on this topic. The Treasury Department and the IRS conclude that the definition of nominal fee should not be addressed in these regulations at this time. The final regulations do not specifically address the qualifications of an LITC under section 7526. The Treasury Department and IRS reiterate the view, originally stated in the preamble of the proposed regulations, that a qualified LITC may not provide return preparation assistance other than assistance directly related to a controversy with the IRS or assistance that is an ancillary part of an ESL outreach program.

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

The principal author of the regulations is Brinton T. Warren of the Office of Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division.

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

The additions read as follows:

Section 3417 of the IRS Restructuring and Reform Act of 1998 (RRA 1998), Public Law 105-206 (112 Stat. 685), amended section 7602 by adding section 7602(c). This provision prohibits IRS officers and employees from contacting any person, other than the taxpayer, with respect to the determination or collection of the taxpayer's liability without giving the taxpayer reasonable advance notice that contacts with persons other than the taxpayer may be made.

On January 2, 2001, the IRS published in the Federal Register a notice of proposed rulemaking (66 FR 32479) to interpret and implement section 7602(c). Two written comments were received but a public hearing was not held. The proposed regulations, as revised by this Treasury decision, are substantially adopted.

As described more fully in the preamble to the proposed regulations, the final regulations balance a taxpayer's business and reputational interests with third parties' privacy interests and the IRS' responsibility to administer the internal revenue laws effectively. By providing general pre-contact notice followed by post-contact identification, these final regulations enable a taxpayer to come forward with information required by the IRS before third parties are contacted. The taxpayer's business and reputational interests therefore can be addressed without impeding the IRS' ability to make those third-party contacts that are necessary to administer the internal revenue laws.

These final regulations do not finalize the provisions in the proposed regulations regarding periodic reports. Subsequent to the issuance of the proposed regulations, the IRS determined that the issuance of periodic reports may result in harm to third parties and, accordingly, has determined that periodic reports should not be issued. Taxpayers will continue to receive pre-contact notice and may specifically request from the IRS reports of persons contacted.

The proposed regulations provided that for contacts with the employees, officers, or fiduciaries of any entity who are acting within the scope of their employment or relationship, it is sufficient to record the entity as the person contacted.

One commentator noted that there may be situations where the name of a specific employee of a business should be recorded and made available to the taxpayer. The commentator suggests adopting a “safe harbor” rule that requires that the name of the party contacted be recorded whenever there is any doubt about how the contact should be recorded. The commentator stated that whenever an employee of a business is contacted due to his or her personal knowledge or business relationship with the taxpayer, the name of the specific employee contacted should be recorded in the contact record rather than (or in addition to) the name of the business entity.

This comment has not been adopted in the final regulations. The final regulations do not prevent IRS employees from providing more than the name of the entity in the record of contact when an employee of a business is contacted. Because the information being sought typically is that of the entity, and not of any specific employee outside of their capacity as an employee, requiring the identification of the specific employees contacted is not required to provide notice to the taxpayer of the contact made and may impede the IRS' ability to obtain information from the entity.

The proposed regulations provided that a statement by the person contacted that harm may occur is good cause for the IRS to believe that reprisal may occur. Such contacts are not reported by the IRS to the taxpayer.

One commentator asserted that the proposed regulations are inconsistent with the statute's origin and purpose because the proposed regulations (i) subordinate the rights given to taxpayers to the rights of third parties and the IRS; (ii) provide an insufficient threshold for determining whether good cause exists to conclude that reprisal may occur; (iii) permit a third party to express concerns that providing notice to the taxpayer may result in reprisal against another person; (iv) permit the IRS to make a reprisal determination based upon information obtained from any source; and (v) permit the IRS to make a reprisal determination without peer or supervisory review. In brief, the commentator argued that the scope of what would be considered reprisal is too broad and that the determination of when reprisal would be considered to exist is too lenient. The commentator claimed that the adoption of the proposed regulations would render the requirement in section 7602(c) to provide taxpayers with a record of persons contacted a nullity.

The Treasury Department and the IRS do not agree that the proposed regulations are either too broad with respect to what will be considered reprisal or too permissive with respect to the determination of whether the potential for reprisal exists. As a general matter, by including a reprisal exception to the notice requirements of section 7602(c), Congress recognized that the rights of taxpayers to receive notice of third-party contacts must be balanced with the rights of third parties to be free from adverse consequences that may result from the IRS providing such notice. The reprisal exception reflects Congress' determination that a taxpayer's right to know whom the IRS has contacted is outweighed by a third party's right to be free from any reprisal. Moreover, since the statute's effective date, the IRS has been operating under reprisal procedures consistent with the proposed regulations. Based upon the small number of reprisal concerns expressed to date, the Treasury Department and the IRS believe that the final regulations, which make no change to the proposed regulations with respect to this issue, appropriately balance the competing interests reflected in the statute and will not render section 7602(c)(2) a nullity.

More specifically, the Treasury Department and the IRS believe that a third party is in the best position to evaluate its relationship with a taxpayer and the potential for reprisal if a contact with that third party is reported by the IRS to the taxpayer. Requiring the IRS to investigate each claim of potential reprisal, including supervisory review of a reprisal determination, would place a heavy administrative burden on the IRS and, more importantly, would intrude into the third party's affairs and require IRS employees to make judgments that they are not well positioned to make. For these reasons, the final regulations do not adopt the “probable cause” standard suggested by the commentator. In addition, the rights provided to a taxpayer under section 7602(c) ( i.e. , prior notice that contacts with third parties may be made and a record of persons contacted) cannot be equated with a person's Fourth Amendment right to be free from unreasonable searches and seizures.

In addition, the statute clearly contemplates that the reprisal exception is not limited to concerns of reprisal against the third party contacted. The reprisal exception applies when providing notice to the taxpayer “may involve reprisal against any person .” section 7602(c)(3)(B) (emphasis added). The statutory exception also does not restrict the source of information that can be used in making a reprisal determination. In certain cases, an IRS employee may be in possession of information that is unknown to the third party contacted but which suggests that reprisal may occur against another person if the contact with the third party is reported to the taxpayer.

Finally, limiting the reprisal exception to physical harm would be inconsistent with the statute and Congress' clear concern that third parties be free from adverse consequences as a result of being contacted by the IRS regarding a taxpayer's liability. Congress did not define or limit the kind of reprisal situations with which it was concerned. Excluding economic, emotional, or other types of harm would significantly diminish the third-party protections provided by the reprisal exception.

The proposed regulations stated that for purposes of section 7602(c), an IRS employee includes, inter alia, a person who, through a written agreement with the IRS, is subject to disclosure restrictions consistent with section 6103. The final regulations provide that an IRS employee includes a person described in section 6103(n), an officer or employee of such person, and a person who is subject to disclosure restrictions pursuant to a written agreement in connection with the solicitation of an agreement described in section 6103(n) and its implementing regulations. This change was made to provide a legally precise statement of the rule and to clarify that persons who provide tax administration services to the IRS and who enter into nondisclosure agreements with the IRS, as well as prospective bidders who enter into nondisclosure agreements, are treated as IRS employees for purposes of section 7602(c).

The regulations provide that returning unsolicited telephone calls or speaking with persons other than the taxpayer as part of an attempt to speak to the taxpayer are not initiations of third-party contacts. This provision is illustrated by Example 3 , where a revenue agent trying to contact the taxpayer to discuss the taxpayer's pending examination twice calls the taxpayer's place of business. The first call is answered by a receptionist, and the second call is answered by the office answering machine. The example in the regulations states that in both situations the employee leaves a message “stating only his name, telephone number, that he is with the IRS, and asks that the taxpayer call him.” The phrase “that he is with the IRS” has been deleted from the example in the final regulations because there may be situations where it would be inappropriate for an IRS employee to identify his or her employer in a telephone conversation or message that can be seen or heard by persons other than the taxpayer. See section 6304(b)(4).

The final regulations add Examples 6(a) and 6(b) to illustrate the application of the third-party contact rules to audits of TEFRA partnerships.

The regulations provide that the pre-contact notice need not be provided to a taxpayer for third-party contacts when advance notice has otherwise been provided to the taxpayer pursuant to another statute, regulation or administrative procedure. The proposed regulations provide that the Collection Due Process (CDP) notice furnished under section 6330 and its regulations is an example of a situation where the pre-contact notice requirement is fulfilled by another notice. The final regulations modify the proposed regulations to clarify that CDP notices sent to taxpayers pursuant to section 6330 and its regulations constitute reasonable advance notice that contacts with third parties may be made for purposes of effectuating a levy.

The final regulations add examples to illustrate the application of the nonadministrative contacts exception.

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

The principal author of these regulations is Charles B. Christopher of the Office of Associate Chief Counsel, Procedure & Administration (Collection, Bankruptcy & Summonses Division).

The Fiscal Year 1997 Omnibus Budget Act (Pub. L. 104-208) first required that we use no funds available to the Bureau “to distribute or make available any commercially published information or material to a prisoner when it is made known to [us] that such information or material is sexually explicit or features nudity.”

On November 6, 1996, we published procedures implementing this provision in the Act as an interim final rule (61 FR 57568). The rule, effective December 1, 1996, became 28 CFR 540.70—540.72.

Within the two months after publishing this rule, we received six comments from individuals challenging the constitutionality of the statutory provisions underlying these rules on First Amendment grounds. The commenters generally argued that denying inmates access to information or material that is sexually explicit or features nudity violated their constitutional right to freedom of speech and communication.

Before we could respond to these comments, a group of inmates and publishers promptly challenged the constitutionality of the policy implemented by these rules in the case of Amatel v. Reno, 975 F. Supp. 365 (D.D.C. 1997). On August 12, 1997, the court in Amatel issued a nationwide preliminary injunction prohibiting us from using these procedures. We then suspended application of these rules.

On September 15, 1998, the U.S. Court of Appeals for the District of Columbia Circuit reversed the district court's preliminary injunction. Amatel v. Reno, 156 F.3d 192 (D.C. Cir. 1998) (rehearing en banc denied Dec. 23, 1998). They further appealed to the U.S. Supreme Court, which denied certiorari on June 24, 1999, Amatel v. Reno, 119 S. Ct. 2392 (1999).

Amatel upheld the apparent constitutionality of this statutory provision. By lifting the injunction, the U.S. Court of Appeals in Amatel allowed us to reimplement the policy mandated by statute through these rules.

In this rule, we finalize 28 CFR 540.70 through 540.72, as originally published in 1996 (61 FR 57568). We also amend § 540.72(b)(1) to clarify that “commercially published information or material” includes photographs or other pictorial depictions in response to a recent trend towards receipt of such prohibited materials. These photographs often arrive as commercially published information or material and are, therefore, prohibited by this rule. Although our previous definition of commercially published information or material did not explicitly include photographs or pictorial depictions, that prohibition is certainly implicit.

The Fiscal Year 1997 Omnibus Budget Act (Pub. L. 104-208) (1997 Budget Act) prohibited us from using authorized funds to “distribute or make available any commercially published information or material” (emphasis added) if it is “sexually explicit or features nudity”. This effectively requires us to prohibit dissemination in our institutions of this type of material. We do not have the discretion to allow inmates to receive the information or material that the statute prohibits. We therefore interpret this provision to prohibit mailroom intake processing of this type of material.

The prohibition in the 1997 Budget Act was later repeated in section 615 of the Fiscal Year 2000 Omnibus Budget Act (Pub. L. 106-113) and section 614 of the D.C. Appropriations Act for Fiscal Year 2001 (Pub. L. 106-553). Currently, the prohibition is found in section 614 of the Department of Commerce, Justice, and State, The Judiciary and Related Agencies Appropriations Act 2002 (P.L. 107-77)(2002 Budget Act). We therefore clarify in our regulation that “commercially published information or material” includes photographs or pictorial depictions.

Although photographs and pictorial depictions that are “sexually explicit” or feature nudity are implicitly banned by the aforementioned statutory prohibitions, this clarification is necessary because inmates and members of the public misread our previous rule, which did not explicitly mention photographs and pictorial depictions. A recent trend involves inmates receiving sexually explicit or nude photographs from apparently commercial photography studios or from individual members of the public attempting to set up a form of paid correspondence through which inmates would buy photographs that were sexually explicit or featured nudity.

Inmates and members of the general public have the misapprehension that this type of “paid correspondence” (soliciting payment for photographs that are sexually explicit or feature nudity) is not prohibited by either (1) the general restriction in 28 CFR 540.12(a) on correspondence that threatens the security, discipline and good order an institution; or (2) our rule in 28 CFR 540.72(b)(1) defining “commercially published information or material” prohibited under section 614 of the 2002 Budget Act.

The general restriction in 28 CFR 540.12(a), which allows Wardens to “establish and exercise controls to protect individuals, and the security, discipline, and good order of the institution” encompasses the Bureau's discretion to reject photographs featuring nudity and explicit sexuality from non-commercial sources, such as an inmate's wife or girlfriend. Such personal photographs typically cause disciplinary problems among inmates and compromise institution security and good order. However, the “paid correspondence” incidents described above could be viewed as commercial correspondence which, arguably, could be thought beyond the reach of the Warden's controls on personal correspondence.

Likewise, it was argued that the restrictions on commercial correspondence did not apply to this form of “paid correspondence” because it was not explicitly encompassed in the previous rule. 28 CFR 540.72(b)(1) defined “commercially published information or material” under the statutory prohibition as: “any book, booklet, pamphlet, magazine, periodical, newsletter, or similar document, including stationery and greeting cards, published by any individual, organization, company, or corporation which is distributed or made available through any means or media for a commercial purpose. This definition includes any portion extracted, photocopied, or clipped from such items.”

This definition represented the Bureau's efforts to encompass all “material” featuring nudity or explicit sexuality contemplated by the statute. Although we believed our definition of commercially published information or material was sufficiently inclusive, inmates and members of the public have misinterpreted this definition as not applicable to photographs or pictorial depictions that are sexually explicit or featuring nudity. This rule change is therefore necessary to explicitly clarify that the statutory prohibition in section 614 of the 2002 Budget Act of all “commercially published information or material” that is “sexually explicit or features nudity” includes photographs and pictorial depictions. We intend this change to eliminate current misunderstanding of the statute by inmates and the general public.

Inmates are allowed to possess material that is “sexually explicit or features nudity” if that material was in their possession before this interim final rule became effective on December 1, 1996. Other regulations prohibit inmates from receiving sexually explicit materials during visits or through personal mail. Similarly, inmates may not receive, through the mail or otherwise, any materials which threaten the safety, security, good order of the institution, or violates criminal laws. Such materials are prohibited by the these rules, and the rules on inmate correspondence, part 540, subpart B.

This regulation has been drafted and reviewed in accordance with Executive Order 12866, “Regulatory Planning and Review”, section 1(b), Principles of Regulation. The Director of the Bureau of Prisons has determined that this rule is not a “significant regulatory action” under Executive Order 12866, section 3(f), and accordingly this rule has not been reviewed by the Office of Management and Budget.

This regulation will not have substantial direct effects on the States, on the relationship between the national government and the States, or on distribution of power and responsibilities among the various levels of government. Under Executive Order 13132, this rule does not have sufficient federalism implications for which we would prepare a Federalism Assessment.

The Director of the Bureau of Prisons, under the Regulatory Flexibility Act (5 U.S.C. 605(b)), reviewed this regulation. By approving it, the Director certifies that it will not have a significant economic impact upon a substantial number of small entities because: This rule is about the correctional management of offenders committed to the custody of the Attorney General or the Director of the Bureau of Prisons, and its economic impact is limited to the Bureau's appropriated funds.

This rule will not cause State, local and tribal governments, or the private sector, to spend $100,000,000 or more in any one year, and it will not significantly or uniquely affect small governments. We do not need to take action under the Unfunded Mandates Reform Act of 1995.

This rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This rule will not result in an annual effect on the economy of $100,000,000 or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign- based companies in domestic and export markets.

We want to make Bureau documents easier to read and understand. If you can suggest how to improve the clarity of these regulations, call or write to Sarah Qureshi at the address or telephone number listed above.

The Bureau makes this minor correction to its final rule published on October 6, 2000 (64 FR 59724), on inmate discipline regarding violations of the telephone policies.

Before we published the October 6th final rule, our prohibited acts code number 406 referred to minor mail and telephone infractions (in the existing low moderate severity level category prohibited act).

When we published the October 6th final rule, we wished to distinguish minor mail infractions from minor telephone infractions, so we created a new code number, 497, for minor telephone infractions. Code number 406, therefore, covered only minor mail infractions.

However, if we use the code number 406 in the Bureau's computer tracking system, that code number will retrieve both mail and telephone minor infractions, instead of only the mail infractions covered by the code number 406.

For clarity, therefore, we reserve code number 406 and assign the code number 410 to the prohibited act covering minor mail infractions. This correction, while maintaining the language of 406, as published in the previous rule, only changes the number of that prohibited act to 410. We make this change to be able to more accurately track specific telephone-related acts using code number 497 only or mail-related prohibited acts using code number 410 only.

The Administrative Procedure Act (5 U.S.C. 553) allows exceptions to notice-and-comment rulemaking for “(A)interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice; or (B) when the agency for good cause finds * * * that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”

This rulemaking is exempt from normal notice-and-comment procedures because it is a minor clarification of currently existing Bureau policy. We are modifying our rule to enable us to more accurately track specific prohibited acts using original prohibited act code numbers in our computer tracking system. The language of the prohibited act remains the same, only the code number that refers to it changes.

Because this change reflects current Bureau policy and is a minor clarification of current agency procedure and practice, we find that normal notice-and-comment rulemaking is unnecessary. We are, however, allowing the public to comment on this rule change by publishing it as an interim final rule.

You can send written comments on this rule to the Rules Unit, Office of General Counsel, Bureau of Prisons, 320 First Street, NW., Washington, DC 20534.

We will consider comments received during the comment period before taking final action. We will try to consider comments received after the end of the comment period. In light of comments received, we may change the rule.

We do not plan to have oral hearings on this rule. All the comments received remain on file for public inspection at the above address.

This regulation has been drafted and reviewed in accordance with Executive Order 12866, “Regulatory Planning and Review”, section 1(b), Principles of Regulation. The Director, Bureau of Prisons has determined that this rule is not a “significant regulatory action” under Executive Order 12866, section 3(f), and accordingly this rule has not been reviewed by the Office of Management and Budget.

This regulation will not have substantial direct effects on the States, on the relationship between the national government and the States, or on distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.

The Director of the Bureau of Prisons, in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation and by approving it certifies that this regulation will not have a significant economic impact upon a substantial number of small entities for the following reasons: This rule pertains to the correctional management of offenders committed to the custody of the Attorney General or the Director of the Bureau of Prisons, and its economic impact is limited to the Bureau's appropriated funds.

This rule will not result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

This rule is not a major rule as defined by § 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This rule will not result in an annual effect on the economy of $100,000,000 or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic and export markets.

We try to write clearly. If you can suggest how to improve the clarity of these regulations, call or write Sarah Qureshi, Rules Unit, Office of General Counsel, Bureau of Prisons, 320 First Street, NW., Washington, DC 20534, 202-514-6655.

On March 29, 2002, we published an interim rule with request for comments entitled “Security Zone; Waters Adjacent to Diablo Canyon Nuclear Power Plant, Avila Beach, CA” in the Federal Register (67 FR 15117). We received no letters commenting on the rule. No public hearing was requested, and none was held.

Previously, on October 24, 2001, we published a temporary final rule (TFR) entitled “Security Zones: Los Angeles Harbor, Los Angeles, CA and Avila Beach, CA” in the Federal Register (66 FR 53713) that expired on March 29, 2002.

The Captain of the Port has determined the need for continued security regulations exists. Accordingly, this rulemaking makes permanent the temporary security zone published in the Federal Register on March 29, 2002.

Since the September 11, 2001 terrorist attacks on the World Trade Center in New York, the Pentagon in Arlington, Virginia and Flight 93, the Federal Bureau of Investigation (FBI) has issued several warnings concerning the potential for additional terrorist attacks within the United States. In addition, the ongoing hostilities in Afghanistan and growing tensions in Iraq have made it prudent for U.S. ports and properties of national significance to be on a higher state of alert because the al Qaeda organization and other similar organizations have declared an ongoing intention to conduct armed attacks on U.S. interests worldwide.

In its effort to thwart terrorist activity, the Coast Guard has increased safety and security measures on the waterfronts of nuclear power plants by establishing security zones to aid in the waterside protection of these facilities. As part of the Diplomatic Security and Antiterrorism Act of 1986 (Pub. L. 99-399), Congress amended section 7 of the Ports and Waterways Safety Act (PWSA), 33 U.S.C. 1226, to allow the Coast Guard to take actions, including the establishment of security and safety zones, to prevent or respond to acts of terrorism against individuals, vessels, or public or commercial structures.

In this particular rulemaking, to address the aforementioned security concerns, and to take steps to prevent the catastrophic impact that a terrorist attack against a nuclear power plant would have on the surrounding area and communities, the Coast Guard is establishing a security zone around the Diablo Canyon Nuclear Power Plant near Avila Beach, California. This security zone helps the Coast Guard to prevent vessels or persons from engaging in terrorist actions against nuclear power plants.

We received no letters commenting on the interim rule. No public hearing was requested, and none was held. Therefore, we have made no changes and will implement the provisions of the interim rule as written.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT)(44 FR 11040, February 26, l979).

We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process. We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism.

We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We received no letters commenting on the interim rule. No public hearing was requested, and none was held.

We have considered the environmental impact of this rule and concluded that under figure 2-1, paragraph (34)(g), of Commandant Instruction M16475.lD, this rule is categorically excluded from further environmental documentation because we are establishing a security zone. A “Categorical Exclusion Determination” is available in the docket for inspection or copying where indicated under ADDRESSES.

The EPA is approving a source-specific revision into the Kentucky SIP for the Lawson Mardon Packaging, USA, Corporation (LMP) located in Shelby County, Kentucky. The revision was submitted to EPA by Kentucky on March 4, 2002. This revision allows LMP to use a 30-day averaging period instead of the required 24-hour averaging period as specified in Kentucky air quality regulations 59:210, “New fabric, vinyl and paper surface coating operations,” and 59:212, “New graphic arts facilities using rotogravure and flexography.” The effect of today's approval action is that once LMP's synthetic minor operating permit is finalized, LMP shall determine compliance with volatile organic compound (VOC) emission rates allowed by its permit every 30 days instead of every 24 hours.

The LMP plant in Shelbyville, Kentucky manufactures flexible packaging for the food and pharmaceutical industries. LMP currently operates a total of 15 printing and/or laminating machines. The plant's proposed, facility-wide synthetic minor operating permit covers all 15 machines, and is conditioned on EPA's approval of the permit as a source-specific SIP revision.

The Agency's policy regarding emissions time averaging for existing sources of VOCs is established and clarified in a January 20, 1984, EPA Memorandum from John O'Connor, Acting Director of the Office of Air Quality Planning and Standards, to Air Directors in Regions I-X. The policy requires that SIP revisions relating to VOC control must maintain the National Ambient Air Quality Standards (NAAQS) for ozone. To allow VOC compliance averaging periods greater than 24 hours, the policy establishes four conditions which are summarized below along with EPA's analysis of the LMP submittal.

Condition 1: Real reductions in actual emissions must be achieved, consistent with Reasonably Available Control Technology (RACT) levels in SIPs or Agency control technique guidelines. EPA Analysis: Incinerators are used as add-on controls on those production lines required to have them. These controls meet or exceed RACT control levels.

Condition 2: Averaging periods must be as short as practicable, and in no case longer than 30 days. EPA Analysis: LMP has requested a 30-day compliance averaging period, which meets this condition. LMP supported its request with a statistical analysis demonstrating that daily, maximum potential VOC emissions are significantly less than daily, maximum allowable VOC emissions. The level of confidence for the statistical analysis is 99.73 percent.

Condition 3: A demonstration must be made that the use of averaging periods greater than 24 hours will not jeopardize the ozone NAAQS or the Reasonable Further Progress (RFP) plan for the area. EPA Analysis: LMP submitted a statistical analysis to compare 24-hour and 30-day compliance averaging results against maximum allowable permit VOC emission rates. The analysis accounts for potential daily emission fluctuations and shows that actual VOC emissions for eight of LMP's older machines are consistently and far below the allowable VOC emission rates. The analysis does not include data from seven, newer machines, which were installed after submittal of LMP's permit application, because data were not available at that time. However, because the seven, newer machines have better overall control efficiencies and less variation than the older machines, the statistical analysis for the existing machines may also be applied to the new machines as representative. A further consideration is that LMP uses continuous emission monitoring systems to ensure its control equipment is operating properly and within limits.

Condition 4: Sources in areas with measured violations cannot be considered for longer term averaging until the SIP has been revised to demonstrate attainment of the ozone NAAQS and maintenance of RFP. EPA Analysis: Shelby County, Kentucky is currently classified as unclassified/attainment for the 1-hour ozone NAAQS and is currently attaining the standard. The closest, downwind monitor has not shown an exceedance of the 1-hour NAAQS within the last five years. Conditions addressing RFP plans are not applicable to 1-hour ozone attainment areas.

EPA is approving this source-specific revision to the Kentucky SIP allowing LMP to use a 30-day compliance averaging period because it is consistent with the requirements of the Clean Air Act and EPA policy. Use of an alternative averaging period is not expected to jeopardize maintenance of the 1-hour ozone NAAQS in Shelby County for reasons discussed in section II.

The EPA is publishing this rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. However, in the proposed rules section of this Federal Register publication, EPA is publishing a separate document that will serve as the proposal to approve the SIP revision should adverse comments be filed. This rule will be effective February 18, 2003 without further notice unless the Agency receives adverse comments by January 17, 2003.

If the EPA receives such comments, then EPA will publish a document withdrawing the final rule and informing the public that the rule will not take effect. All public comments received will then be addressed in a subsequent final rule based on the proposed rule. The EPA will not institute a second comment period. Parties interested in commenting should do so at this time. If no such comments are received, the public is advised that this rule will be effective on February 18, 2003 and no further action will be taken on the proposed rule.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. Section 804 exempts from section 801 the following types of rules: (1) Rules of particular applicability; (2) rules relating to agency management or personnel; and (3) rules of agency organization, procedure, or practice that do not substantially affect the rights or obligations of non-agency parties. 5 U.S.C. 804(3). EPA is not required to submit a rule report regarding this action under section 801 because this is a rule of particular applicability.

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 18, 2003. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

On November 5, 2001, the Commission released a Report and Order, 67 FR 5670, February 6, 2002, as part of its biennial review of accounting requirements and Automated Reporting Management Information System (ARMIS) reporting requirements. In the order, the Commission adopted a number of accounting and reporting requirement reforms. The reforms included the creation of several new part 32 Uniform System of Accounts subaccounts and the elimination or modification of other part 32 accounts and subaccounts and modification of ARMIS reporting requirements. Changes to the part 32 accounting rules are scheduled to take effect January 1, 2003. On March 8, 2002, BellSouth Corporation, SBC Communications Inc., and Verizon filed a joint petition for reconsideration asking that two newly-created subaccounts—the wholesale and retail subaccounts to Account 6620, Services—be eliminated. The petitioners also requested that the Commission change the reporting of “Loop Sheath Kilometers” back to “Sheath Kilometers.” The petitioners argued that the Commission should delay implementation of the relevant rule changes pending review of the arguments raised in their earlier reconsideration petition. The petitioners asserted that implementation of the rule changes will be very costly and time-consuming, and requested that they not be required to undertake this work while the Commission considers their petition. AT&T Corp. opposed both the petition for reconsideration and the request to delay implementation. On September 5, 2002, the Commission convened the Federal-State Joint Conference on Accounting Issues, which is undertaking “a cooperative federal and state review of regulatory accounting and reporting requirements in order to determine their adequacy and effectiveness in the current market and make recommendations for improvements.” In preliminary discussions, members of the Joint Conference identified the following two part 32 accounting changes adopted earlier that they believe should be subject to further consideration before implementation: the consolidation of Account 5230, Directory revenue, with other miscellaneous revenue accounts into Account 5200, Miscellaneous revenue; and the consolidation of the depreciation and amortization expense accounts (Accounts 6561 through 6565) into Account 6562, Depreciation and amortization expenses. The Commission believes that further consideration of these changes by the Joint Conference is reasonable and defers the implementation of the following accounting and reporting requirement rule changes for six months: (1) The consolidation of Accounts 6621 through 6623 into Account 6620, with subaccounts for wholesale and retail; (2) the consolidation of Account 5230, Directory revenue, into Account 5200, Miscellaneous revenue; (3) the consolidation of the depreciation and amortization expense accounts (Accounts 6561 through 6565) into Account 6562, Depreciation and amortization expenses; and (4) the revised “Loop Sheath Kilometers” data collection in Table II of ARMIS Report 43-07. The effective date for the rule changes to Accounts 5200, 6562, and 6620 had earlier been extended to January 1, 2003, published on April 24, 2002, at 67 FR 20052, and now are further extended to July 1, 2003. The change affecting ARMIS Report 43-07 is extended to July 1, 2003.

Regulations implemented under the authority of the Atlantic Tunas Convention Act (16 U.S.C. 971 et seq. ) and the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1801 et seq. ) governing the harvest of BFT by persons and vessels subject to U.S. jurisdiction are found at 50 CFR part 635. Section 635.27 subdivides the U.S. BFT quota recommended by the International Commission for the Conservation of Atlantic Tunas among the various domestic fishing categories. The General category landings quota, including time-period subquotas and the New York Bight set-aside, are specified annually as required under § 635.27(a)(1). The 2002 fishing year General category quota and effort control specifications were issued on October 1, 2002 #(67 FR 61537).

NMFS is required, under § 635.28 (a)(1), to file with the Office of the Federal Register for publication, notification of closure when a BFT quota is reached, or is projected to be reached. On and after the effective date and time of such closure notification, for the remainder of the fishing year, or for a specified period as indicated in the notification, fishing for, retaining, possessing, or landing BFT under that quota category is prohibited until the opening of the subsequent quota period, or until such date as specified in the notification.

Adjustments to the 2002 fishing year BFT quota specifications issued pursuant to § 635.27 (FR cites on 67 FR 68045 Nov. 8 '02 adjustments and 67 FR 71487 Dec. 2 '02) set a total coastwide General category quota of 882.0 mt of large medium and giant BFT to be harvested from the regulatory area during the 2002 fishing year. Based on reported landings and effort, NMFS projects that this quota will be reached by December 15, 2002. Therefore, fishing for, retaining, possessing, or landing large medium or giant BFT intended for sale by persons aboard vessels in the General or Charter/Headboat categories must cease at 11:30 p.m. local time December 15, 2002. The intent of this closure is to prevent overharvest of the adjusted quota established for the General category.

General category permit holders may tag and release BFT while the General category is closed, subject to the requirements of the tag-and-release program at § 635.26.

Vessels permitted in the HMS Charter/Headboat category may continue to fish for and retain BFT under the Angling category regulations. The current Angling category daily retention limit, effective from November 1, 2002 through May 31, 2003 (67 FR 39869, June 11, 2002) is one large school or small medium BFT (measuring from 47 to less than 73 inches (from 119 to less than 185 cm) curved fork length). In addition, HMS Charter/Headboat category vessels may continue to retain one large medium or giant “trophy” BFT, measuring 73 inches (185 cm) or greater, per fishing year (June 1 through May 31). Trophy BFT can not be sold and all BFT landed under the Angling category quota must be reported by calling 1-888-872-8862 or by using the Internet at www.nmfspermits.com , unless there is a landing tag requirement in the state of landing.

The Assistant Administrator for Fisheries, NOAA (AA), finds for good cause that providing prior notice and public comment for this action, as required under 5 U.S.C. 553 (b) (B), is impracticable and contrary to the public interest. This closure is intended to prevent the overharvest of the adjusted BFT quota established for the coastwide General category. The fishery is currently underway and any delay in closure could cause the fishery to exceed the quota and be inconsistent with domestic and international requirements and objectives. For these reasons the AA also finds good cause to waive the 30-day delay in effective date pursuant to 5 U.S.C. 553 (d) (1) and (3). NMFS provides as much advance notification of the closure as possible by publishing the closure notice in the Federal Register , faxing notification to individuals on the HMS FAX Network and to known fishery representatives, announcing the notice on the Atlantic Tunas Information Line, and announcing the closure notice over NOAA Weather and Coast Guard radio channels. This action is required under 50 CFR 635.28(a) (1) and is exempt from review under Executive Order 12866.

Atlantic tunas, swordfish, and billfish are managed under the dual authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) and the Atlantic Tunas Convention Act (ATCA). ATCA authorizes the Secretary of Commerce (Secretary) to implement binding recommendations of the International Commission for the Conservation of Atlantic Tunas (ICCAT). The authority to issue regulations under the Magnuson-Stevens Act and ATCA has been delegated from the Secretary to the Assistant Administrator (AA) for Fisheries, NOAA. Sharks are managed solely under the authority of the Magnuson-Stevens Act.

Background information about the need for revisions to the HMS regulations was provided in the preamble to the proposed rule (67 FR 20716, April 26, 2002), and is not repeated here. By this final rule, NMFS defines operations and regulations for HMS CHBs; requires an Atlantic HMS recreational permit; adjusts the time frame for permit category changes for Atlantic HMS and Atlantic tunas permits; and clarifies the regulations regarding the retention of BFT in the Gulf of Mexico by recreational and HMS CHB vessels. This final rule also amends the regulatory text to clarify the authority to set differential BFT retention limits by vessel type ( e.g. , charter boats, headboats) which was restated less clearly when the HMS regulations were consolidated under 50 CFR part 635 (64 FR 29090, May 28, 1999).

This final rule changes some of the proposed revisions to the regulatory text and some paragraphs have been consolidated. In § 635.4, several proposed revisions to paragraphs (b) and (d) have been revised, the references to certain other permit requirements in the proposed revisions to paragraphs (b) and (d) have been consolidated into paragraph (a), and paragraph (c) has been added. These changes were made to clarify the intent of the regulatory text, to reduce duplication and to facilitate enforcement of the regulations.

NMFS conducted three public hearings on the proposed rule and received written, oral, and electronic comments (through the NMFS e-Comments pilot project website at http://www.nmfs.noaa.gov ) over a 30-day comment period. The majority of the comments were in support of the proposed actions. Responses to specific comments on the issues contained in the proposed rule are provided here.

Comment 1: NMFS has received comments stating that applying the recreational yellowfin tuna (YFT) retention limit to HMS CHB vessels at all times precludes legitimate commercial activity when the vessels are not carrying fee-paying anglers. Commenters have also indicated that some HMS CHB vessels have historically conducted commercial fishing trips for YFT when not operating as a for-hire vessel. Some commenters stated that the HMS FMP did not specifically address commercial fishing by the for-hire fleet and the impacts of prohibiting such commercial fishing on this segment of the fishery. Other commenters stated that HMS CHB vessels should not have the ability to land as many YFT as they can on commercial vessels because the stock is currently defined as fully exploited and an increase in fishing mortality could have adverse effects.

Response: NMFS agrees that applying the recreational YFT retention limit to HMS CHB vessels at all times precludes legitimate commercial activity when the vessels are not carrying fee-paying passengers. The HMS CHB permit is considered a commercial tuna permit in that tunas caught by vessels possessing the permit may be sold. Prior to July 1, 1999, CHB vessels had the ability to retain and sell all YFT that were caught, as long as they met the minimum size requirements. In 2000, commercial handgear landings of YFT totaled 283.7 metric tons (mt), amounting to approximately 4 percent of total U.S. YFT landings, or 9 percent of all commercial landings. Dealer weighout data reported to NMFS included 839 handgear trips that sold YFT from 1998 through 2000, and about 10 percent of these trips were reported by CHBs. Thus, although commercial YFT landings by CHB vessels may be significant to individual vessel operators, they represent less than 1 percent of total U.S. YFT landings.

NMFS has determined that allowing HMS CHB vessels to retain YFT under the commercial limits when not engaged in for-hire activities would not adversely affect the YFT stock. NMFS recognizes the dual nature of the operations of certain vessels issued the HMS CHB permit. Thus, the final rule defines for-hire fishing in a way that would allow such vessels to fish under commercial limits when not engaged in for-hire fishing. The definition of for-hire fishing is similar to that used in other U.S. fisheries operating in the Caribbean, Gulf of Mexico, and South Atlantic. For those vessels that engage in both for-hire and commercial fishing, the impact of this action is positive, as it clarifies the requirements to allow them to participate in both types of fisheries.

Comment 2: Many comments stated that requiring recreational permits for all HMS vessels is long over due. They noted that issuing an HMS Angling category permit will provide critical data by which to accurately assess the status of the Atlantic HMS fishery in the recreational sector. Other commenters stated that this permit requirement will even the playing field and protect the rights of both commercial and recreational fishermen. NMFS also received comments stating that it is essential to know the universe of participants and the total effort that is involved in the recreational sector of HMS fisheries. It was stated that the permits could be used to further our scientific understanding of these HMS. The comment stated that the permit should be merged with the current Atlantic tunas Angling category permit to reduce the burden on the recreational sector. NMFS also received a comment stating that there are other methods of identifying the universe of recreational HMS fishermen, such as coordinating with the states, which would relieve the public of the burden of having to renew the Federal permit on an annual basis.

Response: The HMS recreational permit will enable NMFS to more accurately monitor recreational landings and generate catch and release statistics for all recreational HMS, thereby enhancing HMS management and research efforts. Knowledge of the universe of recreational fishermen and of total fishing effort, catch, and bycatch is incomplete at present, with most data collection currently focused on the Atlantic tunas fisheries. Estimates of some of these parameters are currently made using survey instruments, such as the Large Pelagic Survey (LPS) and the Marine Recreational Fisheries Statistics Survey (MRFSS), as well as reporting from registered tournaments. The current Atlantic tunas angling category permit will be replaced with an Atlantic HMS recreational permit system, which will greatly improve information available to NMFS regarding the recreational Atlantic HMS fisheries by providing an accurate measure of participation, which will improve estimates of effort, catch, and bycatch (including discards) for several important species.

Comment 3: NMFS received a number of comments stating that, due to the nature of the HMS fisheries, effective management is essential throughout the entire range of the regulated species. These commenters agreed that NMFS must exercise jurisdiction over U.S.-flagged vessels regardless of where a vessel is fishing.

Response: NMFS recognizes that state-federal jurisdictional issues are complex. NMFS will work with the individual states to evaluate how permit conditions applied to recreational vessels issued Federal permits may resolve jurisdictional concerns. Upon completing discussions with the states, NMFS may address this issue in a separate rulemaking.

Comment 4: Many comments stated that the different retention limits for inspected headboats are justifiable provided that there is a maximum retention limit placed upon the vessel.

Response: With the BFT retention limits generally defined in terms of the number of fish that can be retained per vessel, a maximum retention limit can be inequitable for U.S. Coast Guard (USCG) inspected vessels authorized to carry a larger number of passengers. This action clarifies the HMS regulations for setting differential retention limits by vessel type ( e.g. , charter boat vs. headboat).

Comment 5: Several comments stated that the E-comments system is a step in the right direction in providing the public with efficient means to submit comments, and in allowing NMFS to take more stakeholders' insights into account when making final rules. Some commenters also stated that having the ability to see previously submitted comments enhances their understanding of the proposed changes and the potential impacts.

Response: NMFS' E-comments pilot project was a success. NMFS will expand the use of this system and will continue to explore ways to use technology to enhance the public's ability to learn about and participate in NMFS rulemaking activities.

Comment 6: Some commenters stated that the HMS CHB recreational trip definition should be coordinated with the regional fishery management councils, NMFS law enforcement, and USCG to minimize the confusion and complexity with different definitions in different fisheries.

Response: NMFS coordinated with other management bodies and enforcement agencies to develop a recreational trip definition for HMS CHB vessels. This issue was discussed at length during the 2001 Advisory Panel (AP) meeting, and there was general consensus among the AP members that defining a charter trip in a manner similar to that used in the NMFS Southeast Region regulations (based on paying passengers aboard and/or the number of persons aboard, with three people or less on board constituting a “commercial” trip and more than three on board constituting a “charter” trip) is appropriate for HMS, especially regarding the YFT bag limit issue.

Comment 7: A few comments received stated that it is unacceptable to charge every fishermen $27.00 per year for the use of the HMS resources. These commenters felt that the fee was a means of generating funds for the Federal government and that NMFS could establish a permit program and obtain the same information without charging a fee. Other commenters stated that the fee is reasonable.

Response: Under the Magnuson-Stevens Act, NMFS is authorized to charge fees for permits to participants in fisheries conducted in the U.S. exclusive economic zone. Administrative costs recovery is a NOAA policy, and the fee is calculated annually to recover the costs attributable to the automated permit and reporting system. Under current law, these funds cannot be directly applied to NMFS' programs, but must be deposited into the General Fund of the United States Treasury.

These regulatory amendments are published under the authority of the Magnuson-Stevens Act, 16 U.S.C. 1801 et seq. and the Atlantic Tunas Convention Act, 16 U.S.C. 971 et seq. The Assistant Administrator (AA) for Fisheries, NOAA, has determined that the regulations contained in this final rule are necessary to implement the recommendations of ICCAT and for the management of the Atlantic HMS fisheries.

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration (SBA) at the proposed rule stage that, if implemented, this final rule would not have a significant economic impact on a substantial number of small entities. No comments were received that would alter the basis for this determination. However, as noted above, a few of the comments received expressed concern about charging a fee for the use of the HMS resources. These commenters felt that the permit fee was a means to generate funds for the Federal government and that NMFS could establish a permit program without charging a fee. However, under the Magnuson-Stevens Act, NMFS is authorized to charge fees for permits issued to participants in fisheries conducted in the U.S. exclusive economic zone. Further, administrative cost recovery is NOAA's policy, and the minimal fee (currently $27 per year) is calculated annually to recover the costs attributable to the automated permit and reporting system. Under current law, these funds cannot be directly applied to NMFS' programs, but must be deposited into the General Fund of the United States Treasury. Given the prior certification to SBA, neither an Initial nor a Final Regulatory Flexibility Analysis was prepared.

This final rule has been determined to be not significant for purposes of Executive Order 12866.

NMFS prepared an Environmental Assessment (EA) for this final rule, and the AA has concluded that there would be no significant impact on the human environment. The EA presents analyses of the anticipated impacts of these final actions and the other alternatives considered. A copy of the EA and other analytical documents prepared for this final rule are available from NMFS ( see ADDRESSES ).

The regulations implemented through this final rule are not expected to increase endangered species or marine mammal interaction rates. On September 7, 2000, NMFS reinitiated formal consultation for all HMS commercial fisheries under section 7 of the Endangered Species Act. A Biological Opinion (BiOp) issued June 14, 2001, concluded that continued operation of the Atlantic pelagic longline fishery is likely to jeopardize the continued existence of endangered and threatened sea turtle species under NMFS jurisdiction. On July 9, 2002 (67 FR 45393), NMFS implemented the reasonable and prudent alternative required by the BiOp. None of the actions in this final rule would have any additional impact on sea turtles as these actions would not likely increase or decrease pelagic longline effort, nor are they expected to shift effort into other fishing areas. No irreversible or irretrievable commitments of resources are expected from the final actions that would adversely affect the implementation of the requirements of the BiOp.

The areas affected by these final actions have been identified as essential fish habitat (EFH) for species managed by the New England Fishery Management Council, the Mid-Atlantic Fishery Management Council, the South Atlantic Fishery Management Council, the Gulf of Mexico Fishery Management Council, the Caribbean Fishery Management Council, and the HMS Management Division of NMFS. It is not anticipated that the actions will have any adverse impacts on EFH; therefore, no consultation is required.

This final rule contains two new collection-of-information requirements and restates several existing reporting requirements subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA). The first new collection of information is approved under OMB Control Number 0648-0327 and is an extension of the Atlantic tunas recreational Angling category permit requirement to include fishermen who fish for all Atlantic HMS, including swordfish, sharks, and billfish, with an estimated public reporting burden of 30 minutes per response for initial permit applications and 6 minutes per response for renewing the permit. The second collection is approved under OMB Control Number 0648-0373 and extends gear-marking requirements to persons acquiring this permit who were not previously subject to a permit requirement, with an estimated response time of 15 minutes per float. This final rule also restates a number of collection-of-information requirements that OMB has previously approved. These requirements and their OMB control numbers and estimated response times are: vessel permits for Atlantic tunas and Atlantic HMS Charter/headboats, initial (30 minutes; 0648-0327) and renewal (6 minutes; 0648-327); vessel permits for Atlantic shark and swordfish (20 minutes; 0648-0205); dealer permits for Atlantic sharks and swordfish (5 minutes; 0648-0205); call in recreational landing reports for Atlantic bluefin tuna (5 minutes; 0648-0328); dealer permits for Atlantic tunas (5 minutes; 0648-0202); gear marking (15 minutes; 0648-0373); and vessel marking (45 minutes; 0648-0373).

All estimates include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate, or any other aspect of this data collection, including suggestions for reducing the burden, to NMFS and OMB ( see ADDRESSES ).

Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to, a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB control number.

The domestic groundfish fisheries in the exclusive economic zone of the Bering Sea and Aleutian Islands management area (BSAI) and Gulf of Alaska (GOA) are managed by NMFS according to the Fishery Management Plan for the Groundfish Fishery of the Bering Sea and Aleutian Islands Area and the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMPs). The FMPs were prepared by the North Pacific Fishery Management Council (Council) under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) and are implemented by regulations governing the U.S. groundfish fisheries at 50 CFR part 679.

Regulations at § 679.21(f) implement the VIP to reduce halibut and red king crab bycatch rates in the groundfish trawl fisheries. Under the incentive program, operators of trawl vessels must not exceed Pacific halibut bycatch rate standards specified for the BSAI and GOA midwater pollock and “other trawl” fisheries and the BSAI yellowfin sole and “bottom pollock” fisheries. Vessel operators also must not exceed red king crab bycatch rate standards specified for the BSAI yellowfin sole and “other trawl” fisheries in Bycatch Limitation Zone 1 (defined in § 679.2). The fisheries included under the incentive program are defined in regulations at § 679.21(f)(2).

Regulations at § 679.21(f)(3) require that halibut and red king crab bycatch rate standards for each fishery included under the incentive program be published in the Federal Register . The standards are in effect for specified seasons within the 6-month periods of January 1 through June 30, and July 1 through December 31. Because the Alaskan groundfish fisheries are closed to trawling from January 1 to January 20 of each year (§ 679.23(c)), the Administrator, Alaska Region, NMFS (Regional Administrator) is promulgating bycatch rate standards for the first half of 2003 effective from January 20, 2003, through June 30, 2003.

As required by § 679.21(f)(4), bycatch rate standards are based on the following information:

(A) Previous years' average observed bycatch rates;

(B) Immediately preceding season's average observed bycatch rates;

(C) The bycatch allowances and associated fishery closures specified under §§ 679.21(d) and (e);

(D) Anticipated groundfish harvests for that fishery;

(E) Anticipated seasonal distribution of fishing effort for groundfish; and

(F) Other information and criteria deemed relevant by the Regional Administrator.

At its October 2002 meeting, the Council reviewed Pacific halibut and red king crab bycatch rates experienced by vessels participating in the fisheries under the incentive program during 1998 2002. The Council recommended that the same rates used in the first half of 2002 be used for the first half of 2003. Along with bycatch rate standards, the industry and the Council are exploring opportunities under fishery cooperatives and other voluntary or mandatory arrangements to control bycatch and optimize the amount of groundfish harvested under halibut and crab bycatch limits. Under § 679.50(k), vessel specific prohibited species bycatch rates from observer data are published weekly on the NMFS, Alaska Region website (www.fakr.noaa.gov). The Council's recommended bycatch rate standards are listed in Table 1.

The Regional Administrator based standards for the first half of 2003 on the anticipated seasonal fishing effort for groundfish species and on the 1998 2002 halibut bycatch rates observed in the trawl fisheries included under the vessel incentive program. In 2002, the BSAI pollock A season was January 20 through June 10 and the pollock fisheries for processing by the inshore and offshore components ended 9 weeks prior to June 10. Directed fishing for pollock for processing by the inshore and offshore components reopened June 10, the start of the 2002 pollock B season. Also, the community development quota (CDQ) pollock fishery ended 10 weeks before the end of the A season and did not resume until mid-July. In 2003, the proposed A season allowance for Bering Sea pollock (40 percent of the directed fishing allowance) would be available January 20 through June 10, with the remainder available June 10 through November 1. As in past years, the directed fishing allowances specified for the first 2003 pollock season likely will be reached before June 10. In the GOA, the 2003 proposed pollock fishery seasons will be from January 20 to February 25 for the “A” season and from March 10 to May 31 for the “B” season.

As in past years, the halibut bycatch rate standard recommended for the BSAI and GOA midwater pollock fisheries (1 kg halibut/mt of groundfish) is higher than the bycatch rates normally experienced by vessels participating in these fisheries. The average halibut bycatch rates for the BSAI 2002 first and second calendar quarter fisheries are equal to 0.08 and 0.05 kg halibut/mt groundfish, respectively, and the average halibut bycatch rates for the GOA 2002 first calendar quarter fishery is equal to 0.02 kg halibut/mt groundfish. In the GOA, directed fishing for pollock did not occur in the second calendar quarters of 2001 or 2002. Thus, the incidental catch rates of halibut during this time period in 2001 and 2002 are zero. The recommended standard is intended to encourage vessel operators to maintain off-bottom trawl operations.

Since 1999, the use of nonpelagic trawl gear has been prohibited when engaged in directed fishing for non-CDQ pollock in the BSAI (§ 679.24(b)(4)). Even with this prohibition, a vessel using pelagic trawl gear may be assigned to the BSAI bottom pollock fishery defined at § 679.21(f)(2) because assignment to the bottom pollock fishery for purposes of the VIP is based on retained catch composition during a weekly period instead of gear type. If the majority of the catch is pollock, but pollock comprises less than 95 percent of the catch, then a haul is assigned to the BSAI bottom pollock fishery. The prohibition on the use of nonpelagic trawl gear has reduced the number of hauls assigned to the BSAI bottom pollock fishery. Since the prohibition became effective, the halibut bycatch rates for this fishery are low compared to the halibut bycatch rate standards established for this fishery, with an average halibut bycatch rate for the 2002 first and second calendar quarter fisheries equal to 0.68 and 0.00 kg halibut/mt groundfish, respectively.

Other factors that could affect the spatial and temporal distribution of directed fishing for pollock include the allocations of pollock among the inshore and offshore fleets under the American Fisheries Act and the implementation of conservation measures that are necessary under the Endangered Species Act to mitigate pollock fishery impacts on Steller sea lions. At this time, the effects of these changes on halibut bycatch rates in the pollock fishery are unknown.

Data available on halibut bycatch rates in the BSAI yellowfin sole fishery during the first and second quarters of 2002 showed an average bycatch rate of 5 and 13 kg halibut/mt of groundfish, respectively. These rates are similar to rates experienced in past years. The Council's recommendation to use the same bycatch rates in 2003 as was used in 2002 would continue bycatch rate standards that represent an acceptable level of halibut bycatch in the yellowfin sole fishery while encouraging vessel operators to continue efforts to avoid unacceptably high halibut bycatch rates while participating in this fishery.

For the “other trawl” fisheries, the Council supported a 30-kg halibut/mt of groundfish bycatch rate standard for the BSAI and a 40 kg halibut/mt of groundfish bycatch rate standard for the GOA. Observer data collected from the 2002 BSAI “other trawl” fishery show first and second quarter halibut bycatch rates of 10 and 26 kg halibut/mt of groundfish, respectively. Observer data collected from the 2002 GOA “other trawl” fishery show first and second quarter halibut bycatch rates of 20 and 61 kg halibut/mt of groundfish, respectively.

Since 1997, with the exception of the GOA second quarter “other trawl” fishery, the average bycatch rates experienced by vessels participating in the GOA and BSAI “other trawl” fisheries for the first half of the year have been lower than the specified bycatch rate standards for these fisheries. The Council and NMFS have determined that the recommended halibut bycatch rate standards for the “other trawl” fisheries, including the second quarter GOA fishery, would continue bycatch rate standards that represent an acceptable level of halibut bycatch in these fisheries and will encourage vessel operators to avoid high halibut bycatch rates while participating in these fisheries. Furthermore, these standards will provide some leniency to those vessel operators who choose to use large mesh trawl gear or other devices as a means to reduce groundfish discard amounts or who are forced to fish in different seasons or fishing grounds under measures implemented to mitigate fishing impacts on Steller sea lions and their critical habitat.

For the BSAI yellowfin sole and “other trawl” fisheries in Zone 1 of the Bering Sea subarea, the Council's recommended red king crab bycatch rate standard is 2.5 crab/mt of groundfish. This standard is unchanged since 1992. The red king crab bycatch rates experienced by the BSAI yellowfin sole fishery in Zone 1 for the first and second quarters of 2002 average 0.47 and 1.76 crab/mt of groundfish, respectively. Although these rates are lower than the standards, these rates are higher than bycatch rates experienced in previous years. The average bycatch rates of red king crab experienced in the BSAI “other trawl” fishery during the first and second quarters of 2002 were 0.12 and 0.72 crab/mt groundfish, respectively. The trawl closures in Zone 1 that were implemented to reduce red king crab bycatch are one of the primary reasons the red king crab bycatch rates remain below the standards.

For the period January through October 2002, the total bycatch of red king crab by trawl vessels fishing in Zone 1 is estimated at 89,944 crab, less than the 97,000 red king crab bycatch limit established for the trawl fisheries in Zone 1. NMFS anticipates that the 2003 red king crab bycatch in Zone 1 will be similar to 2002 because the crab bycatch reduction measures will remain the same.

In spite of anticipated 2003 red king crab bycatch rates being significantly lower than 2.5 red king crab/mt of groundfish, the Council recommended the red king crab bycatch rate standards be maintained at these levels. These levels continue to provide protection against unacceptably high rates of bycatch in these fisheries while providing some leniency to those vessel operators that choose to use large mesh trawl gear as a means to reduce groundfish discard amounts.

The Regional Administrator has determined that the recommended bycatch rate standards are appropriately based on the information and considerations necessary for such determinations under § 679.21(f). Therefore, the Regional Administrator establishes the halibut and red king crab bycatch rate standards for the first half of 2003 as set forth in Table 1. These bycatch rate standards may be revised and these revisions published in the Federal Register when deemed appropriate by the Regional Administrator pending his consideration of the information set forth at § 679.21(f)(4).

As required in regulations at §§ 679.2 and 679.21(f)(5), the 2003 fishing months are specified as the following periods for purposes of calculating vessel bycatch rates under the incentive program:

Month 1: January 1 through February 1;

Month 2: February 2 through March 1;

Month 3: March 2 through March 29;

Month 4: March 30 through May 3;

Month 5: May 4 through May 31;

Month 6: June 1 through June 28;

Month 7: June 29 through August 2;

Month 8: August 3 through August 30;

Month 9: August 31 through September 27;

Month 10: September 28 through November 1;

Month 11: November 2 through November 29; and

Month 12: November 30 through December 31.

This action is taken under 50 CFR 679.21(f) and is exempt from Office of Management and Budget review under Executive Order 12866.

NMFS finds good cause to waive the requirement for prior notice and comment pursuant to 5 U.S.C. 553(b)(B) as such procedures are unnecessary. With the exception of the first quarter BSAI bottom pollock halibut bycatch rate standard that was changed in January 2001, all the first and second quarter halibut and red king crab bycatch rate standards have remained unchanged since the start of the 1994 fishing year. NMFS has not received any written comments on these rate standards during public comment opportunities and did not receive any comments from the public at the council's October 2002 meeting.