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Nuclear Regulatory Commission.
Final rule.
The Nuclear Regulatory Commission (NRC) is amending its regulations to revise the Transnuclear, Inc. (TN) Standardized NUHOMS
This final rule is effective on January 7, 2004.
Jayne M. McCausland, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone (301) 415-6219, e-mail
Section 218(a) of the Nuclear Waste Policy Act of 1982, as amended (NWPA), requires that “[t]he Secretary [of the Department of Energy (DOE)] shall establish a demonstration program, in cooperation with the private sector, for the dry storage of spent nuclear fuel at civilian nuclear power reactor sites, with the objective of establishing one or more technologies that the [Nuclear Regulatory] Commission may, by rule, approve for use at the sites of civilian nuclear power reactors without, to the maximum extent practicable, the need for additional site-specific approvals by the Commission.” Section 133 of the NWPA states, in part, that “[t]he Commission shall, by rule, establish procedures for the licensing of any technology approved by the Commission under Section 218(a) for use at the site of any civilian nuclear power reactor.”
To implement this mandate, the NRC approved dry storage of spent nuclear fuel in NRC-approved casks under a general license, publishing a final rule in 10 CFR Part 72 entitled, “General License for Storage of Spent Fuel at Power Reactor Sites” (55 FR 29181; July 18, 1990). This rule also established a new Subpart L within 10 CFR Part 72, entitled “Approval of Spent Fuel Storage Casks” containing procedures and criteria for obtaining NRC approval of spent fuel storage cask designs. The NRC subsequently issued a final rule on December 22, 1994 (59 FR 65920), that approved the Standardized NUHOMS
On June 29, 2001, the certificate holder (TN) submitted an application to the NRC to amend CoC No. 1004 to add another dry shielded canister, designated NUHOMS
This rule revises the Standardized NUHOMS
The NRC published a direct final rule (68 FR 49683; August 19, 2003) and the companion proposed rule (68 FR 49726) in the
The NRC finds that the amended TN Standardized NUHOMS
The NRC received one comment letter on the proposed rule. A copy of the comment letter is available for review in the NRC Public Document Room. The NRC's responses to the issues raised by the commenter follow. As stated in the proposed rule (68 FR 49726; August 19, 2003), the NRC considered this amendment to be a noncontroversial and routine action. Therefore, the NRC published a direct final rule (68 FR 49683; August 19, 2003) concurrent with the proposed rule (68 FR 49683; August 19, 2003). The NRC indicated that if it received a “significant adverse comment” on the proposed rule, the NRC would publish a document withdrawing the direct final rule and subsequently publish a final rule that addressed comments made on the proposed rule. The NRC believes some of the issues raised by the commenter were “significant adverse comments.” Therefore, the NRC published a notice withdrawing the direct final rule (68 FR 61734; October 30, 2003). This subsequent final rule addresses the issues raised by the commenter that were within the scope of the proposed rule.
The commenter provided specific comments on the Technical Specifications, the SER, and the Final Safety Analysis Report (FSAR). None of these documents were changed as a result of public comments. A review of the comments and the NRC's responses follows:
To support this recommendation, the commenter referred to an inspection of the FSAR which revealed that 0.25g and 0.17g are applied as peak horizontal and vertical ground accelerations on the NUHOMS system. The commenter stated that it is common knowledge in geomechanics that the free field accelerations at the site can be magnified considerably on the pad due to soil-structure interaction effects. The commenter added that TN's analysis of NUHOMS assumes that 0.25g and 0.17g horizontal and vertical accelerations are applied on the horizontal storage module (HSM) basemat; thus, these are the limiting values of on-the-pad accelerations, not “site parameters” as noted in the TS.
The commenter indicates that the SER is ambiguous in addressing when the site-specific seismic parameters are to be taken as design values. In quoting Section 3.1.2.1.7 of the SER, the commenter did not include the second sentence of the SER paragraph. That second sentence of the paragraph states that: “The location of these accelerations is taken at the top of the concrete pad/basemat of the HSM.” What the actual values are is a function of the site which includes the ground accelerations and soil structure interaction effects.
No additional clarification is necessary in the Technical Specifications.
The commenter stated that, based on the information presented in the FSARs and NRC's SER, one cannot conclude with reasonable confidence that the loaded -32PT dry shielded canisters will be able to be removed by the hydraulic ram after the NUHOMS modules have been on the storage pad for their licensed life (20 years).
To support this view, the commenter presented two main technical reasons for pessimism with regard to the removal of the loaded DSCs after 20 years of storage; namely, potential for long-term settlement of the pad and weathering (corrosion) of the DSC/rail interface under extended exposure (20 years) to the elements.
With respect to long-term settlement, the commenter noted that TS 1.2.9 stipulates that the transfer “cask must be aligned with respect to the horizontal storage module (HSM) so that the longitudinal centerline of the DSC in the transfer cask is within ±
As shown in the FSAR, Revision 5, the DSC is supported on two rails that are supported by a structural steel frame in the cavity of the HSM. The frame structure is anchored to the reinforced concrete floor slab, the side walls, and the front wall. Figures 4.2-6 and 4.2-7 illustrate the longitudinal and transverse sections of the HSM with the DSC support structure inside. Figures 4.2-8 and 4.2-9 provide additional
The DSC support structure inside the HSM is adequate for the specified input values to show conformance with § 72.236.
Contrary to the assertion of the commenter, the HSM door is held on by bolts, not straps. Analyses of the HSM and the HSM door are presented in FSAR Sections 8.2.2 and 8.2.3 for tornado and seismic conditions. These analyses show that the entire HSM has been qualified for its design basis tornado and wind loads.
The HSM structure is adequately designed to resist the tornado and seismic loading conditions as required by § 72.236.
The NRC is conducting a comprehensive evaluation that includes consideration of potential consequences of terrorist attacks using various explosives or other terrorist techniques on dry storage casks. As part of this evaluation, the agency is looking at the structural integrity of dry storage cask systems and will consider the need for additional design requirements to enhance licensee security and public safety.
The commenter stated that, in 1997, the NRC established the acceptable method for reliably and conservatively predicting the g-load in a paper titled “NRC Staff Technical Approach for Spent Fuel Storage Cask Drop and Tipover Accident Analysis.” The commenter believed that the method relied on in the FSAR is unconservative and that a much higher value than 75g's will develop if the NUHOMS
The commenter stated that NRC's regulatory practice has been to require a nonmechanistic tipover analysis of casks in long-term storage. According to the NUHOMS FSAR for the NUHOMS Standardized System, each horizontal storage module is freestanding. The height (15 feet) to width radio (9.7 feet wide) of the horizontal storage module is comparable to vertical ventilated systems (that tend to be about 18 feet high by 11 feet diameter) where NRC has always demanded a nonmechanistic tipover analysis. The commenter asked the question why the special dispensation for NUHOMS, with its top heavy structure (a 3-foot thick top roof held in place by slim anchors).
The tipover of a single HSM was considered under specific loading conditions, namely the tornado effects as well as the seismic effects. The discussion on these analyses is included in the FSAR, Revision 5, in Sections 8.2.2.2.A.(i) and 8.2.3.2.B.(iii). The factors of safety are 1.38 and 1.24, respectively, against tipover. In the case of the tipover or liftoff of the 32PT DSC from the DSC support structure rails inside the HSM from a seismic event, the factor of safety is 1.20 as identified in Section M.3.7.3.1.2 of FSAR Amendment 5.
The nonmechanistic tipover analysis of a cask system is performed to ascertain that a cask that is handled, lifted, and moved will not suffer a loss of function under a tipover event. In other words, the specific cause or mechanism of that event such as a failed lifting apparatus or human error in the attachment of the lifting device is not identified as a credible cause. In the case of the NUHOMS design concept, the cask storage system that includes the DSC inside the HSM is never handled, lifted, or moved. The nonmechanistic events for this system are those considered when the DSC is in the TC as indicated in Figure 8.2-3 of the FSAR, Revision 5.
The relevant considerations have been made for the nonmechanistic tipover events.
The commenter indicates that because of the reduced thickness of the cylindrical shell of the 32PT DSC and the full length butt welds, there will be increased ovalization of the DSC shell under dead loads. The implication of the comment is apparently that this increased ovalization could potentially cause the assumed snugly fitting transition rails to become even looser. The DSC was analyzed for dead loads using the ANSYS finite element models shown in Figures 8.1-14a and 8.1-14b in the FSAR. One loading condition considers the fuel loaded DSC in a horizontal position with the dead loads. The fuel-loaded portions of the basket assembly bear on transition rails that then bear on the inner shell of the DSC. Figures M.3.6-3 and M.3.6-4 illustrate the model used with the shell and the basket for a typical support condition of the loaded DSC. Such a model is then analyzed to determine the primary membrane and membrane plus bending stresses as well as for the primary plus secondary stresses. Deformed shapes are also obtained from such analyses.
Figure M.3.6-12 illustrates the stress intensities in the DSC shell and the aluminum transition rails under the dead load of the spent fuel inside the basket assembly as supported in an HSM. This is considered a normal loading condition, and the appropriate stress allowables are 17,500 psi for primary membrane stress, 26,300 psi for membrane plus bending stresses, and 54,300 psi for primary plus secondary stresses. This particular loading condition produces very low stress intensities in the shell material that are 2,650 psi, 6,000 psi, and 7,000 psi, respectively, as identified by stress type above, as shown in Table M.3.6-2. With the worst case thermal effects that can be present under these normal conditions, combined with the dead load, the stress for the primary plus secondary stresses increases to 44,550 psi, still less than the 54,300 psi allowable. Figures M.3.6-12 and M.3.6-13 illustrate the results of the analyses.
The commenter states that snugly fitting aluminum blocks that are the transition rails will be impossible to manufacture. This comment is assumed to have been related to the difficulty that could arise if the positions of the aluminum transition rails were to rely on a “snug fit.” As noted above, the transition rails are positioned controlled via studs attached to the basket assembly. The NRC has no information that would indicate that the solid aluminum transition rails cannot be manufactured by current machining practices to the necessary dimensions and tolerances.
The commenter noted that in direct violation of the above requirement, the Amendment 5 FSAR states in Section 4.1: “During short-term conditions, the fuel temperature limit is 570°C.”
The commenter further stated that calculated temperature values in Table M4.2 indicate that the ISG-11, Rev. 2, limit is exceeded by wide margins under short-term normal conditions.
The commenter recommended that the CoC specify the acceptable neutron absorbers to ensure compliance with the above-cited regulation and not let a CoC holder make the choice of neutron absorber unilaterally.
The NRC staff is aware of a slight potential for chemical or galvanic reaction between the aluminum and stainless steel in contact with borated water spent fuel pools. This reaction may produce small amounts of hydrogen, during loading and unloading operations. Further, the NRC staff is aware of hydrogen being generated from prepassivated Boral. This reaction may also produce small amounts of hydrogen, during loading and unloading operations. As stated in M.3.4 of the SAR, small amounts of hydrogen could be produced during loading and unloading operations. The applicant's analysis showed that a hydrogen concentration of 2.39 percent can be generated. However, the NRC staff recognizes that this amount of hydrogen is below the ignition limit of 4 percent. However, to address the potential hazards associated with hydrogen gas, the applicant employs mitigation actions contained in the generic procedures of SAR Sections M.8.1.3 and M.3.4. These sections state that if hydrogen gas is detected at concentrations above 2.4 percent in air at anytime before or during welding operations, the hydrogen gas will be removed by purging the suspect regions with an inert gas. The NRC staff concluded during this review that the guidance in the generic procedures is adequate to prevent formation of any hydrogen gas that may be generated during welding operations. Hence, the potential reaction of the aluminum with the spent fuel pool water will be minimized and not impact the efficacy of the poison material.
Neutron absorber materials such as Metamic and BorAlyn have undergone qualification testing. The qualification testing included an evaluation for hydrogen generation. The qualification test program was reviewed and approved by the NRC for these two materials.
Finally, any neutron absorbers used inside of an approved cask design must have been shown through qualification testing to be effective and durable during the license period. The tests and data are usually submitted along with the license application and are subject to review and questioning by the NRC staff. After the absorber material has been approved at a particular level of B-10 credit by the NRC, the SER discusses the technical basis for approval. It should be noted that the licensee may potentially use any neutron absorber material at that approved level of B-10 credit in its cask provided it meets the requirements in § 72.48. Therefore, there is no reason to reference the manufacturer/brand name of the neutron absorber in the CoC.
The commenter stated that the a priori exclusion of fire analysis at the HSM is inconsistent with NRC's previous certification reviews of other ventilation systems and that it is also unsafe.
Additionally, in the situation when only the bottom vent is blocked, the water would begin to evaporate from the heat load. This would provide evaporative cooling to the DSC and the upper volume of the HSM. Such a situation would be bounded by the analysis of blocked circulation vents with ambient temperatures at their extremes (−40°F and 117°F) as noted above. In these situations, the maximum temperature gradients experienced by the HSM are 102°F and 99°F, respectively, as shown in Table 8.1-17 of the FSAR.
Certificate No. 1004 is revised by adding the effective date of Amendment Number 5 and adding Model Number NUHOMS
The NRC finds that good cause exists to waive the 30-day deferred effective date provisions of the Administrative Procedure Act (5 U.S.C. 553(d)). The primary purpose of the delayed effective date requirement is to give affected persons;
Under the “Policy Statement on Adequacy and Compatibility of Agreement State Programs” approved by the Commission on June 30, 1997, and published in the
The National Technology Transfer Act of 1995 (Pub. L. 104-113) requires that Federal agencies use technical standards that are developed or adopted by voluntary consensus standards bodies unless the use of such a standard is inconsistent with applicable law or otherwise impractical. In this final rule, the NRC is revising the Standardized NUHOMS
Under the National Environmental Policy Act of 1969, as amended, and the NRC regulations in Subpart A of 10 CFR Part 51, the NRC has determined that this rule is not a major Federal action significantly affecting the quality of the human environment and, therefore, an environmental impact statement is not required. This final rule amends the CoC for the TN Standardized NUHOMS
This final rule does not contain a new or amended information collection requirement subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
If a means used to impose an information collection does not display a currently valid OMB control number, the NRC may not conduct or sponsor, and a person is not required to respond to, the information collection.
On July 18, 1990 (55 FR 29181), the NRC issued an amendment to 10 CFR Part 72 to provide for the storage of spent nuclear fuel under a general license in cask designs approved by the
The alternative to this action is to withhold approval of this amended cask system design and issue an exemption to each general licensee. This alternative would cost both the NRC and the utilities more time and money because each utility would have to submit a request for an exemption, and the NRC would have to review each request.
Approval of this final rule eliminates the problem described and is consistent with previous NRC actions. Further, the direct final rule will have no adverse effect on public health and safety. This direct final rule has no significant identifiable impact or benefit on other Government agencies. On the basis of this discussion of the benefits and impacts of the alternatives, the NRC concludes that the requirements of the final rule are commensurate with the Commission's responsibilities for public health and safety and the common defense and security. No other alternative is believed to be satisfactory. Therefore, this action is recommended.
As required by the Regulatory Flexibility Act of 1980 (5 U.S.C. 605(b)), the Commission certifies that this rule does not have a significant economic impact on a substantial number of small entities. The final rule affects only the licensing and operation of nuclear power plants, independent spent fuel storage facilities, and Transnuclear, Inc. These entities do not fall within the scope of the definition of “small entities” set forth in the Regulatory Flexibility Act or the NRC's size standards (10 CFR 2.810).
The NRC has determined that the backfit rule (10 CFR 50.109 or 10 CFR 72.62) does not apply to this final rule. Therefore, a backfit analysis is not required for this final rule because this amendment does not impose any provisions that would impose backfits as defined in 10 CFR Chapter I.
In accordance with the Small Business Regulatory Enforcement Fairness Act of 1996, the NRC has determined that this action is not a major rule and has verified this determination with the Office of Information and Regulatory Affairs, Office of Management and Budget.
Administrative practice and procedure, Criminal penalties, Manpower training programs, Nuclear materials, Occupational safety and health, Penalties, Radiation protection, Reporting and recordkeeping requirements, Security measures, Spent fuel, Whistleblowing.
Secs. 51, 53, 57, 62, 63, 65, 69, 81, 161, 182, 183, 184, 186, 187, 189, 68 Stat. 929, 930, 932, 933, 934, 935, 948, 953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2071, 2073, 2077, 2092, 2093, 2095, 2099, 2111, 2201, 2232, 2233, 2234, 2236, 2237, 2238, 2282); sec. 274, Pub. L. 86-373, 73 Stat. 688, as amended (42 U.S.C. 2021); sec. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); Pub. L. 95-601, sec. 10, 92 Stat. 2951 as amended by Pub. L. 102-486, sec. 7902, 106 Stat. 3123 (42 U.S.C. 5851); sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332); secs. 131, 132, 133, 135, 137, 141, Pub. L. 97-425, 96 Stat. 2229, 2230, 2232, 2241, sec. 148, Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10151, 10152, 10153, 10155, 10157, 10161, 10168).
Section 72.44(g) also issued under secs. 142(b) and 148(c), (d), Pub. L. 100-203, 101 Stat. 1330-232, 1330-236 (42 U.S.C. 10162(b), 10168(c),(d)). Section 72.46 also issued under sec. 189, 68 Stat. 955 (42 U.S.C. 2239); sec. 134, Pub. L. 97-425, 96 Stat. 2230 (42 U.S.C. 10154). Section 72.96(d) also issued under sec. 145(g), Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10165(g)). Subpart J also issued under secs. 2(2), 2(15), 2(19), 117(a), 141(h), Pub. L. 97-425, 96 Stat. 2202, 2203, 2204, 2222, 2244, (42 U.S.C. 10101, 10137(a), 10161(h)). Subparts K and L are also issued under sec. 133, 98 Stat. 2230 (42 U.S.C. 10153) and sec. 218(a), 96 Stat. 2252 (42 U.S.C. 10198).
Certificate Number: 1004.
Initial Certificate Effective Date: January 23, 1995.
Amendment Number 1 Effective Date: April 27, 2000.
Amendment Number 2 Effective Date: September 5, 2000.
Amendment Number 3 Effective Date: September 12, 2001.
Amendment Number 4 Effective Date: February 12, 2002.
Amendment Number 5 Effective Date: January 7, 2004.
SAR Submitted by: Transnuclear, Inc.
SAR Title: Final Safety Analysis Report for the Standardized NUHOMS
Docket Number: 72-1004.
Certificate Expiration Date: January 23, 2015.
Model Number: Standardized NUHOMS
For the Nuclear Regulatory Commission.
Federal Aviation Administration, DOT.
Final rule.
This amendment adopts a new airworthiness directive (AD), applicable to certain Boeing Model 747 series airplanes, that requires identification of the valves installed on the engine struts as hydraulic supply (fire) shutoff valves for the engine-driven pump, corrective action if necessary, and eventual replacement of discrepant valves with serviceable parts. This action is necessary to prevent leakage of hydraulic (flammable) fluid into an engine fire, which could result in an uncontrolled fire. This action is intended to address the identified unsafe condition.
Effective February 11, 2004.
The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of February 11, 2004.
The service information referenced in this AD may be obtained from Boeing Commercial Airplane Group, P.O. Box 3707, Seattle, Washington 98124-2207. This information may be examined at the Federal Aviation Administration (FAA), Transport Airplane Directorate, Rules Docket, 1601 Lind Avenue, SW., Renton, Washington; or at the Office of the Federal Register, 800 North Capitol Street, NW., suite 700, Washington, DC.
Kenneth W. Frey, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW., Renton, Washington 98055-4056; telephone (425) 917-6468; fax (425) 917-6590.
A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain Boeing Model 747 series airplanes was published in the
Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received.
Two commenters support the proposed AD.
One commenter requests that the proposed AD be revised to include hydraulic supply (fire) shutoff valves, P/Ns 10-3200-1 and 10-3200-2. The commenter states that these additional valves are not manufactured by Circle Seal and should be acceptable replacements. This would provide operators with more options when replacing a discrepant Circle Seal valve.
The FAA agrees. Boeing maintenance drawings permit installation of valve P/Ns 10-3200-1 and 10-3200-2, and Boeing has agreed that those parts are acceptable for replacement of the discrepant Circle Seal valves. In addition, we have determined that those valves do not have the identified unsafe condition. Therefore, we have revised paragraphs (b)(1)(ii) and (b)(3) of this final rule to include valves, P/Ns 10-3200-1 and 10-3200-2, as acceptable replacements for the discrepant Circle Seal valves. Operators should note that Boeing did not include those valves in Boeing Alert Service Bulletin 747-29A2102, dated June 29, 2000 (which was referenced in the proposed AD as the appropriate source of service information for the inspection and corrective actions), because they are easily damaged by improper engine shut down procedures. Such damage necessitates unscheduled replacement of the valves with serviceable valves of the same design or modified valves having design features, which help prevent such damage. These design features were incorporated in valve P/Ns 10-3200-3 and 10-3200-5 (specified in the service bulletin and proposed AD as the appropriate P/N for the replacement valve).
The same commenter requests that the proposed AD be revised to allow operators to continue performing the hydraulic supply (fire) shutoff valve test after four years from valve identification date. The commenter asserts that operational valve replacement should not have a mandatory replacement timetable of four years, and that the option to replace or continue repetitive testing should be left up to the operator to decide.
We do not agree. The Circle Seal valves having P/N S270T010-3 have a known design defect. The failure mode in these valves is not a function of time or number of flight cycles. We can better ensure long-term continued operational safety by modifications or design changes to remove the source of the problem, rather than by repetitive inspections/testing. Long-term inspections/testing may not provide the degree of safety necessary for the transport airplane fleet. This, coupled with a better understanding of the human factors associated with numerous repetitive inspections, has led us to consider placing less emphasis on special procedures and more emphasis on design improvements. No change to the final rule is necessary in this regard.
Another commenter, the airplane manufacturer, requests that we revise paragraph (b)(1)(ii) of the proposed AD. The commenter states that paragraph (b)(1)(ii) of the proposed AD does not allow replacement of an inoperative valve with a valve, P/N S270T010-3, because that paragraph only refers to paragraph 3.I. of the Accomplishment Instructions of Boeing Alert Service Bulletin 747-29A2102. However, paragraph (c) of the proposed AD specifies that a valve, P/N S270T010-3, may be installed if requirements of the AD are accomplished.
We agree. It was our intention to allow a valve, P/N S270T010-3, to be installed if a P/N 10-3200-3 or 10-3200-5 is not available and to allow the valve to remain installed (until replacement per paragraph (b)(3) of the AD) as long as it continues to pass the repetitive hydraulic supply (fire) shutoff valve test, per paragraph 3.J. of the Accomplishment Instructions of Boeing Alert Service Bulletin 747-29A2102. Therefore, we have revised paragraph (b)(1)(ii) of this final rule to allow operators to install a valve, P/N S270T010-3, as a replacement as long as the repeated testing is performed per paragraph 3.J. of the service bulletin in accordance with paragraph (b)(2) of this final rule.
The same commenter requests that we make the following changes to the preamble and paragraph (e) of the proposed AD:
• In the “Discussion” section in the preamble of the proposed AD, identify the model for which the reports indicating malfunctioning valves were received and on which the failure mode was discovered during production testing as Boeing Model 737, 757, and 767 series airplanes, not Model 747 series airplanes. The commenter explains that no reports were received on Model 747 airplanes.
• In paragraph (e) of the proposed AD, omit the duplicate reference to the “sections.”
We partially agree with the commenter's requests:
• We agree that the models for which the original malfunctioning valve reports on which the failure mode was discovered were Model 737, 757, and 767 series airplanes—not Model 747 series airplanes. However, the “Discussion” section is not restated in this final rule, and, therefore, no change to the final rule is necessary in this regard.
• We do not agree that the second reference to the “sections” in paragraph (e) of the proposed AD has been duplicated. The parenthetical reference to sections 21.197 and 21.199 of the Federal Aviation Regulations provides the full Code of Federal Regulations citation for those sections, which is the legal citation. No change to the final rule is necessary in this regard.
Because the cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD, we have revised the Cost Impact section of this final rule to specify an estimate of four work hours for the valve replacement instead of the estimated six work hours specified in the proposed rule for that action. The six work hours specified in the proposed rule included incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions. Those costs are not typically included in AD rulemaking actions.
After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes previously described. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.
On July 10, 2002, the FAA issued a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's airworthiness directives system. The regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. However, for clarity and consistency in this final rule, we have retained the language of the NPRM regarding that material.
We have reviewed the figures we have used over the past several years to calculate AD costs to operators. To account for various inflationary costs in the airline industry, we find it necessary to increase the labor rate used in these calculations from $60 per work hour to $65 per work hour. The cost impact information, below, reflects this increase in the specified hourly labor rate.
There are approximately 681 airplanes of the affected design in the worldwide fleet. The FAA estimates that 130 airplanes of U.S. registry will be affected by this AD, that it will take approximately 1 work hour per airplane to identify the valve, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $8,450, or $65 per airplane.
The cost impact figure discussed above is based on assumptions that no operator has yet accomplished any of the requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.
Replacing a valve, if required, will take approximately 4 work hours, at an average labor rate of $65 per work hour. Required parts and hydraulic fluid will cost approximately $4,438 per valve. Based on these figures, the cost impact of replacing a valve is estimated to be $4,698.
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
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
49 U.S.C. 106(g), 40113, 44701.
This AD applies to each airplane identified in the preceding applicability provision, regardless of whether it has been modified, altered, or repaired in the area subject to the requirements of this AD. For airplanes that have been modified, altered, or repaired so that the performance of the requirements of this AD is affected, the owner/operator must request approval for an
To prevent leakage of hydraulic (flammable) fluid into an engine fire, which could result in an uncontrolled fire, accomplish the following:
(a) Within 6 months after the effective date of this AD, check maintenance records or perform a general visual inspection of each engine strut to determine whether any discrepant valve is installed as a hydraulic supply (fire) shutoff valve for the engine-driven pump. A discrepant valve is a Circle Seal valve part number (P/N) S270T010-3 or a valve that cannot be readily identified. Identify the part in accordance with Boeing Alert Service Bulletin 747-29A2102, dated June 29, 2000. If no discrepant valve is installed, no further work is required by this paragraph.
For the purposes of this AD, a general visual inspection is defined as: “A visual examination of an interior or exterior area, installation, or assembly to detect obvious damage, failure, or irregularity. This level of inspection is made from within touching distance unless otherwise specified. A mirror may be necessary to enhance visual access to all exposed surfaces in the inspection area. This level of inspection is made under normally available lighting conditions such as daylight, hangar lighting, flashlight, or droplight and may require removal or opening of access panels or doors. Stands, ladders, or platforms may be required to gain proximity to the area being checked.”
(b) For any discrepant valve found during the part identification required by paragraph (a) of this AD:
(1) Within 6 months after the effective date of this AD, do a hydraulic supply (fire) shutoff valve test, in accordance with paragraph 3.J. of the Accomplishment Instructions of Boeing Alert Service Bulletin 747-29A2102, dated June 29, 2000.
(i) If the valve passes the test, repeat the test in accordance with paragraph (b)(2) of this AD.
(ii) If the valve does not pass the test: Before further flight, replace the valve with a serviceable valve, P/N S270T010-3, 10-3200-1, 10-3200-2, or a valve identified in paragraph 3.I. of the Accomplishment Instructions of the service bulletin; and do a hydraulic supply (fire) shutoff valve test; in accordance with the Accomplishment Instructions of the service bulletin. Replacement with a serviceable valve, P/N 10-3200-1, 10-3200-2, or a valve identified in paragraph 3.I. of the Accomplishment Instructions of the service bulletin, terminates the repetitive tests required by paragraph (b)(2) of this AD for that valve. If a P/N S270T010-3 valve is installed as a replacement, repeated testing must be performed per paragraph 3.J. of the Accomplishment Instructions of the service bulletin in accordance with paragraph (b)(2) of this AD.
(2) Repeat the test specified in paragraph (b)(1) of this AD on each discrepant valve at intervals not to exceed 6 months, until the actions specified by paragraph (b)(3) of this AD have been accomplished.
(3) Within 4 years after identifying the valve as required by paragraph (a) of this AD: Replace each discrepant valve with a serviceable valve, P/N 10-3200-1, 10-3200-2, or a valve identified in paragraph 3.I. of the Accomplishment Instructions of the service bulletin, and do a hydraulic supply (fire) shutoff valve test, in accordance with the Accomplishment Instructions of the service bulletin. Replacement with a serviceable valve, P/N 10-3200-1, 10-3200-2, or a valve identified in paragraph 3.I. of the Accomplishment Instructions of the service bulletin terminates the repetitive tests required by paragraph (b)(2) of this AD for that valve.
(c) As of the effective date of this AD, no person may install a Circle Seal valve P/N S270T010-3 on any airplane unless the requirements of this AD are accomplished for that valve.
(d) An alternative method of compliance or adjustment of the compliance time that provides an acceptable level of safety may be used if approved by the Manager, Seattle Aircraft Certification Office (ACO), FAA. Operators shall submit their requests through an appropriate FAA Principal Maintenance Inspector, who may add comments and then send it to the Manager, Seattle ACO.
Information concerning the existence of approved alternative methods of compliance with this AD, if any, may be obtained from the Seattle ACO.
(e) Special flight permits may be issued in accordance with §§ 21.197 and 21.199 of the Federal Aviation Regulations (14 CFR 21.197 and 21.199) to operate the airplane to a location where the requirements of this AD can be accomplished.
(f) Unless otherwise specified in this AD, the actions shall be done in accordance with Boeing Alert Service Bulletin 747-29A2102, dated June 29, 2000. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies may be obtained from Boeing Commercial Airplane Group, P.O. Box 3707, Seattle, Washington 98124-2207. Copies may be inspected at the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington; or at the Office of the Federal Register, 800 North Capitol Street, NW., suite 700, Washington, DC.
(g) This amendment becomes effective on February 11, 2004.
Federal Aviation Administration, DOT.
Final rule.
This amendment adopts a new airworthiness directive (AD), applicable to certain Boeing Model 737-600, 737-700, 737-800, 757-200, and 757-300 series airplanes, that requires replacing existing video distribution unit (VDU) connectors with new, improved connectors or new wire assemblies (jumpers), and performing related actions, as applicable. This action is necessary to prevent a short circuit in a VDU connector and consequent arcing and damage to wiring within the connector, which could result in damage to adjacent systems or structure and possible smoke or fire in the airplane cabin. This action is intended to address the identified unsafe condition.
Effective February 11, 2004.
The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of February 11, 2004.
The service information referenced in this AD may be obtained from Boeing Commercial Airplane Group, P.O. Box 3707, Seattle, Washington 98124-2207. This information may be examined at the Federal Aviation Administration (FAA), Transport Airplane Directorate, Rules Docket, 1601 Lind Avenue, SW., Renton, Washington; or at the Office of the Federal Register, 800 North Capitol Street, NW., suite 700, Washington, DC.
Binh V. Tran, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW., Renton,
A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain Boeing Model 737-600, 737-700, 737-800, 757-200, and 757-300 series airplanes was published in the
Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received. Two commenters state that they are not affected by the proposed AD.
One commenter requests that the “Parts Installation” paragraph be removed from the proposed AD. The commenter states that it installed the VDU connectors with the subject connectors on its Model 737-800 series airplanes after delivery. Upon issuance of the proposed AD, the commenter contacted Matsushita, which stated that the problem is not caused by the connector, and that the information supplied by the airplane manufacturer is misleading and erroneous. Matsushita gave the commenter the following reasons for the cause of the unsafe condition addressed by the proposed AD: (1) A 90 degree angled backshell installed by the airplane manufacturer; (2) a 90 degree angled co-ax contact installed by the airplane manufacturer; and (3) lack of drip loop on the airplane manufacturer's installations. The commenter asserts that it has not experienced any problems identified in the proposed AD on any of its 36 Model 737-800 airplanes with the subject VDU connectors installed since December 1999.
The FAA does not agree to remove the “Parts Installation” paragraph. A failure analysis report, which we obtained from an independent lab, showed the failure of the connector, part number (P/N) CAMA11W1P, was caused by moisture entering the connector and causing the electrical short circuit between cavities 1 (115VAC) and 2 (ground). Moisture was able to penetrate the connector because the connector has no wire or facial seal. The two dielectric halves of the connector not being bonded together precipitated the failure, allowing moisture to be trapped between cavities 1 and 2. Therefore, we find moisture ingress to be the primary failure mode of the connector; however, we agree that the installation of 90 degree angled backshell and co-ax contact are contributing factors to that failure. We have determined that the connector should not be installed on any model airplane listed in the applicability of this AD. No change to this final rule is necessary in this regard.
One commenter, the manufacturer of the connector, requests that the “Parts Installation” paragraph of the proposed AD be revised to read, “As of the effective date of this AD, no person shall install a VDU connector, part number CAMA11W1P, together with a 90 degree backshell or co-ax contact, on Model 737 or 757 series airplanes.” The commenter asserts that this change will clarify that the intent of the proposed AD is not against the use of connector P/N CAMA11W1P on the VDU, but against the use of that connector in a particular application/configuration.
The commenter references certain statements in the “Explanation of Requirements of Proposed Rule” and “Differences Between Service Bulletin and Proposed AD” paragraphs of the proposed AD, and states that it is in 100 percent agreement with those key statements/goals. However, the commenter asserts that, as written, the proposed AD is not specific enough to accurately address the unsafe condition as defined. And, if issued as written, the proposed AD will inappropriately impact supplemental type certificates (STC), which have type designs that are in complete compliance with the most current regulations, guidance materials, and intent—while providing no increase to operational safety. The reason the commenter supplies for these assertions is the airplane manufacturer's installation design/practices, because the type design data do not properly account for installation details. Without such details, like strain relief or drip loops, the commenter asserts the problem is worsened by the airplane manufacturer's use of a 90 degree co-ax contact on the connector (and in some cases the connector is oriented vertically), effectively channeling condensate directly into the connector. The commenter asserts that its STCs properly account for these detail requirements, to assure (by design) a repeatable installation for operational safety.
The commenter also points out that, on February 29, 2000, that the Civil Airworthiness Authority (CAA) for the United Kingdom, issued emergency airworthiness directive 005-02-2000 for the same connector and for identical reasons as listed in the proposed AD. After a detailed review with the airplane manufacturer and in coordination with the connector and VDU manufacturers, the CAA issued Revision 1 to its emergency AD on March 8, 2000, to specifically apply to “ * * * connectors P/N CAMA11W1P with a 90 degree co-ax contact * * * .”
We do not agree to revise the “Parts Installation” paragraph. As previously stated, although the unsafe condition may be worsened when the connector is used in certain installation designs, we find the design of the connector itself to be the primary cause of the unsafe condition described in the AD. Therefore, it is our intent that the connector, P/N CAMA11W1P, should not be installed on any affected model airplane. No change to this final rule is necessary in this regard.
One commenter requests that the compliance time specified in the “Parts Installation” paragraph of the proposed AD be extended to give vendors additional time to develop a replacement plan for the connector. The commenter states that its Model 737 and 757 fleet is not equipped with video systems with the specified VDU connectors, and thus has no objection to the action required by paragraph (e) of the proposed AD. However, the commenter objects to using the effective date of the AD as the deadline for installing the connectors on any airplane type. The commenter gives no justification for the request or objection.
We do not agree. Once we have determined that an unsafe condition exists, our normal policy is not to allow that condition to be introduced into the fleet. In developing the technical information on which every AD is based, we consider the availability of spare parts that the AD will require to be installed. When we have determined that those (safe) parts are immediately available to operators, our policy prohibits installation of the unsafe parts after the effective date of the AD. We have confirmed that the manufacturer has developed and manufactured a replacement part that is available to operators for installation.
Additionally, the applicability of this AD affects only Model 737 and 757 series airplanes listed in the service bulletins referenced in the applicability
One commenter states that it has one airplane that has had the in-flight entertainment system removed, so it is not subject to the proposed AD. However, the commenter requests that the FAA revise the proposed AD to include language to address this situation.
We do not agree. The language in Note 1 of the proposed AD already contains language pertaining to “airplanes that have been modified, altered, or repaired so that the performance of the requirements of this AD is affected. * * *” As stated in that note, the commenter may request approval of an alternative method of compliance in accordance with paragraph (d) of this final rule. No change to this final rule is necessary in this regard.
We have changed the service bulletin citations throughout this final rule to include references to Appendices A and B. That information was inadvertently omitted from the service bulletin citations listed in the proposed AD.
After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes previously described. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.
On July 10, 2002, the FAA issued a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's airworthiness directives system. The regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. However, for clarity and consistency in this final rule, we have retained the language of the NPRM regarding that material.
After the proposed rule was issued, we reviewed the figures we use to calculate the labor rate to do the required actions. To account for various inflationary costs in the airline industry, we find it appropriate to increase the labor rate used in these calculations from $60 per work hour to $65 per work hour. The economic impact information, below, has been revised to reflect this increase in the specified hourly labor rate.
There are approximately 280 airplanes of the affected design in the worldwide fleet. The FAA estimates that 28 airplanes of U.S. registry will be affected by this AD, that it will take approximately 16 work hours per airplane to accomplish the required connector replacement, and that the average labor rate is $65 per work hour. Required parts will cost between $334 and $13,944 per airplane. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be between $1,374 and $14,984 per airplane.
The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions. The manufacturer may cover the cost of replacement parts associated with this AD, subject to warranty conditions. Manufacturer warranty remedies may also be available for labor costs associated with this AD. As a result, the costs attributable to the AD may be less than stated above.
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
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
49 U.S.C. 106(g), 40113, 44701.
This AD applies to each airplane identified in the preceding applicability provision, regardless of whether it has been modified, altered, or repaired in the area subject to the requirements of this AD. For airplanes that have been modified, altered, or repaired so that the performance of the requirements of this AD is affected, the owner/operator must request approval for an alternative method of compliance in accordance with paragraph (d) of this AD. The request should include an assessment of the effect of the modification, alteration, or repair on the unsafe condition addressed by this AD; and, if the unsafe condition has not been eliminated, the request should include specific proposed actions to address it.
To prevent a short circuit in a video distribution unit (VDU) connector and consequent arcing and damage to wiring within the connector, which could result in
(a) For Model 737-600, -700, and -800 series airplanes: Within 18 months after the effective date of this AD, replace existing VDU connectors with new, improved connectors, and install a drip loop in the wiring at the new VDU connectors, per Part 2 of the Accomplishment Instructions of Boeing Service Bulletin 737-23A1169, Revision 2, including Appendices A and B, dated June 21, 2001.
(b) For Model 757-200 and -300 series airplanes: Within 18 months after the effective date of this AD, replace existing VDU connectors with new, improved connectors, or with new wire assemblies (jumpers), as applicable, per Part 2 of the Accomplishment Instructions of Boeing Alert Service Bulletin 757-23A0060, Revision 1, including Appendices A and B, dated January 11, 2001 (for Model 757-200 series airplanes); or Boeing Alert Service Bulletin 757-23A0061, Revision 1, including Appendices A and B, dated January 11, 2001 (for Model 757-300 series airplanes); as applicable.
(c) As of the effective date of this AD, no person shall install a VDU connector, part number CAMA11W1P, on any airplane.
(d) An alternative method of compliance or adjustment of the compliance time that provides an acceptable level of safety may be used if approved by the Manager, Seattle Aircraft Certification Office (ACO), FAA. Operators shall submit their requests through an appropriate FAA Principal Maintenance Inspector, who may add comments and then send it to the Manager, Seattle ACO.
Information concerning the existence of approved alternative methods of compliance with this AD, if any, may be obtained from the Seattle ACO.
(e) Special flight permits may be issued in accordance with §§ 21.197 and 21.199 of the Federal Aviation Regulations (14 CFR 21.197 and 21.199) to operate the airplane to a location where the requirements of this AD can be accomplished.
(f) The actions shall be done in accordance with Boeing Service Bulletin 737-23A1169, Revision 2, including Appendices A and B, dated June 21, 2001; Boeing Alert Service Bulletin 757-23A0060, Revision 1, including Appendices A and B, dated January 11, 2001; or Boeing Alert Service Bulletin 757-23A0061, Revision 1, including Appendices A and B, dated January 11, 2001; as applicable. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies may be obtained from Boeing Commercial Airplane Group, P.O. Box 3707, Seattle, Washington 98124-2207. Copies may be inspected at the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington; or at the Office of the Federal Register, 800 North Capitol Street, NW., suite 700, Washington, DC.
(g) This amendment becomes effective on February 11, 2004.
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA adopts a new airworthiness directive (AD) for certain Kidde Aerospace P/N 898052 hand-held halon fire extinguishers that are utilized on aircraft. This AD requires you to remove the affected fire extinguishers from service and would prevent you from using them in the future. This AD is the result of information that shows that the discharge time of the affected fire extinguishers exceeds the maximum allowable discharge time. The problem is due to incomplete crimping of the siphon tube. We are issuing this AD to remove from service fire extinguishers that had this incomplete crimping of the siphon tube. If not removed from service, these fire extinguishers could function at diminished levels and compromise the level of safety in an emergency situation.
This AD becomes effective on February 20, 2004.
The Director of the Federal Register approved the incorporation by reference of certain publications listed in the regulation as of February 20, 2004.
You may get the service information identified in this AD from Kidde Aerospace, Kidde Technologies, Inc., 4200 Airport Drive, NW., Wilson, North Carolina 27896; telephone: (252) 237-7004.
You may view the AD docket at FAA, Central Region, Office of the Regional Counsel, Attention: Rules Docket No. 2003-CE-19-AD, 901 Locust, Room 506, Kansas City, Missouri 64106. Office hours are 8 a.m. to 4 p.m., Monday through Friday, except Federal holidays.
Charles H. Bowser, Flight Test Engineer, FAA, Atlanta Aircraft Certification Office, One Crown Center, 1895 Phoenix Boulevard, Suite 450, Atlanta, Georgia 30349; telephone: (770) 703-6047; facsimile: (770) 703-6097.
The FAA has received information of problems with certain Kidde Aerospace P/N 898052 hand-held halon fire extinguishers that are utilized on aircraft. This information shows that the discharge time of the affected fire extinguishers exceeds the maximum allowable discharge time.
The problem is due to incomplete crimping of the siphon tube. Specifically, worn crimping tools were used to crimp the siphon tube. This is causing leakage between the siphon tube and the valve.
If these fire extinguishers that had this incomplete crimping of the siphon tube are not removed from service, then the fire extinguishers could function at diminished levels and compromise the level of safety in an emergency situation.
We issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply certain Kidde Aerospace P/N 898052 hand-held halon fire extinguishers that are utilized on aircraft. This proposal was published in the
We provided the public the opportunity to participate in the
Several commenters recommend extending the compliance time from 6 months to 12 months, while one commenter recommends an extension to 18 months. The commenters state that the extension is necessary due to the large number of affected extinguishers and the logistics involved with AD compliance.
The FAA agrees that 12 months would be a more realistic compliance time.
We are changing the final rule AD action accordingly.
Several commenters state that the current wording for the fire extinguisher applicability of “manufactured from 1995 through 2002 and have a serial number of W-389653 or lower” is confusing. The commenters recommend the following language to more fully depict the intended applicability:
Fire extinguishers affected by this AD are serial numbers V-432001 through W-389653 inclusive that were manufactured sometime from 1995—2002. Serial numbers are identified by the Underwriter's Laboratories (UL) number printed on the label and are listed in succession. Other variants of the UL number with prefixes other than “V” or “W” are not affected by this AD.
The FAA concurs that the recommended language more accurately reflects the fire extinguisher serial number range.
We are changing the final rule AD action accordingly.
One commenter recommends adding a dash number to the existing fire extinguisher part number. The commenter states that this would allow you to distinguish between pre- and post-bulletin modifications.
The FAA does not believe that this is necessary since the replacement fire extinguishers will have their own separate and unique serial numbers.
We are not making any changes to the final rule AD action.
One commenter states that FAA's estimate of 2 workhours to locate, access, pack, ship, receive the new unit, store, and reinstall the new unit is too high. The commenter states that 1 workhour is a conservative estimate.
The FAA agrees that 1 workhour more adequately reflects the time necessary to do the work.
We are changing the final rule AD action accordingly.
One commenter recommends that the AD should more clearly reference the procedures in the service information for returning any fire extinguishers. Specifically, the commenter states that you should not discharge the fire extinguishers, and you should not ship them back to Kidde because a special collection point is already established. This information is outlined in the service information.
The FAA agrees that the return procedures should reference that in the service information.
We are changing the final rule AD action accordingly.
We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for the changes discussed above and minor editorial corrections. We have determined that these changes and minor corrections:
On July 10, 2002, the FAA published a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's AD system. This regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. This material previously was included in each individual AD. Since this material is included in 14 CFR part 39, we will not include it in future AD actions.
We estimate that this AD affects 38,695 airplanes in the U.S. registry.
We estimate the following costs to remove the affected fire extinguishers from service (including replacing with another unit):
The compliance time of this AD will be “within the next 12 months after February 20, 2004 (the effective date of this AD).”
Although the slow discharge of the fire extinguishers is only a problem during flight, the unsafe condition is not
We have determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.
For the reasons discussed above, I certify that this AD:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the 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.
We prepared a summary of the costs to comply with this AD and placed it in the AD Docket. You may get a copy of this summary by sending a request to us at the address listed under
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
49 U.S.C. 106(g), 40113, 44701.
(a) This AD becomes effective on February 20, 2004.
(b) None.
(c) This AD affects aircraft that are certificated in any category and incorporate hand-held halon fire extinguishers with the following:
(1) Part number (P/N) 898052; and
(2) A serial number in the range of V-432001 through W-389653 inclusive that were manufactured sometime from 1995-2002.
(i) Serial numbers are identified by the Underwriter's Laboratories (UL) number printed on the label and are listed in succession.
(ii) Other variants of the UL number with prefixes other than “V” or “W” are not affected by this AD.
(d) This AD is the result of information that shows that the discharge time of the affected fire extinguishers exceeds the maximum allowable discharge time. The problem is due to incomplete crimping of the siphon tube. We are issuing this AD to remove from service fire extinguishers that have this incomplete crimping of the siphon tube. If not removed from service, these fire extinguishers could function at diminished levels and compromise the level of safety in an emergency situation.
(e) To address this problem, you must accomplish the following:
(f) You may request a different method of compliance or a different compliance time for this AD by following the procedures in 14 CFR 39.13. Send your request to the Manager, Atlanta Aircraft Certification Office, FAA. For information on any already approved alternative methods of compliance, contact Charles H. Bowser, Flight Test Engineer, FAA, Atlanta Aircraft Certification Office, One Crown Center, 1895 Phoenix Boulevard, Suite 450, Atlanta, Georgia 30349; telephone: (770) 703-6047; facsimile: (770) 703-6097.
(g) You must do the actions required by this AD per Kidde Aerospace Service Bulletin 898052-26-449, dated October 7, 2002. The Director of the Federal Register approved the incorporation by reference of this service bulletin in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. You may get a copy from Kidde Aerospace, Kidde Technologies, Inc., 4200 Airport Drive, NW, Wilson, North Carolina 27896; telephone: (252) 237-7004. You may review copies at FAA, Central Region, Office of the Regional Counsel, 901 Locust, Room 506, Kansas City, Missouri 64106; or at the Office of the Federal Register, 800 North Capitol Street, NW, suite 700, Washington, DC.
Federal Aviation Administration, DOT.
Final rule; request for comments.
This amendment adopts a new airworthiness directive (AD) that is applicable to the Airbus airplanes listed above. This action requires a one-time inspection for cracking of the lower outboard flange of gantry No. 4 in the main landing gear bay area, and repair if necessary. This action is necessary to find and fix such cracking, which could result in reduced structural integrity of the fuselage, and consequent rapid decompression of the airplane. This action is intended to address the identified unsafe condition.
Effective January 22, 2004.
The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of January 22, 2004.
Comments for inclusion in the Rules Docket must be received on or before February 6, 2004.
Submit comments in triplicate to the Federal Aviation Administration (FAA), Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2003-NM-248-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056. Comments may be inspected at this location between 9 a.m. and 3 p.m., Monday through Friday, except Federal holidays. Comments may be submitted via fax to (425) 227-1232. Comments may also be sent via the Internet using the following address:
The service information referenced in this AD may be obtained from Airbus, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France. This information may be examined at the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington; or at the Office of the Federal Register, 800 North Capitol Street, NW., suite 700, Washington, DC.
Tony Jopling, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington 98055-4056; telephone (425) 227-2190; fax (425) 227-1149.
The Direction Gĕnĕrale de l'Aviation Civile (DGAC), which is the airworthiness authority for France, notified the FAA that an unsafe condition may exist on certain Model A300 B2 and B4 series airplanes, and A300-600 series airplanes. The DGAC advises that cracks have been found on the lower outboard flange of gantry No. 4 in the main landing gear bay area on several Model A300-600 airplanes. During a maintenance inspection on one airplane, a 670-mm crack was found on the left side of gantry beam No. 4 between frame (FR) 52 and FR 53. The crack extended along the outboard flange of the beam. A 710-mm crack between FR 52 and FR 54 was found during an inspection done on another airplane after detection of an air leak. Subsequent to detection of the cracks, an emergency inspection was done by the manufacturer in a part of the structure between FR 52 and FR 53 that was not previously inspected, which revealed a 227-mm crack. Such cracking, if not found and fixed, could result in reduced structural integrity of the fuselage, and consequent rapid decompression of the airplane. This action is intended to address the identified unsafe condition.
The subject area on certain Model A300 B2 and B4 series airplanes is almost identical to that on affected Model A300-600 series airplanes. Therefore, those airplanes may be subject to the same unsafe condition revealed on the Model A300-600 series airplanes.
Airbus has issued All Operators Telex (AOT) A300-53A0371, Revision 01 (for Model A300 B2 and B4 series airplanes); and AOT A300-53A6145, Revision 01 (for Model A300-600 series airplanes); both dated September 10, 2003. The AOTs describe procedures for a detailed visual inspection of the left and right sides of the lower outboard flange of gantry No. 4 in the MLG bay area between FR 51 and FR 54. The AOTs recommend contacting Airbus if any cracks are found, in addition to specifying that flight with certain cracks is allowed and temporary repairs are available in case of large crack findings. The AOTs also recommend reporting inspection results to Airbus. The DGAC classified these AOTs as mandatory and issued French airworthiness directive 2003-356(B), dated September 17, 2003, to ensure the continued airworthiness of these airplanes in France.
These airplane models are manufactured in France and are type certificated for operation in the United States under the provisions of § 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the DGAC has kept us informed of the situation described above. We have examined the findings of the DGAC, reviewed all available information, and determined that AD action is necessary for products of this type design that are
Since an unsafe condition has been identified that is likely to exist or develop on other airplanes of the same type design registered in the United States, this AD is being issued to find and fix cracking of the lower outboard flange of gantry No. 4, which could result in reduced structural integrity of the fuselage, and consequent rapid decompression of the airplane. This AD requires a one-time inspection for cracking of the lower outboard flange of gantry No. 4 in the main landing gear bay area, and repair if necessary. The actions are required to be accomplished in accordance with the AOTs described previously, except as discussed below. This AD also includes a reporting requirement.
Unlike the procedures described in the AOTs, this AD will not permit further flight if cracks are detected in the lower outboard flange of gantry No. 4. We have determined that, because of the safety implications and consequences associated with such cracking, any cracked flange must be repaired or modified before further flight.
The French airworthiness directive and the AOTs recommend accomplishing the inspection before the accumulation of 8,000 flights “since new” or within 14 days after the effective date of the French airworthiness directive. However, this AD requires accomplishment of the inspection before the accumulation of 8,000 total flight cycles since the date of issuance of the original Airworthiness Certificate or the date of issuance of the Export Certificate of Airworthiness, whichever is first; with a grace period of 30 days after the effective date of this AD. This decision is based on our determination that “since new” may be interpreted differently by different operators. We find that our proposed terminology is generally understood within the industry and records will always exist that establish these dates with certainty. In addition, we have determined that a 30 day grace period will ensure an acceptable level of safety and is an appropriate interval of time wherein the inspection can be accomplished during scheduled maintenance intervals for the majority of affected operators.
Although the AOTs specify that operators may contact the manufacturer for disposition of certain repair conditions, this AD requires operators to repair those conditions per a method approved by either us or the DGAC (or its delegated agent). In light of the type of repair that would be required to address the unsafe condition, and consistent with existing bilateral airworthiness agreements, we have determined that, for this AD, a repair approved by either us or the DGAC will be acceptable for compliance with this AD.
This AD is considered to be interim action. The inspection reports that are required by this AD will enable the manufacturer to obtain better insight into the nature, cause, and extent of the cracking, and eventually to develop final action to address the unsafe condition. Once final action has been identified, we may consider further rulemaking.
Since a situation exists that requires the immediate adoption of this regulation, it is found that notice and opportunity for prior public comment hereon are impracticable, and that good cause exists for making this amendment effective in less than 30 days.
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 shall identify the Rules Docket number and be submitted in triplicate to the address specified under the caption
Submit comments using the following format:
• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.
• For each issue, state what specific change to the AD is being requested.
• Include justification (e.g., reasons or data) for each request.
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.
Comments wishing the FAA to acknowledge receipt of their comments submitted in response to this rule must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2003-NM-248-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
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
49 U.S.C. 106(g), 40113, 44701.
To find and fix cracking of the lower outboard flange of gantry No. 4, which could result in reduced structural integrity of the fuselage, and consequent rapid decompression of the airplane, accomplish the following:
(a) At the later of the times specified in paragraphs (a)(1) and (a)(2) of this AD: Do a one-time detailed inspection for cracking of the lower outboard flange of gantry No. 4 in the main landing gear bay area per paragraph 4.2.1 of Airbus All Operators Telex (AOT) A300-53A0371, Revision 01 (for Model A300 B2 and B4 series airplanes); or AOT A300-53A6145, Revision 01 (for Model A300-600 series airplanes); both dated September 10, 2003; as applicable.
(1) Before the accumulation of 8,000 total flight cycles since the date of issuance of the original Airworthiness Certificate or the date of issuance of the Export Certificate of Airworthiness, whichever is first.
(2) Within 30 days after the effective date of this AD.
For the purposes of this AD, a detailed inspection is defined as: “An intensive visual examination of a specific structural area, system, installation, or assembly to detect damage, failure, or irregularity. Available lighting is normally supplemented with a direct source of good lighting at intensity deemed appropriate by the inspector. Inspection aids such as mirror, magnifying lenses, etc., may be used. Surface cleaning and elaborate access procedures may be required.”
(b) Repair any cracking found during the inspection required by paragraph (a) of this AD before further flight, per a method approved by either the Manager, International Branch, ANM-116, FAA, Transport Airplane Directorate; or the Direction Générale de l'Aviation Civile (or its delegated agent).
(c) Submit a report of the findings (both positive and negative) of the inspection required by paragraph (a) of this AD to Airbus Customer Services, SEA21, Attention: Mr. Davide Cavazzini, fax number +33+ (0) 5.61.93.36.14, at the applicable time specified in paragraph (c)(1) or (c)(2) of this AD. The report must include the inspection results, a description of any cracking found, the airplane serial number, and the number of flight cycles on the airplane. Under the provisions of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501
(1) If the inspection was done after the effective date of this AD: Submit the report within 30 days after the inspection.
(2) If the inspection was done before the effective date of this AD: Submit the report within 30 days after the effective date of this AD.
(d) In accordance with 14 CFR 39.19, the Manager, International Branch, ANM-116, is authorized to approve alternative methods of compliance for this AD.
(e) Unless otherwise provided in this AD, the actions shall be done in accordance with Airbus All Operators Telex A300-53A0371, Revision 01, dated September 10, 2003; or Airbus All Operators Telex A300-53A6145, Revision 01, dated September 10, 2003; as applicable. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies may be obtained from Airbus, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France. Copies may be inspected at the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington; or at the Office of the Federal Register, 800 North Capitol Street, NW., suite 700, Washington, DC.
The subject of this AD is addressed in French airworthiness directive 2003-356(B), dated September 17, 2003.
(f) This amendment becomes effective on January 22, 2004.
Federal Aviation Administration, DOT.
Final rule.
This amendment adopts a new airworthiness directive (AD), applicable to certain BAE Systems (Operations) Limited Model BAe 146 and Avro 146-RJ series airplanes. This AD requires one-time inspections of the inner webs and flanges at frames 15, 18, 41, and 43 for evidence of corrosion or cracking; and corrective actions if necessary. This action is necessary to detect and correct corrosion and cracking of the inner webs and flanges at frames 15, 18, 41, and 43, which could result in reduced structural integrity of the airplane. This action is intended to address the identified unsafe condition.
Effective February 11, 2004.
The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of February 11, 2004.
The service information referenced in this AD may be obtained from British Aerospace Regional Aircraft American Support, 13850 Mclearen Road, Herndon, Virginia 20171. This information may be examined at the Federal Aviation Administration (FAA), Transport Airplane Directorate, Rules Docket, 1601 Lind Avenue, SW., Renton, Washington; or at the Office of the Federal Register, 800 North Capitol Street, NW., suite 700, Washington, DC.
Todd Thompson, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington 98055-4056; telephone (425) 227-1175; fax (425) 227-1149.
A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain BAE Systems (Operations) Limited Model BAe 146 and Avro 146-RJ series
Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were submitted in response to the proposal or the FAA's determination of the cost to the public.
After careful review of the available data, the FAA has determined that air safety and the public interest require the adoption of the rule as proposed.
The FAA estimates that 55 airplanes of U.S. registry will be affected by this AD, that it will take approximately 10 work hours per airplane to accomplish the required inspections, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of this AD on U.S. operators is estimated to be $35,750, or $650 per airplane.
The cost impact figure discussed above is based on assumptions that no operator has yet accomplished any of the requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.
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
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
49 U.S.C. 106(g), 40113, 44701.
To detect and correct corrosion and cracking of the inner webs and flanges at frames 15, 18, 41, and 43, which could result in reduced structural integrity of the airplane, accomplish the following:
(a) Except as provided by paragraph (c) of this AD: Do a detailed inspection of frames 15, 18, 41, and 43 (including any applicable repair) by accomplishing all actions specified in the Accomplishment Instructions of BAE Systems (Operations) Limited Inspection Service Bulletin ISB.53-165, dated December 11, 2001. Do the inspection at the applicable time specified in paragraph (b) of this AD.
For the purposes of this AD, a detailed inspection is defined as: “An intensive visual examination of a specific structural area, system, installation, or assembly to detect damage, failure, or irregularity. Available lighting is normally supplemented with a direct source of good lighting at intensity deemed appropriate by the inspector. Inspection aids such as mirror, magnifying lenses, etc., may be used. Surface cleaning and elaborate access procedures may be required.”
(b) Do the inspection required by paragraph (a) of this AD at the applicable time specified in paragraph D., “Compliance,” of the service bulletin, except where the service bulletin specifies “time period from first flight” or “years of age,” this AD establishes the thresholds in terms of years after the date of issuance of the original Airworthiness Certificate or the date of issuance of the Export Certificate of Airworthiness, whichever is earlier. Where the service bulletin specifies compliance times relative to the date of the service bulletin, this AD requires compliance times relative to the effective date of this AD.
(c) If any discrepancy is found during any inspection required by paragraph (a) of this AD, before further flight, accomplish the applicable repair in accordance with the Accomplishment Instructions of BAE Systems (Operations) Limited Inspection Service Bulletin ISB.53-165, dated December 11, 2001. If the service bulletin specifies to contact the manufacturer for appropriate action, before further flight, repair per a method approved by the Manager, International Branch, ANM-116, FAA, Transport Airplane Directorate; or the Civil Aviation Authority (or its delegated agent).
(d) Although the service bulletin referenced in this AD specifies to submit information to the manufacturer, this AD does not include such a requirement.
(e) In accordance with 14 CFR 39.19, the Manager, International Branch, ANM-116, FAA, is authorized to approve alternative methods of compliance for this AD.
(f) Unless otherwise specified in this AD, the actions shall be done in accordance with BAE Systems (Operations) Limited Inspection Service Bulletin ISB.53-165, dated December 11, 2001. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies may be obtained from British Aerospace Regional Aircraft American Support, 13850 Mclearen Road, Herndon, Virginia 20171. Copies may be inspected at the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington; or at the Office of the Federal Register, 800 North Capitol Street, NW., suite 700, Washington, DC.
The subject of this AD is addressed in British airworthiness directive 004-12-2001.
(g) This amendment becomes effective on February 11, 2004.
Federal Aviation Administration, DOT.
Final rule; request for comments.
This amendment adopts a new airworthiness directive (AD) for Eurocopter Deutschland (Eurocopter) Model MBB-BK-117 A-1, A-3, A-4, B-1, B-2, and C-1 helicopters with a certain tail rotor (TR) transmission or intermediate (INT) gearbox installed. This action requires inspecting the magnetic plug of the TR transmission and INT gearbox for metal particles before the first flight of each day. Replacing an unairworthy TR transmission, INT gearbox, or bearings with airworthy parts is also required within 30 days after the effective date of this AD. This amendment is prompted by a report of production-related cracks on the cage of bearings installed in certain TR transmissions and INT gearboxes. This condition, if not corrected, could result in cracking and separation of the bearing cage, failure of a bearing, failure of the TR transmission or INT gearbox, and subsequent loss of control of the helicopter.
Effective January 22, 2004.
Comments for inclusion in the Rules Docket must be received on or before March 8, 2004.
Submit comments in triplicate to the Federal Aviation Administration (FAA), Office of the Regional Counsel, Southwest Region, Attention: Rules Docket No. 2003-SW-21-AD, 2601 Meacham Blvd., Room 663, Fort Worth, Texas 76137. You may also send comments electronically to the Rules Docket at the following address:
Uday Garadi, Aviation Safety Engineer, FAA, Rotorcraft Directorate, Safety Management Group, Fort Worth, Texas 76193-0110, telephone (817) 222-5123, fax (817) 222-5961.
Luftfahrt-Bundesamt (LBA), the airworthiness authority for the Federal Republic of Germany, notified the FAA that an unsafe condition may exist on Eurocopter Model MBB-BK-117 A-1, A-3, A-4, B-1, B-2, and C-1 helicopters. The LBA advises that Eurocopter has been informed by the manufacturer of the TR transmission and INT gearbox that production-related cracks were found on the bearing cage, which could lead to parts of the cage separating and entering the TR transmission or INT gearbox.
Eurocopter has issued Alert Service Bulletin No. ASB-MBB-BK117-30-108, Revision 1, dated July 4, 2003, which specifies replacing the TR transmission and INT gearbox or replacing the bearings in the TR transmission and INT gearbox by September 30, 2003. The alert service bulletin also specifies inspecting the magnetic plug before the first flight each day until the subject bearings are replaced. The LBA classified this alert service bulletin as mandatory and issued AD 2003-161, dated April 29, 2003, to ensure the continued airworthiness of these helicopters in the Federal Republic of Germany.
These helicopter models are manufactured in the Federal Republic of Germany, and are type certificated for operation in the United States under the provisions of 14 CFR 21.29 and the applicable bilateral agreement. Pursuant to the applicable bilateral agreement, the Federal Republic of Germany has kept the FAA informed of the situation described above. The FAA has examined the findings of the Federal Republic of Germany, reviewed all available information, and determined that AD action is necessary for products of these type designs that are certificated for operation in the United States.
The previously described unsafe condition is likely to exist or develop on other helicopters of these same type designs registered in the United States. Therefore, this AD is being issued to prevent cracking and separation of the bearing cage, failure of a bearing, failure of the TR transmission or INT gearbox, and subsequent loss of control of the helicopter. This AD requires inspecting the magnetic plugs of the TR gearbox and INT gearbox for metal particle deposits before the first flight of each day. If a small amount of fuzz is found on the magnetic plug, the magnetic plug must be cleaned and may be reinstalled. If there is an amount of fuzz that exceeds the amount depicted in “Pos. A” of Figure 1 of this AD, then replacing the INT gearbox, TR transmission, or bearing, part number (P/N) 4639310006, with serial number (S/N) 3246 through 3598, is required within 30 days after the effective date of this AD. 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. Therefore, the inspections and replacement, if necessary, are required before further flight and this AD must be issued immediately.
Since a situation exists that requires the immediate adoption of this regulation, it is found that notice and opportunity for prior public comment hereon are impracticable, and that good cause exists for making this amendment effective in less than 30 days.
On July 10, 2002, the FAA issued a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's AD system. The regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. Because we have now included this material in part 39, we no longer need to include it in each individual AD.
The FAA estimates that this AD will affect 127 helicopters of U.S. registry. It will take approximately 0.5 work hours to inspect both magnetic plugs, and removing and replacing the affected bearings will take approximately 6 work hours to accomplish at an average labor rate of $65 per work hour. Assuming 30 days of inspections, the total cost of inspections will be $123,825. Required parts (3 bearings for each helicopter) will cost approximately $1,147 per helicopter. Based on these assumptions, we estimate the total cost of this AD on U.S. operators to be $319,023. The manufacturer has stated in its alert service bulletin that bearings will be replaced at no cost. Including the warranty coverage, the estimated total cost impact on U.S. operators will be $173,354.
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.
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. 2003-SW-21-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
Air transportation, Aircraft, Aviation safety, Safety.
49 U.S.C. 106(g), 40113, 44701.
(a) Tail rotor (TR) transmission, part number (P/N) 4639003001 or 4639003007, with serial number (S/N) 900 through 932 plus all S/Ns overhauled or repaired after July 15, 2001, and bearing, P/N 4639310006, S/N 3246 through 3598;
(b) Intermediate (INT) gearbox, P/N 4639002001 or 4639002005, with S/N 902 through 928 plus all S/Ns overhauled or repaired after July 15, 2001, and bearing, P/N 4639310006 with S/N 3246 through 3598.
To prevent cracking, separation of the bearing cage, failure of a bearing, failure of the TR transmission or INT gearbox, and subsequent loss of control of the helicopter, accomplish the following:
(a) Until you do paragraph (b) of this AD, before the first flight of each day, inspect the magnetic plugs of the TR transmission and INT gearbox for metal particles deposits by reference to Figure 1 of this AD.
(1) If you find a small amount of fine fuzz as shown in “Pos. A” of Figure 1 of this AD, clean the magnetic plug and reinstall it after ensuring that the O-ring is correctly positioned and there is no other damage.
(2) If you find an amount of fuzz as depicted in “Pos. B” or “Pos. C” or metal chip(s) as depicted in “Pos. D” through “Pos. G” or a combination of both fuzz and chips, do paragraph (b) of this AD.
(b) No later than February 23, 2004, replace bearing, P/N 4639310006 with S/N 3246 through 3598, with an airworthy bearing or replace the affected TR transmission or INT gearbox with an airworthy TR transmission and INT gearbox that does not contain the affected bearing.
(c) To request a different method of compliance or a different compliance time for this AD, follow the procedures in 14 CFR 39.19. Contact the Safety Management Group, Rotorcraft Directorate, FAA, for information about previously approved alternative methods of compliance.
(d) This amendment becomes effective on January 22, 2004.
The subject of this AD is addressed in Luftfahrt-Bundesamt (Federal Republic of Germany) AD 2003-161, dated April 29, 2003.
Department of State.
Final rule.
This rule amends the International Traffic in Arms Regulations (ITAR) to remove from U.S. Munitions List (USML) jurisdiction certain quartz rate sensors when the sensors are integrated into and included as an integral part of a commercial standby inertial navigation system for use on a civil aircraft or exported solely for integration into such systems. Based on a case-by-case review, the Department will review requests to determine if a sensor is eligible for removal from the USML under this regulatory change. In such cases, the Department will provide the exporter with written confirmation of this determination and the export of the sensors will be under the licensing jurisdiction of the Department of Commerce. In all other cases, these items will continue to be covered by the
January 7, 2004.
Interested parties are invited to submit written comments to the Department of State, Directorate of Defense Trade Controls, Office of Defense Trade Controls Policy, ATTN: Regulatory Change, Category VIII, 12th Floor, SA-1, Washington, DC 20522-0112 (202-663-2700). Comments will be accepted at any time.
Ann Ganzer, Director, Office of Defense Trade Controls Policy, Bureau of Political-Military Affairs, Department of State (202) 663-2700.
In conjunction with a request for Commodity Jurisdiction, the Department of State has determined that certain quartz rate sensors otherwise controlled under the ITAR are not subject to the licensing jurisdiction of the Department of State when integrated into backup inertial navigations systems for civil aircraft or exported solely for integration into such systems. This determination will be made on a case-by-case basis in response to requests for consideration under this regulatory change. U.S. exporters are requested to submit a General Correspondence to make a formal request for consideration by the Directorate of Defense Trade Controls. These requests will be favorably considered only where the sensor is an integral part of the commercial system or is exported solely for integration into such a system and is important for the safe operation of the civil aircraft. In making this determination, other factors will also be considered. Among them is the extent to which the sensors can be extracted without damage and used for a significant military application, the extent to which diversion of the sensors alone or in small quantities poses a threat to the national security or foreign policy interests of the United States, and the scope of controls that would be applicable to the commercial system if licensing jurisdiction were transferred to the Department of Commerce. Exports of quartz rate sensors determined by the State Department to not be subject to USML controls will be subject to the licensing jurisdiction of the Department of Commerce whether the sensors are being exported for integration abroad or being exported as an integral part of a commercial standby inertial navigation system.
This amendment involves a foreign affairs function of the United States and therefore, is not subject to the procedures required by 5 U.S.C. 553 and 554. It is exempt from review under Executive Order 12866 but has been reviewed internally by the Department to ensure consistency with the purposes thereof. This rule does not require analysis under the Regulatory Flexibility Act or the Unfunded Mandates Reform Act.
It has been found not to be a major rule within the meaning of the Small Business Regulatory Enforcement Fairness Act of 1996. It will not have substantial direct effects on the States, 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 rule does not have sufficient federalism implications to warrant application of the consultation provisions of Executive Orders 12372 and 13132.
Arms and munitions, Exports.
Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 (22 U.S.C. 2752, 2778, 2797); E.O. 11958, 42 FR 4311; 3 CFR 1977 Comp. p. 79; 22 U.S.C. 2658; Pub. L. 105-261, 112 Stat. 1920.
(e) * * *
(1) Category XII(d) or Category VIII(e) does not include quartz rate sensors if such items:
(i) Are integrated into and included as an integral part of a commercial standby instrument system for use on civil aircraft prior to export or exported solely for integration into such a commercial standby instrument system, and
(ii) When the exporter has been informed in writing by the Department of State that a specific quartz rate sensor or a quartz rate sensor integrated into a commercial standby instrument system has been determined to be subject to the licensing jurisdiction of the Department of Commerce in accordance with this section.
(2) For controls in these circumstances, see the Commerce Control List. In all other circumstances, quartz rate sensors remain under the licensing jurisdiction of the Department of State under Category XII(d) or Category VIII(e) of the U.S. Munitions List and subject to the controls of the ITAR.
Federal Communications Commission.
Final rule.
This document grants three proposals that allot new FM channels to Silverton, Texas; Leedey, Oklahoma; and Memphis, Texas. The Audio Division, at the request of Maurice Salsa, allots Channel 252A at Silverton, Texas, as the community's first local aural transmission service.
Effective February 6, 2004.
Deborah Dupont, Media Bureau, (202) 418-2180.
This is a synopsis of the Commission's Report and Order, MB Docket Nos. 03-72, 03-73, and 03-75, adopted December 18, 2003, and released December 23, 2003. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Information Center, Portals II, 445 12th Street, SW., Room CY-
The Audio Division further allots, at the request of Robert Fabian, Channel 297A at Leedey, Oklahoma, as the community's first local aural transmission FM service.
The Audio Division further allots, at the request of Maurice Salsa, Channel 283A at Memphis, Texas, as the community's third local aural transmission service.
Radio, Radio broadcasting.
47 U.S.C. 154, 303, 334 and 336.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Final rule.
NMFS issues a final rule to correct the definition of the area in which salmon fishing regulations implementing the Fishery Management Plan for the Salmon Fisheries in the EEZ off the Coast of Alaska (Salmon FMP) apply, to remove the words “high seas” wherever they appear in the salmon fishing regulations, and to remove an obsolete reference to the North Pacific Fisheries Act of 1954 from the salmon fishing regulations. This action is necessary to fully implement Amendment 3 to the Salmon FMP. The intended effect of this action is regulatory consistency with the provisions of Amendment 3 to the Salmon FMP and improved conservation and management of the salmon fisheries off the coast of Alaska.
Effective February 6, 2004.
Copies of the Regulatory Impact Review (RIR) may be obtained from the Alaska Region, NMFS, P.O. Box 21668, Juneau, AK 99802 1668, Attn: Lori Durall, 907-586-7247.
Patsy A. Bearden, 907-586-7228 or e-mail at
The salmon fishery in the EEZ off the Coast of Alaska is managed pursuant to the Salmon FMP prepared by the North Pacific Fishery Management Council (Council) under the authority of the Magnuson-Stevens Fishery Conservation and Management Act, 16 U.S.C. 1801
The original Salmon FMP provided for the management of the salmon fisheries throughout the EEZ off the coast of Alaska except for the extreme western part of the EEZ west of 175° E. long., near Attu Island. This °extreme western part of the EEZ was excluded because this area was then under the jurisdiction of the International Convention for the High Sea Fisheries of the North Pacific Ocean. The original name of the salmon FMP was the “Fishery Management Plan for the High Seas Salmon Fishery off the Coast of Alaska East of 175 Degrees East Longitude.”
Over time, the international regime affecting salmon fisheries changed and the Council revisited its salmon management policies. In 1989, the Council adopted Amendment 3 to the FMP which, among other things, renamed the FMP to “Fishery Management Plan for the Salmon Fisheries in the EEZ off the Coast of Alaska,” deferred regulation of the salmon fisheries in the EEZ to the State of Alaska, and extended the geographic jurisdiction of the Salmon FMP over waters of the EEZ west of 175° E. long. The Secretary of Commerce (Secretary) approved Amendment 3 to the FMP in 1990, and published a final rule on November 15, 1990 (55 FR 47773), implementing associated measures and removing all the specific management measures from 50 CFR part 674. The 1990 implementing regulations inaccurately omitted both the new title of the FMP and the extension of the geographic jurisdiction of the FMP. No public comment was received on this or on any of the other changes made by Amendment 3, and the entire amendment was non-controversial.
In compliance with required consolidation of all Federal fishery regulations pursuant to President Clinton's Regulatory Reform Initiative, NMFS combined all existing fisheries regulations for the EEZ off Alaska, including part 674, into a new 50 CFR part 679 (62 FR 19686, April 23, 1997). This final rule recodified the two regulatory provisions that NMFS erroneously failed to revise in its 1990 rulemaking that implemented Amendment 3. Moreover, NMFS erred again in the regulatory consolidation by redefining the “High Seas Salmon Management Area” as “the portion of the EEZ off Alaska east of 175° E. long.” This new error reinstated the definition of the Salmon FMP management area
NMFS published a correction notice in the
NMFS published a proposed rule in the
Appendix C of the Salmon FMP elaborated this intent and delineated the boundaries of the three fisheries at False Pass (South Peninsula), Cook Inlet, and Copper River. The regulations implementing the amended Salmon FMP captured this intent in a provision now codified at 50 CFR 679.7(h)(1), which provides that it is unlawful to fish for salmon “in violation of the North Pacific Fisheries Act of 1954.” The inference is that fishing in compliance with the North Pacific Fisheries Act that is, in the three “historic” net fisheries that technically extend into the EEZ but which are managed by the State of Alaska is not prohibited by the Federal salmon regulations.
In the proposed rule, NMFS proposed to remove § 679.7(h)(1) and delete the reference to the North Pacific Fisheries Act. This would have the unintended consequence of foreclosing fishing that the Salmon FMP expressly authorizes in the three net fisheries identified in section 2.2.2 and Appendix C. Without the reference to the North Pacific Fisheries Act, NMFS is left with the language of 50 CFR § 679.3(f)(3) , which states, in part, “Because no commercial fishing for salmon is allowed in the EEZ west of Cape Suckling, all commercial salmon fishing west of Cape Suckling must take place in Alaska's territorial sea and, consequently, is subject to Alaska's management authority.” This sentence in § 679.3(f)(3) is not accurate in view of Section 2.2.2 of the Salmon FMP, but since it is only descriptive and not proscriptive it does not operate to foreclose fishing that currently is allowed under the Salmon FMP and § 679.7(h)(1). The exemption for the three historical net fisheries may be less clear in the absence of § 679.7(h)(1). The commenter makes suggestions for changes to the final rule regulatory text to ensure that fishing for salmon in the three net fishing areas is not prohibited.
NMFS agrees with the commenter that the proposed rule would have resulted in the unintended prohibitions of fishing for salmon in the three historical fisheries. NMFS makes the suggested changes to the final rule implementing the Salmon FMP at § 679.3(f) and § 679.7(h)(2).
This final rule has been determined to be not significant for purposes of Executive Order 12866.
The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration that this rule does not have a significant economic impact on a substantial number of small entities. This final rule extends the jurisdiction of the Salmon FMP to the EEZ waters west of 175° E. long. This final rule will have no effect on any small entities because there has not been any domestic salmon fishing in these waters for 40 years, and NMFS expects no salmon fishing to develop in these waters in the forseeable future. No comments were received regarding the economic impact of the final rule. As a result, a regulatory flexibility analysis was not prepared.
NMFS is aware of no existing relevant Federal rules which duplicate, overlap, or conflict with this final rule.
This regulation does not impose new recordkeeping or reporting requirements on the regulated small entities.
The legislative authority for this action is the Magnuson-Stevens Fishery Conservation and Management Act, Public Law 94 265, 16 U.S.C. 1801 (Magnuson-Stevens Act).
Alaska, Fisheries, International organizations, Recordkeeping and reporting.
16 U.S.C. 773 et. seq., 1801
(i)
(2) State of Alaska laws and regulations that are consistent with the Salmon FMP and with the regulations in this part apply to vessels of the United States that are fishing for salmon in the Salmon Management Area.
(1) For purposes of the salmon fishery, fishing for salmon for sale or barter.
(1) With respect to the salmon fishery, that amount of any species of salmon
(1) The West Area is the area of the EEZ off the coast of Alaska west of the longitude of Cape Suckling (143°53′36″ W). It includes the EEZ in the Bering Sea, Chukchi Sea, and Beaufort Sea, as well as the EEZ in the North Pacific Ocean west of Cape Suckling.
(2) The East Area is the area of the EEZ off the coast of Alaska east of the longitude of Cape Suckling (143°53′36″ W).
(f)
(3) The Salmon Fishery east of Cape Suckling is administered in close coordination with ADF&G's administration of the State of Alaska's regulations governing the salmon troll fishery off Southeast Alaska. For State of Alaska regulations specifically governing the salmon troll fishery, see 5 Alaska Administrative Code 30 (Yakutat Area), and 5 Alaska Administrative Code 33 (Southeastern Alaska Area).
(4) Commercial fishing for salmon in the EEZ west of Cape Suckling is not allowed except in three net fisheries managed by the State of Alaska as described in Section 2.2.2 and Appendix C of the Salmon FMP. For State of Alaska regulations governing these fisheries, see 5 Alaska Administrative Code 09 (Alaska Peninsula), 5 Alaska Administrative Code 21 (Cook Inlet), and 5 Alaska Administrative Code 24 (Prince William Sound).
(2) Engage in fishing for salmon in the Salmon Management Area defined at § 679.2 and Figure 23 to this part, except to the extent authorized by § 679.4(h) or applicable State of Alaska regulations.
a. In § 679.3:
Paragraph (f)(1).
b. In § 679.4:
Paragraph (a)(1)(v), paragraphs (h) heading and introductory text, (h)(1), (h)(1)(iii), (h)(3), (h)(4), (h)(5)(i), (h)(5)(i)(A), (h)(5)(i)(B), (h)(5)(i)(C), (h)(5)(ii), (h)(6) introductory text, (h)(6)(iv), (h)(7)(i), (h)(8), (h)(10), (h)(13) heading introductory text, (h)(13)(i), (h)(13)(ii)(A), (h)(13)(ii)(E), (h)(14)(i), (h)(15)(i), (h)(15)(iii), (h)(15)(vii), and (h)(16)(i).
Nuclear Regulatory Commission.
Proposed rule.
The Nuclear Regulatory Commission (NRC) proposes to amend its regulations to incorporate by reference the 2001 Edition and the 2002 and 2003 Addenda of Division 1 of Section III of the American Society of Mechanical Engineers (ASME) Boiler and Pressure Vessel Code (BPV Code); the 2001 Edition and the 2002 and 2003 Addenda of Division 1 rules of Section XI of the ASME BPV Code; and the 2001 Edition and the 2002 and 2003 Addenda of the ASME Code for Operation and Maintenance of Nuclear Power Plants (OM Code) to provide updated rules for constructing and inspecting components and testing pumps and valves in light-water cooled nuclear power plants.
Comments regarding the proposed amendment must be submitted by March 22, 2004. Comments received after this date will be considered if it is practical to do so, but the Commission is only able to ensure consideration of comments received on or before this date.
You may submit comments by any one of the following methods. Please include the following number RIN 3150-AH24 in the subject line of your comments. Comments on rulemakings submitted in writing or in electronic form will be made available to the public in their entirety on the NRC rulemaking web site. Personal information will not be removed from your comments.
Mail comments to: Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, ATTN: Rulemakings and Adjudications Staff.
E-mail comments to:
Hand deliver comments to: 11555 Rockville Pike, Rockville, Maryland 20852, between 7:30 am and 4:15 pm Federal workdays. (Telephone (301) 415-1966).
Fax comments to: Secretary, U.S. Nuclear Regulatory Commission at (301) 415-1101.
Publicly available documents related to this rulemaking may be viewed electronically on the public computers located at the NRC's Public Document Room (PDR), O1 F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland. The PDR reproduction contractor will copy documents for a fee. Selected documents, including comments, may be viewed and downloaded electronically via the NRC rulemaking web site at
Publicly available documents created or received at the NRC after November 1, 1999, are available electronically at the NRC's Electronic Reading Room at
Stephen Tingen, Division of Engineering, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. Alternatively, you may contact Mr. Tingen at (301) 415-1280, or via e-mail at: sgt@nrc.gov.
Section 50.55a requires, in part, that nuclear power plant licensees—
(1) Construct Class 1, 2, and 3 components in accordance with the provisions provided in Section III, Division 1, “Requirements for Construction of Nuclear Power Plant Components,” of the ASME BPV Code;
(2) Inspect Class 1, 2, and 3, metal containment (MC), and concrete containment (CC) components in accordance with the provisions provided in Section XI, Division 1, “Requirements for Inservice Inspection of Nuclear Power Plant Components,” of the ASME BPV Code; and
(3) Test Class 1, 2, and 3 pumps and valves in accordance with the provisions provided in the ASME OM Code.
In a final rule dated September 26, 2002 (67 FR 60520), the NRC revised § 50.55a to incorporate by reference the 1997 Addenda through 2000 Addenda of Division 1 rules of Section III of the ASME BPV Code; the 1997 Addenda through 2000 Addenda of Division 1 rules of Section XI of the ASME BPV Code; and the 1997 Addenda through 2000 Addenda of the ASME OM Code.
In this rulemaking, the NRC proposes to amend § 50.55a to incorporate by reference the 2001 Edition and the 2002 and 2003 Addenda of Division 1 rules of Section III of the ASME BPV Code; the 2001 Edition and the 2002 and 2003 Addenda of Division 1 rules of Section XI of the ASME BPV Code; and the 2001 Edition and the 2002 and 2003 Addenda of the ASME OM Code. The NRC has reviewed the 2001 Edition and the 2002 and 2003 Addenda of the ASME BPV Code, Sections III and XI, and the ASME OM Code, and concludes that—
(1) Section III of the ASME BPV Code is acceptable for use subject to proposed modifications and limitations;
(2) Section XI of the ASME BPV Code is acceptable for use subject to proposed modifications and limitations; and
(3) The ASME OM Code is acceptable for use with no new proposed limitations or modifications.
The proposed amendment would revise § 50.55a(b)(1) to incorporate by reference the 2001 Edition and the 2002
The proposed amendment would revise the existing modification and limitation for weld leg dimensions and independence of inspection in §§ 50.55a(b)(1)(ii) and 50.55a(b)(1)(v), respectively, to apply to the 2001 Edition through 2003 Addenda of Section III, Division 1, of the ASME BPV Code. The modification and limitation in §§ 50.55a(b)(1)(ii) and 50.55a(b)(1)(v) would continue to apply to the 2001 Edition through 2003 Addenda of Section III because the earlier Code provisions that these regulations are based on were not revised in the 2001 through 2003 Addenda of Section III to address the underlying issues which led to the NRC to impose the modification and limitation on the ASME Code provisions.
The proposed amendment would revise the existing limitation for seismic design in § 50.55a(b)(1)(iii) to limit its application to the 1994 Addenda through 2000 Addenda of Section III, Division 1, of the ASME BPV Code. The limitation in § 50.55a(b)(1)(iii) would not apply to the 2001 Edition through 2003 Addenda of Section III because the earlier Code provisions that this regulation was based on were revised in the 2001 through 2003 Addenda of Section III to address a number of the underlying issues which led the NRC to impose the limitation on the ASME Code provisions. New modifications and limitations proposed by the NRC on seismic design provisions in the 2001 through 2003 Addenda of Section III are discussed in § 50.55a(b)(1)(vi) below.
The proposed amendment would add modifications and limitations, § 50.55a(b)(1)(vi)(A) through (F), that prohibit or supplement as discussed below the use of certain piping design criteria for reversing dynamic loads in the 2001 Edition and the 2002 and 2003 Addenda of Section III of the ASME BPV Code. These provisions involve the alternative method for evaluating reversing dynamic loads. Reversing dynamic loads are defined as those loads which cycle about a mean value and include building filtered loads, seismic (earthquake) loads, and reflected wave loads.
The alternative method for evaluating reversing dynamic loads was revised in the 1994 Addenda of Section III. The new provisions in the 1994 Addenda were based, in part, on industry evaluations of the data from tests performed under sponsorship of the Electric Power Research Institute (EPRI) and NRC. After reviewing changes in the 1994 Addenda, the NRC determined that the alternative method was unacceptable because evaluation of the test data did not support the changes. An ASME special working group was established to reevaluate the bases for the alternative method for evaluating reversing dynamic loads that was revised in the 1994 Addenda. An NRC sponsored research program was also initiated to evaluate the technical issues regarding the adequacy of the new provisions in the 1994 Addenda. These technical issues are summarized in NUREG/CR-5361, “Seismic Analysis of Piping,” dated June 1998. The technical issues summarized in NUREG/CR-5361 were subsequently evaluated by ASME committees, and Section III of the ASME BPV Code has been revised to resolve the technical issues in NUREG/CR-5361. However, in the NRC's view, several technical issues in NUREG/CR-5361 have not been satisfactorily resolved. These technical issues are discussed below.
NB-3200, NB-3600, NC-3600, and ND-3600 of the 2001 Edition and the 2002 and 2003 Addenda allow the alternative method for evaluating reversing dynamic loads to be applied to calculations for piping subject to loads generated by reflected waves caused by flow transients (sudden closure of a valve is an example of a condition that could create a flow transient). Members on ASME committees used data from tests performed under the sponsorship of EPRI and NRC that focused on seismic loading conditions to demonstrate that use of the alternative method for evaluating reversing dynamic loads for piping subject to loads provided acceptable design margins. As discussed in NUREG/CR-5361, the limited amount of test data does not support a finding that the design margin is adequate for these types of loadings. Therefore, the NRC is proposing to disallow the use of the alternative method for evaluating reversing dynamic loads for piping subject to loads generated by reflected waves caused by flow transients in NB-3200, NB-3600, NC-3600, and ND-3600.
NB-3228.6 of the 2001 Edition and the 2002 and 2003 Addenda provides alternative provisions for performing an inelastic analysis for evaluating reversing dynamic loads. The NRC is proposing to disallow the use of NB-3228.6. As discussed in NUREG/CR-5361, the NRC's and industry's review of the limited amount of test data does not support a finding that the design margin is adequate. In addition, it would require validation of the nonlinear material modeling (constitutive relationships) in order to justify selection of the material models because of the high sensitivity of the dynamic analysis to these material models.
NC-3653.2(d) and ND-3653.2(d) of the 2001 Edition and the 2002 and 2003 Addenda provide a separate equation for evaluating reversing dynamic loads from other design basis loadings for Level A and B service limits. The NRC is proposing to disallow the use of NC-3653.2(d) and ND-3653.2(d) because it has not been demonstrated that these provisions provide an adequate design margin or that the treatment of reversing dynamic loads separate from other design basis loads is acceptable. The NRC is proposing the use of NC-3653.1 and NC-3653.2 instead of NC-3653.2(d), and ND-3653.1 and ND-3653.2 instead of ND-3653.2(d). Analysis using NC-3653.1 or ND-3653.1 must include pressure and reversing dynamic loads that are not required to be combined with nonreversing dynamic loads. The allowable B
NB-3656(b)(3), NC-3655(b)(3), and ND-3655(b)(3) of the 2001 Edition and the 2002 and 2003 Addenda provide a definition of the moment, M
NB-3656(b)(3), NC-3655(b)(3), and ND-3655(b)(3) of the 2001 Edition and the 2002 and 2003 Addenda specify the maximum allowable B
The proposed amendment would allow the use of an allowable stress limit of 6S
The proposed modification, § 50.55a(b)(1)(vii), would not approve the use of Subsection NH of the 2001 Edition through 2003 Addenda of Section III of the ASME BPV Code, and withdraw the current approval of Subsection NH of the 1995 through 2000 Addenda of Section III of the ASME BPV Code. The scope of Subsection NH includes Class 1 components that function in water, steam, sodium, helium, or any other fluid. The special design provisions in Subsection NH apply to Class 1 components that are required to function at elevated metal temperatures where creep and relaxation effects may be significant and for which the stress limits and design provisions in Subsection NB of Section III are not applicable. These stress limits and design provisions of Subsection NB are applicable only to service conditions where creep and relaxation effects are negligible. The elevated temperature provisions in Subsection NH—applicable to certain Class 1 components in future advanced reactor designs such as liquid metal, sodium, and high-temperature gas-cooled reactor designs—have not been reviewed by the NRC for technical adequacy because the design provisions in Subsection NH are not applicable to any currently operating nuclear power plant nor to any currently approved standard advanced light water reactor plant design. For these reasons, the NRC is proposing not to approve the use of Subsection NH. Future reactor designs may not employ the special design methodologies for high temperatures described in Subsection NH absent specific approval by the NRC.
The proposed amendment would revise § 50.55a(b)(2) to incorporate by reference the 2001 Edition and the 2002 and 2003 Addenda of Division 1 of Section XI of the ASME BPV Code subject to proposed modifications and limitations.
The proposed amendment would revise the existing modifications and limitations for quality assurance, Class 1 piping, underwater welding, reconciliation of quality requirements, certification of nondestructive examination personnel, substitution of alternative method, and Table IWB-2500-1 examination requirements in §§ 50.55a(b)(2)(x), 50.55a(b)(2)(xi), 50.55a(b)(2)(xii), 50.55a(b)(2)(xvii), 50.55a(b)(2)(xviii), 50.55a(b)(2)(xix), and 50.55a(b)(2)(xxi), respectively, to apply to the 2001 Edition through 2003 Addenda of Section XI, Division 1, of the ASME BPV Code. The modifications and limitations in §§ 50.55a(b)(2)(x), 50.55a(b)(2)(xi), 50.55a(b)(2)(xii), 50.55a(b)(2)(xvii), 50.55a(b)(2)(xviii), 50.55a(b)(2)(xix), and 50.55a(b)(2)(xxi) would continue to apply to the 2001 Edition through 2003 Addenda of Section XI because the earlier Code provisions that these regulations are based on were not revised in the 2001 through 2003 Addenda of Section XI to address the underlying issues which led the NRC to impose the modifications and limitations on the ASME Code provisions.
The proposed amendment would add Footnote 10 to § 50.55a(b)(2) to indicate that the NRC has issued Order EA-03-009 which imposed enhanced reactor pressure vessel (RPV) head inspections at pressurized water reactors (PWRs). In February 2003, the NRC issued EA-03-009 to licensees of PWRs to establish interim inspection requirements that would ensure adequate protection of public health and safety, based in part, on the information gathered from NRC Bulletins 2001-01 and 2002-02. The Order imposes enhanced requirements for PWR licensees that supplement areas of Section XI of the ASME BPV Code to ensure the structural and leakage integrity of the reactor coolant pressure boundary. The requirements imposed by the Order do not conflict with the requirements in Section XI of the ASME
The proposed amendment would revise the existing modification for examination of concrete containments in § 50.55a(b)(2)(viii) to apply to the 2001 Edition through 2003 Addenda of Section XI, Division 1, of the ASME BPV Code. The modification in § 50.55a(b)(2)(viii) would continue to apply to the 2001 Edition through 2003 Addenda of Section XI because the earlier Code provisions that this regulation was based on were not revised in the 2001 through 2003 Addenda of Section XI to address the underlying issues which led the NRC to impose the modification of the ASME Code provisions. The existing modification for examination of concrete containments in § 50.55a(b)(2)(viii) also would be revised to require that a new modification, § 50.55a(b)(2)(viii)(G), which is discussed below, would apply to the 2001 Edition through 2003 Addenda of Section XI, Division 1, of the ASME BPV Code.
The proposed modification, § 50.55a(b)(2)(viii)(G), would require that corrosion protection medium (CPM) be restored in accordance with the quality assurance program requirements specified in IWA-1400 following IWL-4000 repair and replacement activities conducted on concrete containment post-tensioning systems when using the 2001 Edition through 2003 Addenda of Section XI. IWL-4110 of Section XI defines the scope of the repair and replacement activities associated with concrete containments. IWL-4110(b) specifies those items that are exempt from repair and replacement activity requirements. A new provision, IWL-4110(b)(3), was added in the 2002 Addenda exempting the removal, replacement, or addition of concrete containment post-tensioning system CPM from repair and replacement requirements. Prior to the 2002 Addenda, IWL-4000 specifies that the CPM must be restored following a concrete containment post-tensioning system repair and replacement activity.
CPM is applied to containment post-tension system components to prevent corrosion. The function of the containment post-tension system is to retain pressure and CPM is relied upon to maintain the integrity of the containment post-tension system. Therefore, the restoration of concrete containment post-tensioning system CPM is important to ensure that the containment integrity and load capacity satisfy design basis requirements under accident conditions. For example, the acceptable concentration of water soluble chlorides, nitrates and sulfides of the replacement CPM must be verified. The amount of CPM to be installed and the method used to apply the CPM must be specified.
The proposed amendment would revise the existing modification for examination of metal containments and the liners of concrete containments in § 50.55a(b)(2)(ix) to apply to the 2001 Edition through 2003 Addenda of Section XI, Division 1, of the ASME BPV Code. With the exception of the visual examination requirements specified in § 50.55a(b)(2)(ix)(B), the modification in § 50.55a(b)(2)(ix) would continue to apply to the 2001 Edition through 2003 Addenda of Section XI because the earlier Code provisions that this regulation was based on were not revised in the 2001 through 2003 Addenda of Section XI to address the underlying issues which led to the NRC to impose the modification on the ASME Code provisions. The minimum illumination and distance visual examination provisions in Table IWA-2210-1 in Section XI were revised in the 2003 Addenda and are equivalent to the minimum illumination and distance visual examination requirements in § 50.55a(b)(2)(ix)(B). Therefore, the modification for examination of metal containments and the liners of concrete containments in § 50.55a(b)(2)(ix) would also be revised to specify that the existing modification in § 50.55a(b)(2)(ix)(B) would not apply to the 2003 Addenda of Section XI, Division 1, of the ASME BPV Code.
The proposed amendment would revise § 50.55a(b)(2)(xiii) to eliminate the authorization to use Code Case N-513. The existing regulation in § 50.55a(b)(2)(xiii) authorizes the use of Code Cases N-513 and N-523-1. The authorization of Code Case N-513 was added to Regulatory Guide 1.147, “Inservice Inspection Code Case Acceptability, ASME Section XI, Division 1,” in Revision 13. Revision 13 to Regulatory Guide 1.147 was incorporated by reference into § 50.55a in a final rule dated July 8, 2003 (68 FR 40469). Thus, it is no longer necessary to authorize the use of Code Case N-513 in § 50.55a(b)(2)(xiii) because this code case is included in Regulatory Guide 1.147. Section 50.55a(b)(2)(xiii) would continue to authorize the use of Code Case N-523-1, because Code Case N-523-1 is currently not included in Regulatory Guide 1.147.
The proposed amendment would revise the existing modification for Appendix VIII personnel qualification in § 50.55a(b)(2)(xiv) to apply to the 2001 Edition through 2003 Addenda of Section IX, Division 1, of the ASME BPV Code. The modification in § 50.55a(b)(2)(xiv) would continue to apply to the 2001 Edition through 2003 Addenda of Section XI because the earlier Code provisions that this regulation was based on were not revised in the 2001 through 2003 Addenda of Section IX to address the underlying issues which led to the NRC to impose the modification on the ASME Code provisions. The proposed rule would also revise § 50.55a(b)(2)(xiv) to correct an oversight. The existing regulation incorrectly states that the annual practice requirements in VII-4240 of Supplement VII of Section XI may be used. The reference to Supplement VII is incorrect; it should be Appendix VII. Therefore, § 50.55a(b)(2)(xiv) would be revised to state that the annual practice requirements in VII-4240 of Appendix VII of Section XI may be used.
The proposed amendment would revise the existing modification for Appendix VIII specimen set and qualification requirements in § 50.55a(b)(2)(xv) to apply to the 2001 Edition of Section XI, Division 1, of the ASME BPV Code. The modification in § 50.55a(b)(2)(xv) would continue to apply to the 2001 Edition of Section XI because the earlier Code provisions that this regulation was based on were not revised in the 2001 Edition of Section XI to address the underlying issues which led the NRC to impose the modification of the ASME Code provisions. A new limitation, § 50.55a(b)(2)(xxiv), is discussed below that would prohibit the use of Appendix VIII and the supplements to Appendix VIII, and Article I-3000 in the 2002 and 2003 Addenda of Section XI of the ASME BPV Code.
The proposed amendment would also revise the existing regulation in § 50.55a(b)(2)(xv)(C)(
The proposed amendment would revise the existing regulation in § 50.55a(b)(2)(xv)(J) to eliminate the authorization to use Code Case N-522. The regulation in § 50.55a(b)(2)(xv)(J) authorizes the use of Code Case N-552. The authorization of Code Case N-552 was added to Regulatory Guide 1.147, “Inservice Inspection Code Case Acceptability, ASME Section XI, Division 1,” in Revision 13. Revision 13 to Regulatory Guide 1.147 was incorporated by reference into § 50.55a in a final rule dated July 8, 2003 (68 FR 40469). Thus, it is no longer necessary to authorize the use of Code Case N-552 in § 50.55a(b)(2)(xv)(J) because this code case is included in Regulatory Guide 1.147.
The proposed limitation, § 50.55a(b)(2)(xxiv), would prohibit the use of Appendix VIII and the supplements to Appendix VIII, and Article I-3000 in the 2002 and 2003 Addenda of Section XI of the ASME BPV Code. The elements of the Performance Demonstration Initiative (PDI) program was added to Appendix VIII and its supplements in the 2002 Addenda of Section XI of the ASME BPV Code. The PDI is an organization formed for the purpose of developing efficient, cost-effective, and technically sound ultrasonic (UT) performance demonstration methods to meet Appendix VIII requirements. The PDI program has evolved as programs were developed for each Appendix VIII supplement. Article I-3000, Examination Coverage, was also added in the 2002 Addenda to provide UT examination coverage criteria for certain welds.
The final rule dated September 22, 1999 (64 FR 51370), requires licensees to implement Appendix VIII and its supplements. The essential elements of the PDI program were added to the final rule as § 50.55a(b)(2)(xv). Section 50.55a(b)(2)(xv) also provides UT examination coverage criteria. Licensees are currently implementing Appendix VIII and its supplements in accordance with § 50.55a(b)(2)(xv). Although the NRC, ASME, and PDI have made considerable progress in the development of UT qualification and inspection requirements, the addition of the PDI program and UT examination coverage criteria into Section XI are not complete at this time. As a result, conflicts exist between the modifications in § 50.55a(b)(2)(xv), and the provisions in Appendix VIII and its supplements and Article I-3000 in the 2002 and 2003 Addenda of Section XI of the ASME BPV Code. Therefore, Appendix VIII and its supplements can not be implemented in accordance with § 50.55a(b)(2)(xv) when using the 2002 and 2003 Addenda. Consequently, the proposed rule prohibits the use of Appendix VIII and its supplements and Article I-3000 beyond the 2001 Edition. The NRC plans to endorse Appendix VIII and its supplements and Article I-3000 when the addition of the PDI program and the addition of UT examination coverage criteria into Section XI are complete.
The proposed amendment would revise the existing modification for system leakage tests in § 50.55a(b)(2)(xx) to limit its application to the 1997 Addenda through 2001 Addenda of Section XI, Division 1, of the ASME BPV Code. The modification in § 50.55a(b)(2)(xx) would not apply to the 2002 and 2003 Addenda of Section XI because the earlier Code provisions that this regulation was based on were revised in the 2002 Addenda of Section XI to address the underlying issues which led to the NRC to impose the modification of the ASME Code provisions. The system leakage test provisions in IWA-5213(a) were revised in the 2002 Addenda of Section XI and are equivalent to the existing requirements in § 50.55a(b)(2)(xx).
The proposed modification, § 50.55a(b)(2)(xxii), would prohibit the use of a new provision in IWA-2220. The provisions of Code Case N-615, “Ultrasonic Examination as a Surface Examination Method for Category B-F and B-J piping Welds,” were incorporated into IWA-2220 in the 2001 Edition of Section XI of the ASME BPV Code. Code Case N-615 and IWA-2220 (2001 Edition and the 2002 and 2003 Addenda) allow a surface examination to be conducted using a UT examination method. The UT examination is conducted from the inside surface of certain piping welds. Other allowable surface examination methods (magnetic particle or liquid penetrant) are conducted from the outside surface of certain piping welds. The purpose of the these surface examinations is to identify flaws in the outer surface of the weld. The NRC disallowed the use of Code Case N-615 and is proposing to prohibit the use of the same type of UT examination specified in IWA-2220 because there are no provisions in Section XI that address qualification requirements and performance demonstration criteria and requirements to ensure proper consideration of flaws in the outer surface of a piping weld when conducting a UT examination from the inside surface of the piping weld.
The proposed modification, 50.55a(b)(2)(xxiii), would supplement the use of the new provisions in IWA-4461.4.2 to require that the tests and
The provisions in IWA-4461.4.2 allow the elimination of mechanical processing of thermally cut surfaces provided that the tests and inspections and the analysis specified in IWA-4461.4.2(a)(1) through (5) are considered by an evaluation. It is unclear if Code provisions that state that specific items that must be considered by evaluation are intended to be mandatory or optional requirements. The provisions specified in IWA-4461.4.2(a)(1) through (5) specify the appropriate tests and inspections and analysis for eliminating the mechanical processing of thermally cut surfaces provided that all these actions are performed. These actions are necessary to ensure proper evaluation of cracks, stress risers, oxidation, or other contamination of cut surfaces that could exist in the final weld which would seriously degrade the material toughness or corrosion resistance of the material. Therefore, proposed paragraph (b)(2)(xxiii) would explicitly require that the tests and inspections, and the analysis specified in IWA-4461.4.2(a)(1) through (5) be performed whenever a thermally cut surface is not mechanically processed.
The proposed modification, § 50.55a(b)(2)(xxv), would prohibit the use of the provisions in IWA-4340 when using the 2001 Edition and the 2002 and 2003 Addenda of Section XI of the ASME BPV Code. IWA-4340 was added in the 2000 Addenda to provide requirements for the mitigation of defects by “modification.” Paragraph IWA-4340 allows a defect to remain in a component provided that the defect can be eliminated from the pressure boundary by “modification.”
The scope of the activity envisioned or permitted by this subsubarticle is not clear. The subsubarticle does not provide limitations on the applicability of its provisions to specific ASME Classes or components. As written, this provision could be used in applications with widely varying safety significance and levels of difficulty in implementation, ranging from the elimination of a defect in a Class 1 item or component, such as a penetration of the lower head of the reactor vessel to the encapsulation of a defect on a straight section of Class 3 moderate energy piping. IWA-4340 has no prohibition on the number of times it can be used to mitigate the same defect. Therefore, if the flaw propagated “beyond the limits of the modification” implemented under the provisions of IWA-4340, a licensee could, for example, encapsulate the previous modification with another larger modification. This could result in unusual and unforeseeable design configurations.
IWA-4520(b)(2) exempts piping, pump and valve welding or brazing that does not penetrate the pressure boundary from any pressure test. Since the modification to mitigate the defect will become the new pressure boundary and the modification may be attached to the pressure boundary by welds that do not penetrate the pressure boundary, pressure testing may not be required. The NRC does not accept the elimination of pressure testing requirements for a modification that will function as a pressure boundary.
Since this subsubarticle does not provide specificity for the types of modifications or limitations on the applicability of its provisions to specific ASME Classes or items, the NRC is unable to determine whether the “modifications” under the provisions of this paragraph would maintain safety and ensure the protection of public health and safety.
IWA-4340(c) requires that each licensee define the successive examinations to be performed after the completion of the “modification.” As currently stated, the purpose of the successive examinations is to monitor the flaw to detect propagation of the flaw beyond the limits of the modification and, when practicable, to validate the projected growth. The terminology “beyond the limits of the modification” needs to be more specifically defined. For example, it is not clear by these words if a flaw would be permitted to propagate outside the physical boundary of the “modification” if it had not reached the level of a defect. The NRC also does not agree with the inclusion of the “when practicable” limitation in IWA-4340(c). The flaw propagation must be validated to accurately predict when, or if, the flaw will become unacceptable. IWA-4340(c), as written, does not require that a licensee's examination program predict propagation of the flaw such that the licensee would be able to identify, in advance, a flaw that is expected to propagate outside the area physically modified such that corrective action could be taken. In IWA-4340, each licensee would be responsible for determining the method and frequency of examinations to be performed. In addition, each licensee would be permitted to define the acceptance criteria for these examinations. The ASME Code currently contains rules for successive examination of flaws left in service, as addressed in IWB-2420, and requirements for that more stringent examinations for defects left in service. However, IWA-4340(c) does not define an examination process which would require examinations at a frequency, based on flaw propagation rate, that would require a licensee to identify in advance when a flaw is projected to propagate outside the physical configuration of the “modification.” Therefore, the NRC is unable to determine whether the examinations and acceptance criteria prepared by each licensee under the provisions of this paragraph would ensure the protection of public health and safety because the acceptance limits specified as “beyond the limits of the modification” are ambiguous. Furthermore, the provisions of IWA-4340(c) could result in inconsistent examination requirements and acceptance criteria being applied at different facilities for the same type of mitigating action.
For the reasons stated above, the NRC is proposing to prohibit the use of IWA-4340 when using the 2001 Edition and the 2002 and 2003 Addenda.
The proposed modification, 10 CFR 50.55a(b)(2)(xxvi), would supplement the test provisions in IWA-4540 of the 2001 Edition and the 2002 and 2003 Addenda of Section XI of the ASME BPV Code to require that Class 1, 2, and 3 mechanical joints be pressure tested in accordance with IWA-4540(c) of the 1998 Edition of Section XI. The requirements to pressure test Class 1, 2, and 3 mechanical joints undergoing
The proposed modification, § 50.55a(b)(2)(xxvii), would supplement a new provision in IWA-5242(a) to require that insulation be removed when conducting visual examinations on bolting susceptible to stress corrosion cracking. The purpose of the provisions in IWA-5242 is to periodically examine bolted connections for evidence of boric acid leakage. The 17-4 PH stainless steels and the 410 stainless steels installed in borated systems are susceptible to stress corrosion cracking when aged at a temperature below 1100 °F or have a hardness above R
The proposed modification, § 50.55a(b)(2)(xxviii), would supplement a new provision in IWA-4226.1 to require that repair/replacement components be manufactured, procured, and controlled as safety-related under a quality assurance program meeting the requirements of Appendix B to 10 CFR Part 50. The purpose of IWA-4226.1 (2003 Addenda) and Code Case N-554-2, “Alternative Requirements for Reconciliation of Replacement Items and Addition of New Systems, Section XI, Division 1,” is to provide requirements for reconciling design requirements when using later editions of a construction code or Section III. However, IWA-4226.1 and Code Case N-554-2 do not require reconciliation of the quality assurance requirements for certification, Code symbol stamping, data reports, and authorized Inspection. For example, a component manufactured in a commercial shop that does not have a quality assurance program could be used in a safety-related application without having to reconcile quality assurance requirements. The NRC conditionally accepted the use of Code Case N-554-2, by requiring that repair/replacement components be manufactured, procured, and controlled as safety-related under a quality assurance program meeting the requirements of Appendix B to 10 CFR Part 50. The proposed modification in (b)(2)(xviii) would impose the same quality assurance requirements on IWA-4226.1.
The proposed revision to § 50.55a(b)(3) would incorporate by reference the 2001 Edition and the 2002 and 2003 Addenda of the ASME OM Code.
The proposed amendment would revise the existing modifications and limitations for quality assurance, motor-operated valve testing, Subsection ISTD, and exercise interval for manual valves in §§ 50.55a(b)(3)(i), 50.55a(b)(3)(ii), 50.55a(b)(3)(v), and 50.55a(b)(3)(vi), respectively, to apply to the 2001 Edition through 2003 Addenda of the ASME OM Code. The modifications and limitations in §§ 50.55a(b)(3)(i), 50.55a(b)(3)(ii), 50.55a(b)(3)(v), and 50.55a(b)(3)(vi) would continue to apply to the 2001 Edition through 2003 Addenda of ASME OM Code because the earlier Code provisions that these regulations are based on were not revised in the 2001 through 2003 Addenda of the ASME OM Code to address the underlying issues which led to the NRC to impose the modifications and limitations on the ASME Code provisions.
The proposed amendment would revise the existing quality assurance requirements in § 50.55a(b)(3)(i) to state that ISTA-1500 is applicable when using the 1998 Edition and later editions and addenda of the ASME OM Code. Subsections of the ASME OM Code were renumbered in the 1998 Edition; therefore, § 50.55a(b)(3)(i) would be revised to account for the renumbering. The proposed revision does not change requirements in a substantive manner.
The proposed amendment would revise § 50.55a(b)(3)(iii) to eliminate the authorization to use Code Case OMN-1. The existing regulation in § 50.55a(b)(3)(iii) authorizes the use of Code Case OMN-1. Code Case OMN-1 is now authorized by Regulatory Guide 1.192, “Operation and Maintenance Code Case Acceptability, ASME OM Code.” Regulatory Guide 1.192 was incorporated by reference into § 50.55a in a final rule dated July 8, 2003 (68 FR 40469). Thus, it is no longer necessary to authorize the use of Code Case OMN-1 in § 50.55a(b)(3)(iii) because this code case is now included in Regulatory Guide 1.192.
The proposed amendment would revise the existing modification for the check valve monitoring program in § 50.55a(b)(3)(iv) to limit its application to the 1995 edition through 2002 Addenda of the ASME OM Code. The modification in § 50.55a(b)(3)(iv) would not apply to the 2003 Addenda of the ASME OM Code because the earlier Code provisions that this regulation was based on were revised in the 2003 Addenda of the ASME OM Code to
In July 2001, the NRC issued “Generic Aging Lessons Learned (GALL) Report,” NUREG-1801, Volumes 1 and 2, for use by applicants in preparing their license renewal applications. The GALL report evaluates existing generic programs, documents the bases for determining when generic existing programs are adequate without change, and documents when generic existing programs should be augmented for license renewal. Section XI, Division 1, of the ASME BPV Code is one of the generic existing programs in the GALL report that is evaluated as an aging management program (AMP) for license renewal. Subsections IWB, IWC, IWD, IWF, IWE, and IWL of the 1995 Edition up to and including the 1996 Addenda of Section XI of the ASME BPV Code for inservice inspection were evaluated in the GALL report and the conclusions in the GALL report are valid for these edition and addenda.
In the GALL report Sections XI.M1, “ASME Section XI Inservice Inspection, Subsections IWB, IWC, and IWD,” XI.S1, “ASME Section XI, Subsection IWE,” XI.S2, “ASME Section XI, Subsection IWL,” and XI.S3, “ASME Section XI, Subsection IWF,” describe the evaluation and technical bases for determining the adequacy of Subsections IWB, IWC, IWD, IWE, IWL, and IWF, respectively. In addition, many other AMPs in the GALL report rely in part, but to a lesser degree, on the requirements in the ASME Code, Section XI (
The NRC has completed an evaluation of Subsections IWB, IWC, IWD, IWE, IWF, and IWL of Section XI of the ASME BPV Code (2001 Edition and the 2002 and 2003 Addenda) as part of the § 50.55a amendment process to determine if the conclusions of the Gall Report are also applicable for AMPs that rely upon the ASME Codes edition and addenda which are proposed to be incorporated by reference into § 50.55a by this proposed rule. NRC finds that the 2001 Edition and 2002 and 2003 Addenda of Sections III and XI of the ASME BPV Code are acceptable and the conclusions of the GALL report remain valid. Accordingly, an applicant may use Subsections IWB, IWC, IWD, IWE, IWF, and IWL of Section XI of the ASME BPV Code (2001 Edition and the 2002 and 2003 Addenda) as acceptable alternatives to the requirements of the 1995 Edition up to and including the 1996 Addenda of the ASME Code, Section XI, referenced in the GALL AMPs without the need to submit these alternatives for NRC review in its plant-specific license renewal application. Similarly, a licensee approved for license renewal that relied on the GALL AMPs may use Subsections IWB, IWC, IWD, IWE, IWF, and IWL of Section XI of the ASME BPV Code (2001 Edition and the 2002 and 2003 Addenda) as acceptable alternatives to the AMPs described in the GALL report. However, a licensee must assess and follow applicable NRC requirements with regard to changes to its licensing basis.
The GALL report identified areas of the 1995 Edition with the 1996 Addenda of Section XI of the ASME Code that require augmentation for license renewal. A license renewal
The NRC is making the documents identified below available to interested persons through one or more of the following methods as indicated.
The Presidential memorandum dated June 1, 1998, entitled, “Plain Language in Government Writing,” directed that the Federal government's writing must be in plain language. This memorandum was published on June 10, 1998 (63 FR 31883). The NRC requests comments on this proposed rule specifically with respect to the clarity and effectiveness of the language used. Comments should be sent to the address listed under the
The National Technology Transfer and Advancement Act of 1995, Pub. L. 104-113, requires agencies to use technical standards that are developed or adopted by voluntary consensus standards bodies unless the use of such a standard is inconsistent with applicable law or is otherwise impractical. Public Law 104-113 requires Federal agencies to use industry consensus standards to the extent practical, it does not require Federal agencies to endorse a standard in its entirety. The law does not prohibit an agency from generally adopting a voluntary consensus standard while taking exception to specific portions of the standard if those provisions are deemed to be “inconsistent with applicable law or otherwise impractical.” Furthermore, taking specific exceptions furthers the Congressional intent of Federal reliance on voluntary consensus standards because it allows the adoption of substantial portions of consensus standards without the need to reject the standards in their entirety because of limited provisions which are not acceptable to the agency.
The NRC is proposing to amend its regulations to incorporate by reference a more recent edition and addenda of Sections III and XI of the ASME BPV Code and ASME OM Code, for construction, inservice inspection, and inservice testing of nuclear power plant components. ASME BPV and OM Codes are national consensus standards developed by participants with broad and varied interests, in which all interested parties (including the NRC and licensees of nuclear power plants) participate. In a staff requirements memorandum dated September 10, 1999, the Commission indicated its intent that a rulemaking identify all portions of an adopted voluntary consensus standard which are not adopted and to provide a justification for not adopting such portions. The portions of the ASME BPV Code and OM Code which the NRC proposes not to adopt, or to partially adopt, are identified in Section 2 of the preceding section and the draft regulatory analysis. The justification for not adopting portions of the ASME BPV Code, as set forth in these statements of consideration and the draft regulatory analysis for this proposed rule, satisfy the requirements of Section 12(d)(3) of Pub. L. 104-113, Office of Management and Budget (OMB) Circular A-119, and the Commission's direction in the staff requirements memorandum dated September 10, 1999.
In accordance with the National Technology Transfer and Advancement Act of 1995 and OMB Circular A-119, the NRC is requesting public comment regarding whether other national or international consensus standards could be endorsed as an alternative to the ASME BPV Code and the ASME OM Code.
The Commission has determined, under the National Environmental Policy Act of 1969, as amended, and the Commission's regulations in subpart A of 10 CFR part 51, that this rule, if adopted, would not be a major Federal action significantly affecting the quality of the human environment, and therefore, an environmental impact statement is not required.
The proposed rulemaking will not significantly increase the probability or consequences of accidents; no changes are being made in the types of effluents that may be released off-site; there is no increase in occupational exposure; and there is no significant increase in public radiation exposure. Therefore, there are no significant radiological impacts associated with the proposed action. The proposed rulemaking does not involve non-radiological plant effluents and has no other environmental impact. Therefore, no significant non-radiological impacts are associated with the proposed action.
The determination of this draft environmental assessment is that there will be no significant off-site impact to the public from this action. However, the NRC is seeking public comment of the draft environmental assessment. Section 5 of this notice describes how to obtain a copy of the draft environmental assessment. Comments may be submitted to the NRC as indicated under the
The NRC has sent a copy of the draft environmental assessment and this proposed rule to every State Liaison Officer and requested their comments on the environmental assessment.
This proposed rule decreases the burden on licensees for recordkeeping requirements related to examinations, tests, and repair and replacement activities. The industry annual public burden reduction for this information collection is estimated at 713 hours. Because the burden reduction for this information collection is insignificant, Office of Management and Budget (OMB) clearance is not required. Existing requirements were approved by the OMB, approval number 3150-0011.
The NRC may not conduct or sponsor, and a person is not required to respond to, a request for information collection or an information collection requirement unless the requesting document displays a currently valid OMB control number.
The NRC has prepared a draft regulatory analysis on this proposed rule. The draft analysis is available for review in the NRC's Public Document Room, located in One White Flint North, 11555 Rockville Pike, Rockville, Maryland. Section 5 of this notice describes how to obtain a copy of the draft regulatory analysis. The Commission requests public comment on the draft analysis and comments may be submitted to the NRC as indicated under the
In accordance with the Regulatory Flexibility Act of 1980, 5 U.S.C. 605(b), the Commission certifies that this proposed amendment will not, if promulgated, have a significant economic impact on a substantial number of small entities. This proposed amendment affects only the licensing and operation of nuclear power plants. The companies that own these plants do not fall within the scope of the definition of small entities set forth in the Regulatory Flexibility Act or the Small Business Size Standards set forth in regulations issued by the Small Business Administration at 13 CFR part 121.
The NRC's Backfit Rule in 10 CFR 50.109 states that the Commission shall require the backfitting of a facility only when it finds the action to be justified under specific standards stated in the rule. Section 50.109(a)(1) defines backfitting as the modification of or addition to systems, structures, components, or design of a facility; or the design approval or manufacturing license for a facility; or the procedures or organization required to design, construct or operate a facility; any of which may result from a new or amended provision in the Commission rules or the imposition of a regulatory staff position interpreting the Commission rules that is either new or different from a previously applicable staff position after issuance of the construction permit or the operating license or the design approval.
Section 50.55a requires nuclear power plant licensees to construct ASME BPV Code Class 1, 2, and 3 components in accordance with the rules provided in Section III, Division 1, of the ASME BPV Code; inspect Class 1, 2, 3, Class MC, and Class CC components in accordance with the rules provided in Section XI, Division 1, of the ASME BPV Code; and test Class 1, 2, and 3 pumps and valves in accordance with the rules provided in the ASME OM Code. This proposed rule would incorporate by reference the 2001 Edition and the 2002 and 2003 Addenda of Section III, Division 1, of the ASME BPV Code; Section XI, Division 1, of the ASME BPV Code; and the ASME OM Code.
Incorporation by reference of more recent editions and addenda of Section III, Division 1, of the ASME BPV Code does not affect a plant that has received a construction permit or an operating license or a design that has been approved, because the edition and addenda to be used in constructing a plant are, by rule, determined on the basis of the date of the construction permit, and are not changed thereafter, except voluntarily by the licensee. Thus, incorporation by reference of a more recent edition and addenda of Section III, Division 1, does not constitute a “backfitting” as defined in § 50.109(a)(1).
Incorporation by reference of more recent editions and addenda of Section XI, Division 1, of the ASME BPV Code and the ASME OM Code affect the inservice inspection (ISI) and inservice testing (IST) programs of operating reactors. However, the Backfit Rule generally does not apply to incorporation by reference of later editions and addenda of the ASME BPV Code (Section XI) and OM Code. The NRC's longstanding policy has been to incorporate later versions of the ASME Codes into its regulations. This is codified in § 50.55a which requires licensees to revise their ISI and IST programs every 120 months to the latest edition and addenda of Section XI of the ASME BPV Code and the ASME OM Code incorporated by reference into § 50.55a that is in effect 12 months prior to the start of a new 120-month ISI and IST interval. Thus, when the NRC endorses a later version of the Code, it is implementing this longstanding policy and requirement.
Other circumstances where the NRC does not apply the Backfit Rule to the endorsement of a later Code are as follows—
(1) When the NRC takes exception to a later ASME BPV Code or OM Code provision but merely retains the current existing requirement, prohibits the use of the later Code provision, limits the use of the later Code provision, or supplements the provisions in a later Code, the Backfit Rule does not apply because the NRC is not imposing new requirements. However, the NRC explains any such exceptions to the Code in the Statement of Considerations and regulatory analysis for the rule. Exceptions in this proposed rule either retain current existing requirements, prohibit the use of the later Code provision, limit the use of the later Code provision, or supplement the provisions in a later Code.
(2) When an NRC exception relaxes an existing ASME BPV Code or OM Code provision but does not prohibit a licensee from using the existing Code provision the Backfit Rule does not apply because the NRC is not imposing new requirements. There are no such exceptions in this proposed rule.
(3) Modifications and limitations imposed during previous routine updates of § 50.55a have established a precedent for determining which modifications or limitations are backfits or require a backfit analysis (final rules dated August 6, 1992 (57 FR 34666), August 8, 1996 (61 FR 41303), September 22, 1999 (64 FR 51370), and September 26, 2002 (67 FR 60520)). The application of the backfit requirements to modifications and limitations in the current proposed rule are consistent with the application of backfit requirements to modifications and limitations in previous rules. Since the modifications and limitations in the current proposed rule are not considered backfits or do not require backfit analyses, the NRC is not required to demonstrate that the new modifications and limitations result in an increase in quality or safety.
There are some circumstances in which the endorsement of a later ASME BPV Code or OM Code introduces a backfit. In these cases, the NRC would perform a backfit analysis in accordance
(1) When the NRC endorses a later provision of the ASME BPV Code or OM Code that takes a substantially different direction from the existing requirements, the action is treated as a backfit. An example was the NRC's initial endorsement of Subsections IWE and IWL of Section XI, which imposed containment inspection requirements on operating reactors for the first time. The final rule dated August 8, 1996 (61 FR 41303), incorporated by reference in § 50.55a the 1992 Edition with the 1992 Addenda of IWE and IWL of Section XI to require that containments be routinely inspected to detect defects that could compromise a containment's structural integrity. This action expanded the scope of § 50.55a to include components that were not considered by the existing regulations to be within the scope of ISI. Since those requirements involved a substantially different direction, they were treated as backfits, and justified in accordance with the standards of 10 CFR 50.109. There are no provisions in this proposed rule which impose requirements involving a substantially different direction than existing requirements.
(2) When the NRC requires implementation of later ASME BPV Code or OM Code provision on an expedited basis, the action is treated as a backfit. This applies when implementation is required sooner than it would be required if the NRC simply endorsed the Code without any expedited language. An example was the final rule dated September 22, 1999 (64 FR 51370), which incorporated by reference the 1989 Addenda through the 1996 Addenda of Section III and Section XI of the ASME BPV Code, and the 1995 Edition with the 1996 Addenda of the ASME OM Code. The final rule expedited the implementation of the 1995 Edition with the 1996 Addenda of Appendix VIII of Section XI of the ASME BPV Code for qualification of personnel and procedures for performing ultrasonic examinations. The expedited implementation of Appendix VIII was considered a backfit because licensees were required to implement the new requirements in Appendix VIII prior to the next 120-month ISI program inspection interval update. Another example was the final rule dated August 6, 1992 (57 FR 34666), which incorporated by reference in § 50.55a the 1986 Addenda through the 1989 Edition of Section III and Section XI of the ASME BPV Code. The final rule added a requirement to expedite the implementation of the revised reactor vessel shell weld examinations in the 1989 Edition of Section XI. Imposing these examinations was considered a backfit because licensees were required to implement the examinations prior to the next 120-month ISI program inspection interval update. There are no provisions in this proposed rule which require expedited implementation.
(3) When the NRC takes an exception to a ASME BPV Code or OM Code provision and imposes a requirement that is substantially different from the existing requirement as well as substantially different than the later Code. An example was the adoption of dissimilar metal piping weld UT examination coverage requirements in the final rule dated September 26, 2002 (67 FR 60529) that incorporated by reference in § 50.55a the 1997 through 2000 Addenda of Section XI. Dissimilar metal piping weld examination coverage requirements, although contained in the 1989 Edition, and earlier editions and addenda of Section XI, are not addressed in 1989 Addenda and later editions and addenda of Section XI. Therefore, the addition of dissimilar metal piping weld examination coverage requirements to the regulation was necessary. There are no such provisions in this proposed rule.
The proposed modification, § 50.55a(b)(1)(b)(vii), would, among other things, withdraw the prior NRC approval of Subsection NH of the 1995 through 2000 Addenda of Section III of the ASME BPV Code. Subsection NH was added to Section III of the ASME BPV Code in the 1995 Addenda. At that time, the 1995 and 1996 Addenda of Subsection NH were inadvertently incorporated by reference in a final rule dated September 22, 1999 (64 FR 51370), and the 1997 through 2000 Addenda of Subsection NH were later inadvertently incorporated by reference in a final rule dated September 26, 2002 (67 FR 60520). The incorporation by reference of Subsection NH was inadvertent because the NRC was unaware that Subsection NH had been published in Section III and had not performed a technical review of the new subsection. Because the previous final rules that incorporated Subsection NH by reference affect only future combined license applicants and design certification applicants, and do not affect any existing licensees nor holders of design certificates, the backfit rule does not apply. The backfit rule was not intended to apply to every action which changes settled expectations. The backfit rule does not apply to rules that revise requirements for future combined license applicants and design certification applicants, even though such a rule may impact an applicant who was considering applying for a permit but had not done so yet. The backfit rule protects the permit holder, not the prospective applicant, or even the present applicant. For these reasons, the NRC concludes that the withdrawal of its approval of Subsection NH of the 1995 through 2000 Addenda of Section III does not constitute a backfit as defined in 10 CFR 50.109(a)(1), and a backfit analysis need not be prepared for this portion of the proposed amendment.
Antitrust, Classified information, Criminal penalties, Fire protection, Incorporation by reference, Intergovernmental relations, Nuclear power plants and reactors, Radiation protection, Reactor siting criteria, Reporting and recordkeeping requirements.
For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended, the Energy Reorganization Act of 1974, as amended, and 5 U.S.C. 552 and 553, the NRC is proposing to adopt the following amendments to 10 CFR part 50.
1. The authority citation for part 50 continues to read as follows:
Secs 102, 103, 104, 105, 161, 182, 183, 186, 189, 68 Stat. 936, 938, 948, 953, 954, 955, 956, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2132, 2133, 2134, 2135, 2201, 2232, 2233, 2239, 2282); secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846).
Section 50.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5841). Section 50.10 also issued under secs. 101, 185, 68 Stat. 936, 955 as amended (42 U.S.C. 2131, 2235), sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.13, 50.54(dd), and 50.103 also issued under sec. 108, 68 Stat. 939, as amended (42 U.S.C. 2138). Sections 50.23, 50.35, 50.55, and 50.56 also issued under sec. 185, 68 Stat. 955 (42 U.S.C. 2235). Sections 50.33a, 50.55a and Appendix Q also issued under sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.34 and 50.54 also issued under sec. 204, 88 Stat. 1245 (42 U.S.C. 5844. sec. 50, 58, 50.91, and 50.92 also issued under Pub. L. 97-415, 96 Stat. 2073 (42 U.S.C. 2239). Section 50.78 also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Sections 50.80-50.81 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234).
2. Section 50.55a is amended by:
(a) Removing and reserving paragraphs (b)(2)(xv)(J) and (b)(3)(iii).
(b) Revising the introductory text of paragraph (b)(1), paragraph (b)(1)(iii), the introductory text of paragraph (b)(2), the introductory text of paragraphs (b)(2)(viii) and (b)(2)(ix), paragraph (b)(2)(xiii), paragraph (b)(2)(xiv), and the introductory text of paragraph (b)(2)(xv), paragraph (b)(2)(xv)(C)(
(c) Adding paragraphs (b)(1)(vi), (b)(1)(vii), (b)(2)(viii)(G), and (b)(2)(xxii) through (b)(2)(xxviii), and Footnote 10.
(b) * * *
(1) As used in this section, references to Section III of the ASME Boiler and Pressure Vessel Code refer to Section III, and include the 1963 Edition through 1973 Winter Addenda, and the 1974 Edition (Division 1) through the 2003 Addenda (Division 1), subject to the following limitations and modifications:
(iii)
(vi)
(A) The application of the alternative method for evaluating reversing dynamic loads to calculations for piping subject to loads generated by reflected waves caused by flow transients as delineated in NB-3200, NB-3600, NC-3600, and ND-3600 is prohibited.
(B) The use of NB-3228.6 is prohibited.
(C) NC-3653.1 and NC-3653.2 must be used instead of NC-3653.2(d). ND-3653.1 and ND-3653.2 must be used instead of ND-3653.2(d). Analyses using NC-3653.1 and ND-3653.1 must include pressure and reversing dynamic loads that are not required to be combined with nonreversing dynamic loads, and the allowable B
(D) When applying NB-3656(b)(3), NC-3655(b)(3), or ND-3655(b)(3), the linear elastic response spectrum analysis as defined by the licensing basis must be used whenever these provisions result in a more conservative calculation of M
(E) The allowable B
(F) The evaluation of anchor motions in NB-3656(b)(4), NC-3655(b)(4), and ND-3655(b)(4) must include a demonstration that the global piping system response to the anchor movement does not create inelastic strain concentrations. A demonstration that the global piping system response to the anchor movement does not create inelastic strain concentrations is not required if an allowable stress limit of 3S
(vii)
(2) As used in this section, references to Section XI of the ASME Boiler and Pressure Vessel Code refer to Section XI, and include the 1970 Edition through the 1976 Winter Addenda, and the 1977 Edition (Division 1) through the 2003 Addenda (Division 1), subject to the following limitations and modifications:
(viii)
(G) Corrosion protection material must be restored following concrete containment post-tensioning system repair and replacement activities in accordance with the quality assurance program requirements specified in IWA-1400.
(ix)
(xiii)
(xiv)
(xv)
(C) * * *
(
(J) [Reserved]
(xx)
(xxii)
(xxiii)
(xxiv)
(xxv)
(xxvi)
(xxvii)
(xxviii)
(3) As used in this section, references to the OM Code refer to the ASME Code for Operation and Maintenance of Nuclear Power Plants, and include the 1995 Edition through the 2003 Addenda subject to the following limitations and modifications:
(i)
(iii) [Reserved]
(iv)
Footnotes to § 50.55a:
For the Nuclear Regulatory Commission.
Office of the Comptroller of the Currency, Treasury.
Notice of proposed rulemaking.
The Office of the Comptroller of the Currency (OCC) is proposing to amend its regulations to require a national bank to obtain the approval of the OCC before two types of fundamental changes in the composition of the bank's assets: (1) Changing the composition of all, or substantially all, of its assets through sales or other dispositions or, (2) after having sold or disposed of all or substantially all of its assets, subsequently purchasing or otherwise acquiring assets. The proposal also provides that, in the second case, the OCC will apply, among other factors,
Comments must be received by March 8, 2004.
Please send your comments to: Office of the Comptroller of the Currency, Public Information Room, 250 E Street, SW., Mail Stop 1-5, Washington, DC 20219, Attention: Docket No. 04-02. Due to delays in paper mail delivery in the Washington, DC area, commenters are encouraged to submit their comments by fax or e-mail. You may fax your comments to (202) 874-4448 or electronic mail them to
Heidi M. Thomas, Special Counsel, Legislative and Regulatory Activities, at (202) 874-5090; or Jan Kalmus, NBE/Licensing Expert, Licensing Policy and Systems, at (202) 874-5060.
A national bank that divests itself of assets through sale or other disposition to become a “stripped” or “dormant” bank charter, or, having “stripped down,” subsequently takes on new assets through purchases or acquisitions, raises significant supervisory concerns. These concerns include increased operations risk, increased concentration risk (especially where asset composition changes as a result of divestiture), and the ability of bank management to implement the new strategy successfully. In addition, the dormant bank being revived may propose to engage in activities that significantly deviate or are a change from the bank's original business plan or operations.
Our current regulations do not require the approval of the OCC before a bank “strips down” to a dormant bank charter, nor do they require our approval when a dormant bank increases its asset size to engage again in the business of banking. To better assess the bank's compliance with applicable law and safe and sound banking practices, we are proposing to amend our regulations to require prior OCC approval for two types of fundamental changes in the composition of a national bank's assets: (1) A change in composition of all or substantially all of a bank's assets resulting from a sale or other disposition of the bank's assets, or (2) an increase in the asset size of a national bank that had previously “stripped down” in a transaction described in item (1), regardless of existing or new ownership.
In addition, because a “stripped” or dormant charter that subsequently increases in asset size fundamentally resembles a new entrant obtaining a new charter, transactions described in item (2) will be evaluated under the same standards that the OCC applies to a
We note that the acquisition of deposits by a dormant bank raises the presumption that the bank intends to use the deposits to fund an increase in assets, which would trigger this proposal's application requirement. A dormant bank should not gather deposits to fund its asset acquisition without first seeking the approval of the OCC pursuant to this proposal.
In reviewing applications filed under § 5.53, we will consider the purpose of the transaction, its impact on the safety and soundness of the bank, and any effect on the bank's customers. Relevant to our consideration of an application to dispose of all or substantially all of the bank's assets will be the reasons for the proposed decrease in asset size and future plans for the bank charter (including any plans for liquidation), future asset growth, future plans to market or sell the charter, and future business plans, as applicable. Depending on the circumstances presented in the bank's application, our approval of the bank's disposition of all or substantially all of its assets will address how long the dormant charter may continue, and could include a requirement that the bank submit a plan of liquidation.
In reviewing an application in connection with an increase in the assets of a stripped charter, we will consider the bank's future business plan and whether this plan involves activities that significantly deviate from
This proposal also provides that, where a national bank has sold or otherwise disposed of its assets in a transaction requiring approval pursuant this new § 5.53, our review of any subsequent growth in assets pursuant to this proposal will include, among other things, the factors governing the organization of a
The OCC requests comment on all aspects of this proposal, including the specific issues that follow.
The OCC seeks comment on the impact of this proposal on community banks. The OCC recognizes that community banks operate with more limited resources than larger institutions and may present a different risk profile. Thus, the OCC specifically requests comment on the impact of the proposal on community banks' current resources and available personnel with the requisite expertise, and whether the goals of the proposal could be achieved, for community banks, through an alternative approach.
Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, section 722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. We invite your comments on how to make this proposal easier to understand. For example:
• Have we organized the material to suit your needs? If not, how could this material be better organized?
• Are the requirements in the proposed regulation clearly stated? If not, how could the regulation be more clearly stated?
• Does the proposed regulation contain language or jargon that is not clear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes to the format would make the regulation easier to understand?
• What else could we do to make the regulation easier to understand?
Pursuant to section 605(b) of the Regulatory Flexibility Act, the Comptroller of the Currency certifies that this proposal will not have a significant economic impact on a substantial number of small entities.
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 104-4 (Unfunded Mandates Act) requires that an agency prepare a budgetary impact statement before promulgating a rule that includes a Federal mandate that may result in expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. The OCC has determined that this proposal will not result in expenditures by State, local, or tribal governments or by the private sector of $100 million or more. Accordingly, the OCC has not prepared a budgetary impact statement or specifically addressed the regulatory alternatives considered.
The Comptroller of the Currency has determined that this rule does not constitute a “significant regulatory action” for the purposes of Executive Order 12866.
In accordance with the requirements of the Paperwork Reduction Act of 1995, the OCC may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The information collection requirements contained in this notice of proposed rulemaking have been submitted to OMB for review and approval under OMB Control Number 1557-0014.
This proposal is expected to increase annual paperwork burden for respondents by adding certain application requirements. The information collection requirements are contained in § 5.53. Section 5.53 requires a national bank to submit an application to the OCC before changing the composition of all, or substantially all, of its assets through sales or other dispositions or, having sold or disposed of all or substantially all of its assets, through subsequent purchases or other acquisitions. The time per response to complete an application is estimated to be five hours and the number of respondents is estimated to be five national banks. The likely respondents are national banks.
The OCC invites comments on: (1) Whether the collection of information contained in the proposed rulemaking is
(2) The accuracy of the OCC's estimate of the burden of the information collection, including the validity of the methodology and assumptions used;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected;
(4) Ways to minimize the burden of the information collection on respondents; including the use of automated collection techniques or other forms of information technology; and
(5) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
Comments should be sent to: John Ference, Clearance Officer, Office of the Comptroller of the Currency, Legislative and Regulatory Activities Division, Attention: 1557-0194, 250 E Street, SW., Mailstop 8-4, Washington, DC 20219. Due to delays in paper mail in the Washington area, commenters are encouraged to submit their comments by fax to (202) 874-4889 or by e-mail to
Administrative practice and procedure, National banks, Reporting and recordkeeping requirements.
For reasons set forth in the preamble, the OCC proposes to amend part 5 of chapter I of title 12 of the Code of Federal Regulations as follows:
1. The authority citation for part 5 is revised to read as follows:
12 U.S.C. 1
2. In § 5.20, revise all references to “operating plan” or “operating plans” to read “business plan or operating plan” or “business plans or operating plans,” as appropriate.
3. In Subpart D—Other Changes in Activities and Operations, a new § 5.53 is added to read as follows:
(a)
(b)
(c)
(2) In determining whether to approve an application under paragraph (c)(1) of this section, the OCC will consider the purpose of the transaction, its impact on the safety and soundness of the bank, and any effect on the bank's customers, and may deny the application if the transaction would have a negative effect in any such respect. Where a national bank has sold or otherwise disposed of all or substantially all of its assets in a transaction requiring approval under paragraph (c)(1)(i) of this section, the OCC's review of any subsequent change in asset composition through purchase or other acquisition will include, in addition to the foregoing factors, the factors governing the organization of a bank under § 5.20.
(d)
Federal Aviation Administration, DOT.
Notice of proposed rulemaking (NPRM).
This document proposes the adoption of a new airworthiness directive (AD) that is applicable to certain Model Astra SPX and 1125 Westwind Astra series airplanes. This proposal would require detailed inspections and resistance measurements of the starter generator electrical cables of both engines to detect damage, and replacement of the electrical cable and cable support if any damage is found. This proposal would also require eventual replacement of the cable support. This action is necessary to prevent chafing of the starter generator cable, which could result in electrical arcing in the vicinity of a fuel line, and possible fire or explosion. This action is intended to address the identified unsafe condition.
Comments must be received by February 6, 2004.
Submit comments in triplicate to the Federal Aviation Administration (FAA), Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2002-NM-236-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056. Comments may be inspected at this location between 9 a.m. and 3 p.m., Monday through Friday, except Federal holidays. Comments may be submitted via fax to (425) 227-1232. Comments may also be sent via the Internet using the following address:
The service information referenced in the proposed rule may be obtained from Gulfstream Aerospace Corporation, P.O. Box 2206, Mail Station D25, Savannah, Georgia 31402. This information may be examined at the FAA, Transport
Tim Dulin, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington 98055-4056; telephone (425) 227-2141; fax (425) 227-1149.
Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this action may be changed in light of the comments received.
Submit comments using the following format:
• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.
• For each issue, state what specific change to the proposed AD is being requested.
• Include justification (
Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed 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 summarizing each FAA-public contact concerned with the substance of this proposal 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-NM-236-AD.” The postcard will be date stamped and returned to the commenter.
Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2002-NM-236-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.
The Civil Aviation Administration of Israel (CAAI), which is the airworthiness authority for Israel, notified the FAA that an unsafe condition may exist on certain Gulfstream Aerospace LP Model Astra SPX and 1125 Westwind Astra series airplanes. The CAAI advises that there has been a report of electrical failure on one airplane. Investigation revealed that the starter generator electrical cable was chafed in the area of the firewall support, and that the cable shorted to the structure. This condition, if not corrected, could result in electrical arcing in the vicinity of a fuel line, and possible fire or explosion.
Gulfstream Aerospace LP has issued Gulfstream Service Bulletin 100-54-252, dated April 24, 2002, which describes procedures for repetitive detailed inspections of the starter generator electrical cables of both engines to detect damage. If no damage is found, the service bulletin describes procedures for measuring the insulation resistance between the cable and the support. If any damage is found or if the insulation resistance is less than 20 megaohms, the service bulletin describes procedures for replacement of the electrical cables and cable support prior to further flight. If no damage is found, and the insulation resistance is more than 20 megaohms, the service bulletin describes procedures for repetitive inspection and eventual replacement of the cable support at the next engine removal. Replacement of the cable support and the cable, as necessary, is considered terminating action for repetitive inspections. Accomplishment of the actions specified in the service bulletin is intended to adequately address the identified unsafe condition. The CAAI classified this service bulletin as mandatory and issued Israeli airworthiness directive 54-02-06-12, dated July 4, 2002, to ensure the continued airworthiness of these airplanes in Israel.
These airplane models are manufactured in Israel and are type certificated for operation in the United States under the provisions of § 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the CAAI has kept the FAA informed of the situation described above. The FAA has examined the findings of the CAAI, 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.
Since an unsafe condition has been identified that is likely to exist or develop on other airplanes of the same type design registered in the United States, the proposed AD would require accomplishment of the actions specified in the service bulletin described previously, except as discussed below.
While the service bulletin gives a compliance time of “at the next engine removal” for replacement of the cable support if no damage is found, this proposed AD gives a compliance time for the replacements of “within 5 years after the effective date of this AD, or at the next engine removal, whichever occurs first.” This difference has been coordinated with the CAAI.
Although the service bulletin specifies to submit certain information to the manufacturer, this proposed AD does not include such a requirement.
While the Israeli AD does not require repetitive inspections until replacement, the proposed AD would require, and the service bulletin recommends repetitive inspections at intervals not to exceed 250 flight hours until the applicable replacement is accomplished.
The FAA estimates that 55 airplanes of U.S. registry would be affected by this proposed AD; that it would take approximately 2 work hours per airplane to accomplish the proposed inspection and measurement; 4 hours per airplane to accomplish the proposed replacement of the cable support if no damage is found; and 12 hours per airplane to accomplish the proposed replacement of the cable and cable support if any damage is found. The average labor rate is $65 per work hour. All necessary parts will be provided by the manufacturer free of charge. Based on these figures, the cost impact of the proposed inspection and measurement on U.S. operators is estimated to be $7,150, or $130 per airplane, per inspection cycle. For airplanes on which no damage is found, the cost impact of the proposed replacement on U.S. operators is estimated to be
The cost impact figure discussed above is based on assumptions that no operator has yet accomplished any of the proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.
The regulations proposed herein 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. Therefore, it is determined that this proposal would not have federalism implications under Executive Order 13132.
For the reasons discussed above, I certify that this proposed regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated, 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 copy of the draft regulatory evaluation prepared for this action is contained in the Rules Docket. A copy of it may be obtained by contacting the Rules Docket at the location provided under the caption
Air transportation, Aircraft, Aviation safety, Safety.
Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. Section 39.13 is amended by adding the following new airworthiness directive:
To prevent chafing of the starter generator cable, which could result in electrical arcing in the vicinity of a fuel line, and possible fire or explosion, accomplish the following:
(a) The following information pertains to the service bulletin referenced in this AD:
(1) The term “service bulletin,” as used in this AD, means the Accomplishment Instructions of Gulfstream Service Bulletin 100-54-252, dated April 24, 2002.
(2) Although the service bulletin referenced in this AD specifies to submit certain information to the manufacturer, this AD does not include such a requirement.
(b) Within 250 flight hours after the effective date of this AD, perform a detailed inspection of the starter generator electrical cables of both engines to detect damage, per the service bulletin.
For the purposes of this AD, a detailed inspection is defined as: “An intensive visual examination of a specific structural area, system, installation, or assembly to detect damage, failure, or irregularity. Available lighting is normally supplemented with a direct source of good lighting at intensity deemed appropriate by the inspector. Inspection aids such as mirror, magnifying lenses, etc., may be used. Surface cleaning and elaborate access procedures may be required.”
(c) If no damage is found during any inspection required by paragraph (b) of this AD: Before further flight, measure the insulation resistance between the starter generator cable and firewall support in accordance with the service bulletin.
(1) If the measured resistance is less than 20 Megaohms: Before further flight, replace the electrical cables and cable support per paragraph (d) of this AD.
(2) If the measured resistance is greater than or equal to 20 Megaohms, repeat the inspection required by paragraph (b) of this AD at intervals not to exceed 250 flight hours, including the follow-on measurement in paragraph (c), as applicable, until the applicable replacement required by paragraph (d) or (e) of this AD is accomplished.
(d) If any damage is found during any inspection required by paragraph (b), or if the insulation resistance as required to be measured by paragraph (c) of this AD is less than 20 megaohms: Before further flight, replace the electrical cables and cable support per Part C of the service bulletin. This replacement terminates the repetitive inspections required by paragraph (b) and the measurement required by paragraph (c) of this AD, for that affected engine.
(e) If no damage is found during any inspection required by paragraph (b) or if the insulation resistance as required to be measured by paragraph (c) of this AD is greater than or equal to 20 megaohms: Within 5 years after the effective date of this AD, or at the next engine removal, whichever comes first, replace the cable support per Part B of the service bulletin. This replacement terminates the repetitive inspections required by paragraph (b) and the measurement required by paragraph (c) of this AD, for that affected engine.
(f) In accordance with 14 CFR 39.19, the Manager, International Branch, ANM-116, FAA, Transport Airplane Directorate, is authorized to approve alternative methods of compliance for this AD.
The subject of this AD is addressed in Israeli airworthiness directive 54-02-06-12, dated July 4, 2002.
Federal Aviation Administration, DOT.
Notice of proposed rulemaking (NPRM).
This document proposes the adoption of a new airworthiness directive (AD) that is applicable to all Boeing Model 737-100, -200, and -200C series airplanes. This proposal would require repetitive inspections to detect discrepancies of certain fuselage skin panels located just aft of the wheel well, and repair if necessary. The actions specified by the proposed AD are intended to detect and correct
Comments must be received by February 23, 2004.
Submit comments in triplicate to the Federal Aviation Administration (FAA), Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2002-NM-289-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056. Comments may be inspected at this location between 9 a.m. and 3 p.m., Monday through Friday, except Federal holidays.
The service information referenced in the proposed rule may be obtained from Boeing Commercial Airplane Group, P.O. Box 3707, Seattle, Washington 98124-2207. This information may be examined at the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington.
Suzanne Lucier, Aerospace Engineer, Airframe Branch, ANM-120S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW., Renton, Washington 98055-4056; telephone (425) 917-6438; fax (425) 917-6590.
Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this notice may be changed in light of the comments received.
Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed 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 summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this notice must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2002-NM-289-AD.” The postcard will be date stamped and returned to the commenter.
Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2002-NM-289-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.
The FAA has received reports of fatigue cracking of the skins and doublers located aft of the wing, between body station (BS) 727 and BS 1016, and between body stringers 14 and 25, on numerous Boeing Model 737-100, -200, and -200C series airplanes. On some airplanes, reinforcing angles had been installed on the skin doublers; however, cracking was detected on both modified and unmodified airplanes. The cracking has been attributed to fatigue from a combination of shear stresses due to repeated wrinkling of the skin, and the skin chem-milled pockets configuration. Such fatigue cracking, if not corrected, could cause rapid decompression of the airplane.
AD 90-06-02, amendment 39-6489 (55 FR 8372, March 7, 1990), requires numerous modifications to aging Model 737 series airplanes. That AD requires, among other things, accomplishment of the preventive modification specified in Boeing Service Bulletin 737-53-1065, Revision 1, dated October 12, 1989, of certain fuselage skin panels in the subject area.
Since AD 90-06-02 was issued, the FAA has received reports indicating that several airplanes developed fatigue cracking in the fuselage skin panels even after the skin panels had been modified or repaired in accordance with that AD. While the cause of this post-modification or post-repair skin cracking has not yet been determined, it is evident that the previous modifications or repairs may not have adequately addressed the original fatigue cracking problem.
The FAA has reviewed and approved Boeing Service Bulletin 737-53-1065, Revision 2, dated April 19, 2001, including Evaluation Form. This service bulletin describes procedures for various actions on 42 different groups of airplanes, based on airplane configuration differences. The service bulletin includes procedures in different areas of the airplane for:
• A subsurface eddy current or magnetic optical imaging inspection on the exterior skin to detect skin cracking or other damage in zones 1 and 3;
• An internal HFEC inspection, if cracking is detected during the eddy current or magnetic optical imaging inspection, to detect cracking along the edge of the tearstrap and disbonding of the bonded doubler;
• A blind fastener repair, which would extend the interval for the next HFEC inspection;
• A general visual inspection of the exterior side of the skin in Zone 2;
• Repair of cracking;
• Removal of wrinkles from the skin to allow the repair to be done;
• Reinspecting unrepaired areas at regular intervals; and
• Installation of reinforcing angles, which would extend the interval for the next inspection.
Since an unsafe condition has been identified that is likely to exist or develop on other products of this same type design, the proposed AD would require repetitive inspections to detect discrepancies of certain fuselage skin panels located just aft of the wheel well, and repair if necessary. The purpose of these inspections is to detect fatigue cracking of the skin panels, which could cause rapid decompression of the airplane. The proposed inspections are to be accomplished in accordance with the service bulletin, except as discussed below.
Although the service bulletin specifies that the manufacturer may be contacted for disposition of certain repair conditions, this proposed AD would require the repair of those conditions to be accomplished in accordance with a method approved by the FAA, or in accordance with data meeting the type certification basis of the airplane approved by a Boeing Company Designated Engineering Representative who has been authorized by the FAA to make such findings.
Although the service bulletin recommends that operators report certain crack findings, this AD would not require such a report.
This is considered to be interim action. The manufacturer has advised that it is developing an improved preventive modification intended to address the identified unsafe condition for unmodified skin areas. After this modification is developed, approved, and available, the FAA may consider additional rulemaking.
There are approximately 1,000 airplanes of the affected design in the worldwide fleet. The FAA estimates that 390 airplanes of U.S. registry would be affected by this proposed AD.
It would take approximately 47 to 88 work hours per airplane (depending on configuration) to accomplish the proposed inspections, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the inspections proposed by this AD is estimated to be $3,055 to $5,720 per airplane, per inspection cycle.
The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this proposed AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.
The regulations proposed herein would 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. Therefore, in accordance with Executive Order 12612, it is determined that this proposal would not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this proposed regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated, 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 copy of the draft regulatory evaluation prepared for this action is contained in the Rules Docket. A copy of it may be obtained by contacting the Rules Docket at the location provided under the caption
Air transportation, Aircraft, Aviation safety, Safety.
Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. Section 39.13 is amended by adding the following new airworthiness directive:
To detect and correct fatigue cracking of the skin panels, which could cause rapid decompression of the airplane, accomplish the following:
(a) For fuselage skin panel areas that have not been modified with stiffening angles: Before the airplane accumulates 16,000 total flight cycles, or within 4,500 flight cycles after the effective date of this AD, whichever occurs later, inspect the unmodified fuselage side skins just aft of the main wheelwell, and perform all follow-on actions, in accordance with Part I of the Accomplishment Instructions of Boeing Service Bulletin 737-53-1065, Revision 2, dated April 19, 2001. If no cracking, loose fasteners, disbonding, or damage is found: Repeat the inspection at the time specified in paragraph 1.E., of the service bulletin, as applicable, except as provided by paragraph (d) of this AD.
(b) For fuselage skin panel areas that have been modified with stiffening angles in accordance with Boeing Service Bulletin 737-53-1065, dated April 19, 2001: Within 16,000 flight cycles after the modification, or within 4,500 flight cycles after the effective date of this AD, whichever occurs later, inspect the modified areas as specified in accordance with Part I of Boeing Service Bulletin 737-53-1065, Revision 2, dated April 19, 2001. Repeat the inspection at the time specified in paragraph 1.E., of the service bulletin, as applicable, except as provided by paragraph (d) of this AD. If any cracks, loose fasteners, disbonding, or damage is found: Repair before further flight in accordance with the requirements of paragraph (d) of this AD.
(c) For fuselage skin panel areas that have been modified with stiffening angles in accordance with Boeing Service Bulletin 737-53-1065, dated April 19, 2001: At the later of the times specified by paragraphs (c)(1) and (c)(2) of this AD: Perform a subsurface eddy current or magneto optical imaging inspection to detect subsurface skin cracks along the edge of the bonded doubler, in accordance with Figure 10 of Boeing Service Bulletin 737-53-1065, Revision 2, dated April 19, 2001. If any cracks are found, repair before further flight in accordance with paragraph (d) of this AD. Accomplishment of this inspection and all applicable corrective actions terminates the repetitive inspections required by paragraph (b) of this AD for the modified areas.
(1) Inspect within 24,500, but not fewer than 20,000, flight cycles after the modification of the skin.
(2) Inspect within 4,500 flight cycles after the effective date of this AD.
(d) If any cracking is detected during any inspection required by this AD: Do the actions specified by paragraph (d)(1) or (d)(2) of this AD before further flight. Do the actions in accordance with Boeing Service Bulletin 737-53-1065, Revision 2, dated April 19, 2001, except as required by paragraph (e) of this AD.
(1) Do a time-limited repair (including a detailed inspection of the skin in the area of the repair to detect corrosion and doubler disbonding) in accordance with Part III of the Accomplishment Instructions of the service bulletin.
(i) After the time-limited repair has been accomplished: At intervals not to exceed 3,000 flight cycles, perform an external general visual inspection of the repair to detect loose or missing fasteners, in accordance with Part III of the Accomplishment Instructions of the service bulletin, until the actions specified in paragraph (d)(1)(v) of this AD have been accomplished.
(ii) After the time-limited repair has been accomplished: At intervals not to exceed 4,500 flight cycles, perform an internal inspection of the repair to detect cracking or doubler disbonding using general visual and high-frequency eddy current methods, in accordance with Figure 11 of the service bulletin, until the actions specified in paragraph (d)(1)(v) of this AD have been accomplished.
(iii) If any cracking is found during any inspection required by paragraph (d)(1) of this AD: Repair before further flight in accordance with paragraph (e) of this AD.
(iv) If any disbonding is found during any inspection required by paragraph (d)(1) of this AD: Repair before further flight in
(v) Within 10,000 flight cycles after accomplishment of the time-limited repair: Make the repair permanent in accordance with Part III of the Accomplishment Instructions of the service bulletin. Permanent repair of an area terminates the repetitive inspections specified in this AD for that repaired area only.
(2) Do a permanent repair (including an inspection using external subsurface eddy current or magneto optical imaging methods to detect cracks at the chem-milled step in each adjacent bay of the fuselage skin, a detailed inspection of the skin in the area of the repair for corrosion and doubler disbonding, and applicable corrective action) of the cracked area, in accordance with Part II of the Accomplishment Instructions of the service bulletin. Permanent repair of an area terminates the repetitive inspections specified in this AD for that repaired area only.
(e) During any inspection required by this AD, if any discrepancy (including cracking) is detected for which the service bulletin specifies to contact Boeing for appropriation action: Before further flight, repair in accordance with a method approved by the Manager, Seattle ACO; or in accordance with data meeting the type certification basis of the airplane approved by a Boeing Company Designated Engineering Representative who has been authorized by the Manager, Seattle ACO, to make such findings. For a repair method to be approved, as required by this paragraph, the approval letter must specifically refer to this AD.
(f) Although Boeing Service Bulletin 737-53-1065, Revision 2, dated April 19, 2001, recommends that cracks found in Zone 2 be reported to Boeing, this AD does not require such a report.
(g)(1) In accordance with 14 CFR 39.19, the Manager, Seattle ACO, FAA, is authorized to approve alternative methods of compliance (AMOCs) for this AD.
(2) An AMOC that provides an acceptable level of safety may be used for any repair required by this AD, if it is approved by a Boeing Company Designated Engineering Representative who has been authorized by the Manager, Seattle ACO, to make such findings.
Federal Aviation Administration, DOT.
Notice of proposed rulemaking (NPRM).
This document proposes the adoption of a new airworthiness directive (AD) that is applicable to certain McDonnell Douglas Model MD-90-30 airplanes. For some airplanes, the proposal would require replacing one 3-phase limiter block assembly, 6 current limiters, and hardware for 9 electrical cables with new parts. For other airplanes, this proposal would require inspecting 6 current limiters and 3 spare current limiters and replacing any defective current limiters with new current limiters. These actions are necessary to prevent overheating of the terminal studs on the 3-phase limiter blocks and associated current limiters, which could cause a fire in the airplane. This action is intended to address the identified unsafe condition.
Comments must be received by February 23, 2004.
Submit comments in triplicate to the Federal Aviation Administration (FAA), Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2001-NM-226-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056. Comments may be inspected at this location between 9 a.m. and 3 p.m., Monday through Friday, except Federal holidays. Comments may be submitted via fax to (425) 227-1232. Comments may also be sent via the Internet using the following address:
The service information referenced in the proposed rule may be obtained from Boeing Commercial Aircraft Group, Long Beach Division, 3855 Lakewood Boulevard, Long Beach, California 90846, Attention: Data and Service Management, Dept. C1-L5A (D800-0024). This information may be examined at the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington or at the FAA, Los Angeles Aircraft Certification Office, 3960 Paramount Boulevard, Lakewood, California.
George Mabuni, Aerospace Engineer, Systems and Equipment Branch, ANM-130L, FAA, Los Angeles Aircraft Certification Office, 3960 Paramount Boulevard, Lakewood, California 90712-4137; telephone (562) 627-5341; fax (562) 627-5210.
Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this action may be changed in light of the comments received.
Submit comments using the following format:
• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.
• For each issue, state what specific change to the proposed AD is being requested.
• Include justification (
Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed 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 summarizing each FAA-public contact concerned with the substance of this proposal 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 2001-NM-226-AD.” The postcard will be date stamped and returned to the commenter.
Any person may obtain a copy of this NPRM by submitting a request to the
The FAA has received reports of overheating of the terminal studs on the 3-phase limiter block and associated current limiters on MD-90 airplanes. Investigation has determined that incorrect manufacturing or assembly procedures were used during manufacture of the 3-phase limiter blocks or the current limiters. If the defective 3-phase limiter blocks or current limiters are not replaced, overheating of the terminal studs on the 3-phase limiter blocks and associated current limiters could occur. Overheating of the terminal studs causes the casing of the current limiters attached to the limiter block to melt and deform. Such overheating could cause a fire in the airplane.
The FAA has reviewed and approved McDonnell Douglas Alert Service Bulletin MD90-24A031, Revision 01, dated February 28, 2001, which describes procedures for replacing (1) The 3-phase limiter block assembly, (2) the 6 current limiters and attaching parts located on the limiter block, and (3) hardware for 9 electrical cables attached to the limiter block.
The FAA has also reviewed and approved McDonnell Douglas Alert Service Bulletin MD90-24A043, Revision 01, dated March 12, 2001, which describes procedures for (1) inspecting the 6 current limiters and attaching hardware and the 3 spare current limiters located in the electrical power center and (2) replacing the current limiters which have manufacturing defects with new current limiters. This service bulletin specifies that the actions required by McDonnell Douglas Alert Service Bulletin MD90-24A031, Revision 01, dated February 28, 2001, are to be accomplished prior to or concurrent with those described in McDonnell Douglas Alert Service Bulletin MD90-24A043, Revision 01, dated March 12, 2001.
Accomplishment of the actions specified in the service bulletins is intended to adequately address the identified unsafe condition.
Since an unsafe condition has been identified that is likely to exist or develop on other products of this same type design, the proposed AD would require accomplishment of the actions specified in the service bulletins described previously, except as indicated below.
Operators should note that, although the Accomplishment Instructions of the referenced alert service bulletins describe procedures for recording certain data regarding replacement of the 3-phase limiter block assembly and forwarding the data to the FAA, this proposed AD would not require those actions. The FAA does not need this information from operators.
There are approximately 29 airplanes in the worldwide fleet which are listed in McDonnell Douglas Alert Service Bulletin MD90-24A031, Revision 01, dated February 28, 2001. The FAA estimates that 18 airplanes of U.S. registry would be affected by this proposed AD, that it would take approximately 3 work hours per airplane to accomplish the actions proposed in paragraph (b) of this AD, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the actions proposed in paragraph (b) of this AD on U.S. operators is estimated to be $5,655, or $195 per airplane.
There are approximately 4 airplanes in the worldwide fleet which are listed in McDonnell Douglas Alert Service Bulletin MD90-24A031, Revision 01, dated February 28, 2001, and are also listed as Group 1 airplanes in McDonnell Douglas Alert Service Bulletin MD90-24A043, Revision 01, dated March 12, 2001. None of those airplanes are on the U.S. registry.
There are approximately 5 airplanes in the worldwide fleet which are listed as Group 2 airplanes in McDonnell Douglas Alert Service Bulletin MD90-24A043, Revision 01, dated March 12, 2001. The FAA estimates that one airplane of U.S. registry would be affected by this proposed AD, that it would take approximately 3 work hours per airplane to accomplish the actions proposed in paragraph (c) of this AD, and that the average labor rate is $65 per work hour. The manufacturer may cover the cost of replacement parts associated with this proposed AD, subject to warranty conditions. Based on these figures, the cost impact of the actions proposed in paragraph (c) of this AD on U.S. operators is estimated to be $195.
The cost impact figure discussed above is based on assumptions that no operator has yet accomplished any of the proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this proposed AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.
The regulations proposed herein 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. Therefore, it is determined that this proposal would not have federalism implications under Executive Order 13132.
For the reasons discussed above, I certify that this proposed regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated, 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 copy of the draft regulatory evaluation prepared for this action is contained in the Rules Docket. A copy of it may be obtained by contacting the Rules Docket at the location provided under the caption
Air transportation, Aircraft, Aviation safety, Safety.
Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. Section 39.13 is amended by adding the following new airworthiness directive:
To prevent overheating of the terminal studs on the 3-phase limiter blocks and associated current limiters, which could cause a fire in the airplane, accomplish the following:
(a) For those airplanes listed as Group 1 airplanes in McDonnell Douglas Alert Service Bulletin MD90-24A043, Revision 01, dated March 12, 2001, which are also listed in McDonnell Douglas Alert Service Bulletin MD90-24A031, Revision 01, dated February 28, 2001: Within 6 months after the effective date of this AD, accomplish the following actions:
(1) Inspect the 3 spare current limiters located in the electrical power center (EPC) in accordance with the Accomplishment Instructions of McDonnell Douglas Alert Service Bulletin MD90-24A043, Revision 01, dated March 12, 2001. If the inspection reveals that any of the current limiters located in the electrical power unit are defective, before further flight replace the defective current limiter(s) with new current limiter(s) in accordance with the alert service bulletin.
(2) Prior to or concurrent with accomplishment of paragraph (a)(1) of this AD, accomplish the following actions in accordance with McDonnell Douglas Alert Service Bulletin MD90-24A031, Revision 01, dated February 28, 2001:
(i) Replace the 3-phase limiter block assembly and associated clear cover of the EPC with a serialized 3-phase limiter block assembly and a new clear cover.
(ii) Replace the six current limiters and attaching parts on the limiter block with new current limiters and attaching parts.
(iii) Replace hardware for nine electrical cables attached to the limiter block with new attaching hardware.
(b) For those airplanes listed in McDonnell Douglas Alert Service Bulletin MD90-24A031, Revision 01, dated February 28, 2001: Within 6 months after the effective date of this AD, accomplish the following actions in accordance with the Accomplishment Instructions of the alert service bulletin:
(1) Replace the 3-phase limiter block assembly and associated clear cover of the EPC with a serialized 3-phase limiter block assembly and a new clear cover.
(2) Replace the six current limiters and attaching parts on the limiter block with new current limiters and attaching parts.
(3) Replace hardware for nine electrical cables attached to the limiter block with new attaching hardware.
(c) For those airplanes listed as Group 2 airplanes in McDonnell Douglas Alert Service Bulletin MD90-24A043, Revision 01, dated March 12, 2001: Within 6 months after the effective date of this AD, accomplish the following actions in accordance with the Accomplishment Instructions of the alert service bulletin.
(1) Inspect the 6 current limiters and attaching hardware on the 3-phase limiter blocks and the 3 spare current limiters located in the EPC to determine whether any of the current limiters are defective.
(2) If the inspection required by paragraph (c)(1) of this AD reveals that any of the current limiters are defective, before further flight replace the defective current limiters with new current limiters, in accordance with Figure 1 of the Accomplishment Instructions.
(d) As of the effective date of this AD, no person shall install on any airplane a Tri-Star 3-phase limiter block assembly having part number (P/N) C-1301-3 or a Burndy 3-phase limiter block assembly having P/N F6H-2, unless that 3-phase limiter block assembly has serial number 3015 or higher.
(e) Although the service bulletin referenced in this AD specifies that certain information is to be submitted to the FAA, this AD does not include such a requirement.
(f) In accordance with 14 CFR 39.19, the Manager, Los Angeles ACO, FAA, is authorized to approve alternative methods of compliance for this AD.
Information concerning the existence of approved alternative methods of compliance with this AD, if any, may be obtained from the Los Angeles ACO.
Pursuant to the Federal Advisory Committee Act, notice is hereby given of the one hundred and fortieth meeting of the Board for International Food and Agricultural Development (BIFAD). The meeting will be held from 8 a.m. to 1 p.m. on February 5, 2004 in the ground floor meeting room of the National Association of State Universities & Land Grant Colleges (NASULGC), at 1307 New York Avenue, NW., Washington, DC.
The BIFAD will hear a status report regarding revision of the CRSP Guidelines and a report on the status of the Request for Assistance (RFA) to procure the management entity for the next phase of the SANREM and IPM CRSPs. The Board will also be updated on the implementation of the BIFAD Long-Term Training initiative and hear the report from the East African Regional Training Assessment team. Recommendations from the BIFAD-commissioned study on USAID-university relationships will be considered.
The meeting is free and open to the public. Those wishing to attend the meeting or obtain additional information about BIFAD should contact Curtis Nissly, the Designated Federal Officer for BIFAD. Write him in care of the U.S. Agency for International Development, Ronald Reagan Building, Office of Agriculture and Food Security, 1300 Pennsylvania Avenue, NW., Room 2.11-085, Washington, DC, 20523-2110 or telephone him at (202) 712-1064 or fax (202) 216-3010.
Pursuant to the Agricultural Trade Development and Assistance Act of 1954 (Pub. L. 480, as amended), notice is hereby given that the Draft Guidelines for Pub. L. 480 Title II Cooperating Sponsor Results Reports and Resource Requests are being made available to interested parties for the required thirty (30) day comment period.
Individuals who wish to receive a copy of these draft guidelines should contact: Office of Food for Peace, Agency for International Development, RRB 7.06-153, 1300 Pennsylvania Avenue, Washington, DC 20523-7600. Individuals who have questions or comments on the draft guidelines should contact P.E. Balakrishnan at the above address, at (202) 712-1368 or
The thirty-day comment period will begin on the date that this announcement is published in the
Forest Service, USDA.
Notice of meeting.
Pursuant to the authorities in the Federal Advisory Committee Act (Pub. L. 92-463) and under the Secure Rural Schools and Community Self-Determination Act of 2000 (Pub. L. 106-393), the Boise and Payette National Forests' Southwest Idaho Resource Advisory Committee will conduct a business meeting. The meeting is open to the public.
Wednesday, January 21, 2004, beginning at 10:30 a.m.
Idaho Counties Risk Management Program Building, 3100 South Vista Avenue, Boise, Idaho.
Agenda topics will include review and approval of project proposals, ratification of the committee chair, and an open public forum.
Randy Swick, Designated Federal Officer, at (208) 634-0401 or e-mail
Import Administration, International Trade Administration, Department of Commerce.
Notice of initiation of new shipper antidumping duty review: Fresh garlic from the People's Republic of China.
January 7, 2004.
In November 2003, the Department of Commerce received two requests to conduct new shipper reviews of the antidumping duty order on fresh garlic from the People's Republic of China. We have determined that one of these requests meets the statutory and regulatory requirements for the initiation of a new shipper review.
Brian Ellman or Minoo Hatten at (202) 482-4852 and (202) 482-1690, respectively, AD/CVD Enforcement III, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230.
The notice announcing the antidumping duty order on fresh garlic from the People's Republic of China (PRC) was published on November 16, 1994. In November 2003, we received two requests to conduct new shipper reviews of the antidumping duty order.
On November 25, 2003, we received a request for a new shipper review from H&T Trading Company of Hong Kong (H&T). On November 26, 2003, we also received a request for a new shipper review from Jinxiang Shanyang Freezing Storage Co., Ltd. (Shanyang).
H&T and Shanyang certified that they exported the subject merchandise on which they based their requests for a new shipper review, but that they did not grow the subject merchandise. Specifically, H&T certified that Shandong Jining Jinshan Textile Co., Ltd. (Jining Jinshan), grew the subject merchandise it exported, and Shanyang certified that Kaifeng Wangtun Fresh Vegetables Factory (Kaifeng) grew the subject merchandise it exported.
On December 16 and December 23, 2003, respectively, Shanyang and H&T resubmitted their requests for new shipper reviews to correct certain deficiencies (
The Department of Commerce (the Department) issued a letter to H&T on December 19, 2003, in which it requested additional documentation establishing H&T's entitlement to a new shipper review. In its December 23, 2003, response, H&T included the sales contract pertaining to its transaction with the grower, Jining Jinshan. The sales contract, which was generated prior to the date of H&T's U.S. sale, specifies the ultimate U.S. destination of the merchandise and stipulates that the transaction between Jining Jinshan and H&T will be conducted in U.S. dollars.
Section 772(a) of the Tariff Act of 1930, as amended (the Act) states in part:
The term “export price” means the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States * * *
Accordingly, the Department has interpreted section 772(a) of the Act to mean that it is to use the price at which the first party in the chain of distribution who has knowledge of the U.S. destination of the merchandise sells the subject merchandise, either directly to a U.S. purchaser or to an intermediary such as a trading company. The party making such a sale, with knowledge of destination, is the appropriate party to be reviewed. Our focus is on the first party in the chain of distribution with knowledge of the U.S. destination rather than on the first chronological sale of the merchandise. See,
Hong Kong companies are treated as market-economy companies (
Applying these principles, we are not initiating a new shipper review of H&T's sale to its U.S. customer because evidence on the record supports a finding that Jining Jinshan had knowledge of the U.S. destination when it completed its transaction with H&T. Because of its knowledge and the fact that the sale between Jining Jinshan and H&T was the first non-intra-NME sale in the chain of distribution, this sale is the appropriate basis for determining the export price.
The Department did not receive a request for a new shipper review of Jining Jinshan at any point prior to or during the anniversary month of the publication of the antidumping duty order. See 19 CFR 351.214(d). Therefore, we find that it is not appropriate to conduct a review of the sale at issue at this time and have determined that H&T is ineligible for a new shipper review based on this transaction.
Pursuant to 19 CFR 351.214(b)(2)(i), Shanyang certified that it did not export subject merchandise to the United States during the period of investigation (POI). In addition, pursuant to 19 CFR 351.214(b)(2)(ii)(B), Kaifeng, the grower of the garlic exported by Shanyang, provided certifications that it did not export the subject merchandise to the United States during the POI.
Pursuant to 19 CFR 351.214(b)(2)(iii)(A), Shanyang certified that, since the initiation of the investigation, it has never been affiliated with any exporter or producer who exported the subject merchandise to the United States during the POI, including those not individually examined during the investigation. As required by 19 CFR 351.214(b)(2)(iii)(B), Shanyang also certified that its export activities were not controlled by the central government.
In addition to the certifications described above, Shanyang submitted documentation establishing the following: (1) The date on which it first shipped the subject merchandise for export to the United States and the date on which the subject merchandise was first entered, or withdrawn from warehouse, for consumption; (2) the volume of its first shipment and the volume of subsequent shipments; (3) the date of its first sale to an unaffiliated customer in the United States.
Pursuant to section 751(a)(2)(B) of the Tariff Act of 1930, as amended (the Act), and 19 CFR 351.214(d)(1), we are initiating a new shipper review for shipments of fresh garlic from the PRC grown by Kaifeng and exported by Shanyang.
The period of review is November 1, 2002, through October 31, 2003. See 19 CFR 351.214(g)(1)(i)(A). We intend to issue final results of these reviews no later than 270 days from the date of initiation. See section 751(a)(2)(B)(iv) of the Act.
Shanyang has certified that it exported but did not grow the subject merchandise on which it based its request for a new shipper review (
Interested parties that need access to proprietary information in this new shipper review should submit applications for disclosure under administrative protective order in accordance with 19 CFR 351.305 and 351.306.
This initiation and notice are in accordance with section 751(a)(2)(B) of the Act and 19 CFR 351.214 and 351.221(c)(1)(i).
Import Administration, International Trade Administration, Department of Commerce.
Notice of preliminary results of antidumping duty administrative review.
In response to timely requests by one manufacturer/exporter and the petitioners,
We preliminarily determine that sales have been made below normal value. Interested parties are invited to comment on these preliminary results. If these preliminary results are adopted in our final results of administrative review, we will instruct U.S. Customs and Border Protection to assess antidumping duties on all appropriate entries.
January 7, 2004.
Rebecca Trainor or Kate Johnson, Office 2, AD/CVD Enforcement Group I, Import Administration—Room B099, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-4007 or (202) 482-4929, respectively.
On March 7, 2000, the Department published in the
On March 3, 2003, we published a notice advising of the opportunity to request an administrative review of the antidumping duty order on stainless steel bar from the United Kingdom (68 FR 9974). In response to timely requests by two manufacturers/exporters, Corus Engineering Steels Limited (CES) and Firth Rixson Special Steels Limited (FRSS), and the petitioners, the Department published a notice of initiation of an administrative review with respect to two companies: CES and FRSS (68 FR 19498 (April 21, 2003)).
On May 7, 2003, the Department issued antidumping duty questionnaires to the above-mentioned companies. On June 11, 2003, FRSS requested that the Department limit its request for information concerning sales in the United Kingdom and its request for information concerning the cost of production for those sales. On July 8, 2003, we granted FRSS's request to limit its reporting of home market sales and the associated cost of production for those sales.
On June 26, 2003, CES timely withdrew its request for an administration review of the antidumping duty order on stainless steel bar from the United Kingdom for the above-referenced review period. On July 10, 2003, we published a
We received FRSS's response to the questionnaire on July 25, 2003. We issued supplemental questionnaires in August, September and October 2003, and received responses during the period August through November 2003.
On October 27, 2003, we received notification from counsel for FRSS that the company did not intend to participate any further in the administrative review. For further discussion, see the “Use of Facts Available (FA)” section of this notice.
For purposes of this order, the term “stainless steel bar” includes articles of stainless steel in straight lengths that have been either hot-rolled, forged, turned, cold-drawn, cold-rolled or otherwise cold-finished, or ground, having a uniform solid cross section along their whole length in the shape of circles, segments of circles, ovals, rectangles (including squares), triangles, hexagons, octagons, or other convex polygons. Stainless steel bar includes cold-finished stainless steel bars that are turned or ground in straight lengths, whether produced from hot-rolled bar or from straightened and cut rod or wire, and reinforcing bars that have indentations, ribs, grooves, or other deformations produced during the rolling process.
Except as specified above, the term does not include stainless steel semi-finished products, cut length flat-rolled products (
The stainless steel bar subject to this order is currently classifiable under subheadings 7222.11.00.05, 7222.11.00.50, 7222.19.00.05, 7222.19.00.50, 7222.20.00.05, 7222.20.00.45, 7222.20.00.75, and 7222.30.00.00 of the
On October 27, 2003, two weeks prior to the Department's planned verification of FRSS's submitted cost and sales information, FRSS notified the Department that it no longer intended to participate in this administrative review (
Once we determine that the use of facts available is warranted, section 776(b) of the Act further permits us to apply an adverse inference if we make the additional finding that “[a respondent] has failed to cooperate by not acting to the best of its ability to comply with a request for information.” By ceasing to participate in the review, effectively cancelling the Department's planned verification of FRSS's submitted cost and sales information, FRSS did not act to the best of its ability as required by section 776(b) of the Act. Consequently, we have determined to make an adverse inference in determining a dumping margin for FRSS.
(
Section 776(b) of the Act authorizes the Department to use as adverse facts available (AFA) information derived from the petition, the final determination from the less-than-fair-value (LTFV) investigation, a previous administrative review, or any other information placed on the record. As AFA, we have assigned to FRSS the highest margin found in any segment of the proceeding, which in this case is the highest margin calculated in the petition, and used as AFA in the LTFV investigation.
Section 776(c) of the Act provides that, when the Department relies on secondary information (such as the petition) in using the facts otherwise available, it must, to the extent practicable, corroborate that information from independent sources that are reasonably at its disposal. We have interpreted “corroborate” to mean that we will, to the extent practicable, examine the reliability and relevance of the information used.
In accordance with section 776(c) of the Act, we consider the petition rates to be corroborated using information from independent sources that were reasonably at our disposal. As a result, we have preliminarily assigned FRSS the highest rate from any segment of the proceeding, 125.77 percent.
As a result of this review, we preliminarily determine that the weighted-average dumping margin for the period August 2, 2001, through January 28, 2002, and March 8, 2002, through February 28, 2003, is as follows:
Interested parties who wish to request a hearing or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, Room B-099, within 30 days of the date of publication of this notice. Requests should contain: (1) The party's name, address and telephone number; (2) the number of participants; and (3) a list of issues to be discussed.
Issues raised in the hearing will be limited to those raised in the case briefs of interested parties. Case briefs and rebuttal briefs, limited to the issues raised in the respective case briefs, may be submitted not later than 30 days and 37 days, respectively, from the date of publication of these preliminary results.
The Department will issue the final results of this administrative review, including the results of its analysis of issues raised in any written briefs, not later than 120 days after the date of publication of this notice.
The Department shall determine, and U.S. Customs and Border Protection (CBP) shall assess, antidumping duties on all appropriate entries. The Department will issue appropriate appraisement instructions directly to CBP upon completion of this review. We will instruct CBP to assess antidumping duties on all appropriate entries covered by this review.
The following cash deposit requirements will be effective for all shipments of the subject merchandise entered, or withdrawn from warehouse,
This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
This administrative review and notice are published in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.221.
Import Administration, International Trade Administration, Department of Commerce.
Notice of Preliminary Results of Countervailing Duty Administrative Review.
The Department of Commerce (the Department) is conducting an administrative review of the countervailing duty (CVD) order on certain hot-rolled carbon steel flat products from India for the period April 20, 2001, through December 31, 2002,
EFFECTIVE DATE: January 7, 2004.
Tipten Troidl at (202) 482-1767, Maura Jeffords at (202) 482-3146 or Cindy Robinson at (202) 482-3797, Office of AD/CVD Enforcement VI, Group II, Import Administration, International Trade Administration, U.S. Department of Commerce, Room 4012, 14th Street and Constitution Avenue, NW, Washington, DC 20230.
On December 3, 2001, the Department published in the
On February 11, 2003, the Department issued a questionnaire to the Government of India (GOI) and Essar. We received questionnaire responses from Essar on April 7, 2003, and from the GOI on April 17 and April 28, 2003. On June 3, 2003, we issued a supplemental questionnaire to the GOI; the response was received on August 5, 2003. On July 14 and September 5, 2003, we issued supplemental questionnaires to Essar, which submitted its responses on August 5, September 20, October 14, and October 16, 2003. On July 30, 2003, the Department published in the
On May 19, 2003, petitioners submitted new subsidy allegations. These allegations covered the following programs: unequityworthiness in 2001 and 2002, uncreditworthiness in 2001 and 2002, forgiveness of debt obligations in 2002 restructuring, suspension and restructuring of interest payments, debt-to-equity conversions, preferential restructuring of loans and guarantee and repayment of debt. On September 12, 2003, the Department initiated a review of the new subsidy allegations.
In accordance with 19 CFR 351.213(b), this review covers only those producers or exporters for which a review was specifically requested. The only company subject to this review is Essar. This review covers eleven programs.
The merchandise subject to this order is certain hot-rolled flat-rolled carbon-quality steel products of a rectangular shape, of a width of 0.5 inch or greater, neither clad, plated, nor coated with metal and whether or not painted, varnished, or coated with plastics or other non-metallic substances, in coils (whether or not in successively superimposed layers), regardless of thickness, and in straight lengths, of a thickness of less than 4.75 mm and of a width measuring at least 10 times the thickness. Universal mill plate (
Specifically included within the scope of this order are vacuum degassed, fully stabilized (commonly referred to as interstitial-free (IF)) steels, high strength low alloy (HSLA) steels, and the substrate for motor lamination steels. IF steels are recognized as low carbon steels with micro-alloying levels of elements such as titanium or niobium (also commonly referred to as columbium), or both, added to stabilize carbon and nitrogen elements. HSLA steels are recognized as steels with micro-alloying levels of elements such as chromium, copper, niobium, vanadium, and molybdenum. The substrate for motor lamination steels contains micro-alloying levels of elements such as silicon and aluminum.
Steel products included in the scope of this order, regardless of definitions in the Harmonized Tariff Schedule of the United States (HTS), are products in which: I) iron predominates, by weight, over each of the other contained elements; ii) the carbon content is 2 percent or less, by weight; and iii) none of the elements listed below exceeds the quantity, by weight, respectively indicated:
All products that meet the physical and chemical description provided above are within the scope of this order unless otherwise excluded. The following products, by way of example, are outside or specifically excluded from the scope of this order:
The merchandise subject to this order is classified in the HTS at subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60, 7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60, 7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30, 7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90, 7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00, 7208.90.00.00, 7211.14.00.90, 7211.19.15.00, 7211.19.20.00, 7211.19.30.00, 7211.19.45.00, 7211.19.60.00, 7211.19.75.30, 7211.19.75.60, and 7211.19.75.90. Certain hot-rolled flat-rolled carbon-quality steel covered by this order, including: vacuum degassed fully stabilized; high strength low alloy; and the substrate for motor lamination steel may also enter under the following tariff numbers: 7225.11.00.00, 7225.19.00.00, 7225.30.30.50, 7225.30.70.00, 7225.40.70.00, 7225.99.00.90, 7226.11.10.00, 7226.11.90.30, 7226.11.90.60, 7226.19.10.00, 7226.19.90.00, 7226.91.50.00, 7226.91.70.00, 7226.91.80.00, and 7226.99.00.00. Subject merchandise may also enter under 7210.70.30.00, 7210.90.90.00, 7211.14.00.30, 7212.40.10.00, 7212.40.50.00, and 7212.50.00.00. Although the HTS subheadings are provided for convenience and CBP purposes, the Department's written description of the merchandise subject to this order is dispositive.
As discussed above, petitioners alleged that Essar was unequityworthy in 2001 and 2002. On September 12, 2003, the Department initiated a review of Essar's equityworthiness for 2001 and 2002.
On May 19, 2003, petitioners alleged that Essar was uncreditworthy in 2001 and 2002.
Pursuant to section 351.505(a)(4)(I) of the Department's Regulations, the Department will generally consider a firm to be uncreditworthy if, based on information available at the time of the government-provided loan, the firm could not have obtained long-term loans from conventional commercial sources. To make this determination, the
The Department found that Essar did not receive commercial loans during 2001 or 2002, as set forth in factor (A).
Also, during 2001, Essar defaulted on a long-term loan to a group of noteholders.
Based on our analysis of Essar's financial ratios, its financial statements, its history of missed principal and interest payments, Essar's negotiations of a restructuring package of its outstanding debt obligations, and its application for protection under the BRU, we preliminarily find that Essar was uncreditworthy during fiscal years 2001 and 2002.
In accordance with section 351.505(a)(3)(I) of the Department's Regulations, for those programs requiring the application of a short-term benchmark interest rate, we used company-specific, short-term interest rates on commercial loans as reported by Essar. With respect to the rupee-denominated, short-term benchmark used in calculating the benefit for pre-shipment export financing, we used the weighted-average rate of the company's cash credit loans. Cash credit loans are the most comparable type of short-term loan to use as a benchmark because, like the pre- shipment export financing, cash credit loans are denominated in rupees and take the form of a line of credit which can be drawn down by the recipient.
For those programs requiring a rupee-denominated discount rate or the application of a rupee-denominated, long-term benchmark interest rate, we used, where available, company-specific, weighted-average interest rates on commercial long-term, rupee-denominated loans. We note, however, that Essar did not have rupee-denominated, long-term loans from commercial banks for all required years. Therefore, for those years for which we did not have company- specific information, we relied on a rupee-denominated, long-term benchmark interest rate from the immediately preceding year as directed by section 351.505(a)(2)(iii) of the Department's regulations.
As discussed in the “Creditworthiness” section of this preliminary results, we have preliminarily determined that Essar was uncreditworthy during 2001 and 2002. In these preliminary results for years 2001 and 2002, where Essar received benefits that were treated as fixed, long-term loans, we used as our long-term benchmark interest rate India's Prime Lending Rate (PLR), as published by the Reserve Bank of India (RBI).
The RBI, through commercial banks, provides short-term pre-shipment financing to exporters. Upon presentation of a confirmed export order or letter of credit to a bank, companies may receive pre-shipment loans for working capital purposes. Exporters may also establish pre-shipment credit lines upon which they may draw as needed.
We determined in
Essar did not use this program in 2001. To calculate the benefit conferred by these pre-shipment loans taken out by Essar in 2002, we compared the actual interest paid on the loans with the amount of interest that would have been paid at the benchmark interest rate. Where the benchmark interest exceeds the actual interest paid, the difference constitutes the benefit. We then divided the total amount of benefit by Essar's 2002 total exports. On this basis, we preliminarily determine the net countervailable subsidy under the pre-shipment export financing program in 2002 to be less than 0.005 percent ad valorem for Essar.
The EPCGS provides for a reduction or exemption of customs duties and an exemption from excise taxes on imports of capital goods. Under this program, producers may import capital equipment at reduced rates of duty by undertaking to earn convertible foreign exchange equal to
five times the CIF value of capital goods to be fulfilled over a period of eight years (12 years in the case where the CIF value is Rs. 100 Crore
In
We have determined the benefit under this program in accordance with our findings and treatment of benefit in
Accordingly, for those unpaid duties for which Essar has yet to fulfill its export obligations, we determine the benefit to be the interest that Essar would have paid during the POR had they borrowed the full amount of the duty reduction at the time of import. Pursuant to section 351.505(d)(1) of the Department's regulations, we used a long-term interest rate as our benchmark to calculate the benefit of a contingent liability interest-free loan because the event upon which repayment of the duties depends (
The second potential benefit is the waiver of import duty on imports of capital equipment covered by those EPCGS licenses for which export requirements have been met. Essar reported that it imported machinery under the EPCGS in the years prior to the POR and during the POR. Upon importation under these licenses Essar received reduced import duty liabilities and agreed to the export obligations prescribed under the program, as noted above. For some of its licenses, Essar reported to the GOI that it met its export requirements and requested waiver of the obligation to repay the duties otherwise due for importation of the equipment. However, Essar did not provide evidence that the GOI has granted these waivers during the POR. Consistent with our policy, absent acknowledgment from the GOI that the liability has been eliminated, we continue to treat benefits of these licenses as contingent liabilities.
Essar reported that it paid application fees in order to obtain its EPCGS license. We preliminarily determine that the application fees paid by Essar qualify as an “application fee, deposit, or similar payment paid in order to qualify for, or to receive, the benefit of the countervailable subsidy.”
To calculate the subsidy rate, we summed the benefits conferred on Essar in the form of contingent liability loans. We note, that for some licenses related to imports of capital goods during 2001 and 2002, we prorated the contingent liability by the actual number of days. We then divided Essar's total benefit under the program by its respective total export sales during years 2001 and 2002. On this basis, we preliminarily determine the net countervailable subsidy from this program to be 1.69 percent
In addition, we found that Essar had taken out EPCGS licenses for the importation of capital goods equipment used for making iron ore pellets. At the time that Essar took out these licenses, it wholly-owned Hy-Grade Pallets Ltd. (Hy-Grade), an iron ore pellet manufacturer. In September 2000, subsequent to the issuance of the EPCG licenses, Essar divested itself of its
With respect to the EPCGS licenses that were transferred from Essar to Hy-Grade, we preliminarily determine that 1) the license can be tied to Hy-Grade, the transferee, and 2) the license is tied to a product, which in this case are iron ore pellets (
In their May 19, 2003 submission, petitioners alleged that the State Government of Gujarat conferred a countervailable benefit upon Essar under the Bombay Relief Undertaking Act (BRU). As explained in our New Subsidy Allegation Memorandum, we initiated an investigation of this program.
Enacted in 1958 and later amended in 1974, the BRU is a provincial law enacted by the State of Gujarat that is intended to safeguard employment. Under the BRU, companies designated as a relief undertakings have all litigation against them stayed for a period of one year. In disputes between companies and their creditors, the effect is that principal and interest payments are also put on hold, as a creditor is unable to sue for collection. During the time in which litigation is stayed, the company has the opportunity to become current on its financial debts. Subsequent BRU declarations are allowable after the initial declaration. A company can be protected under the BRU for up to ten years. To be designated as a relief undertaking, a company must submit an application. The State Government of Gujarat evaluates applications according to three criteria: (1) whether the company's balance sheet indicates a loss, (2) whether there is an allegation that unemployment will occur if the applicant is not declared a relief undertaking, and (3) whether there is information demonstrating that the company has the potential to turn itself around. While the BRU is specific to Gujarat, most other states in India have similar legislation.
Essar applied for BRU protection in late 2001. Essar stated that its application was prompted by a group of foreign lenders that refused to agree to the terms of the company's debt restructuring package.
Upon review of Essar's application, the State Government of Gujarat granted Essar protection under the BRU in order to “serve as a measure of preveningt unemployment.”
In determining whether a program is countervailable, the Department must conclude that the program constitutes a financial contribution by the government, confers a benefit, and is specific pursuant to the criteria enumerated under the Act. For purposes of these preliminary results, we find that the State Government of Gujarat's protection of Essar from litigation under the BRU constitutes a financial contribution under section 771(5)(B)(iii) of the Act. Specifically, we find that by granting Essar protection under the BRU, the State Government of Gujarat, by prohibiting Essar's creditors from pursuing any pending litigation against the company, directed the creditors to not collect principal and interest payments on loans that otherwise would be due. For purposes of these preliminary results, we further determine that the limitations imposed on the creditors by the State Government of Gujarat conferred a benefit upon Essar, under section 771(E)(ii) of the Act, in an amount equal to the principal and interest it would have had to pay absent the legal protection afforded under the BRU.
Regarding the criterion of specificity, as defined by section 771(5A) of the Act, in our new subsidies allegations questionnaire, we asked the GOI and the State Government of Gujarat to provide information regarding how companies are granted BRU status.
In its response, the GOI provided the legislation for the BRU program.
In our October 21, 2003, verification outline issued to the GOI and the State Government of Gujarat, we informed the two governments that they should prepared to discuss the BRU. Namely, we instructed them to be ready to discuss how the program was administered, including the eligibility requirements.
During verification, the officials from the State Government of Gujarat claimed that eight companies were granted protection in 2001 while six were granted BRU status in 2002. State government officials further claimed that there are between 25 and 30 applicants per year. However, the State Government of Gujarat presented no documentation to support these contentions.
Regarding specificity, we find that there is nothing in the BRU legislation indicating that the program is
Record evidence indicates that the State Government of Gujarat granted eight companies protection in 2001 while in 2002, the year in which Essar received protection under the program, the State Government of Gujarat approved only six companies. Record evidence further indicates that the State Government of Gujarat reviewed between 25 and 30 applicants during these years. In 2002, Essar received protection under the BRU, while some 19 or so other applicants were rejected. The fact that only six companies were approved under this program during 2002 demonstrates that the actual recipients of the subsidy are limited in number. While this, by itself, may be inconclusive, we preliminarily find that the State Government of Gujarat's exercise of discretion in approving applicants, supports a finding of specificity. Although the three criteria for designation as a relief undertaking would make the program appear broadly available, we note that the State Government of Gujarat has established a set of generic criteria under which it analyzes applications. For example, the State Government of Gujarat has not established the amount of financial losses that a company must be experiencing, the level of anticipated unemployment, or the factors upon which the company's proposed turn-around should be based. On this basis, at least 19 other applicants were rejected during 2002. Therefore, we find that the State Government of Gujarat exercises discretion in the manner in which grants approval under the program to a limited number of users, as provided for under section 771(5A)(D)(iii)(I) of the Act. Thus, for purposes of these preliminary results, we find that the BRU is countervailable.
To calculate the benefit to Essar, we summed the amount of the principal and interest payments that Essar would have otherwise been required to make had it not been under the protection of the BRU. We treated these payments as interest-free short-term loans using the short-term interest benchmark, as discussed in the “Benchmarks for Loans and discount Rate” section above. We then took this amount and divided it by Essar's total sales for 2002. As the protection under the BRU did not take affect until March 19, 2002, we are not calculating a net subsidy rate for this program for 2001. On this basis, we preliminarily find that Essar received a countervailable subsidy of 1.43 percent
The DEPS enables exporting companies to earn import duty exemptions in the form of passbook credits rather than cash. All exporters are eligible to earn DEPS credits on a post-export basis, provided that the GOI has established a standard input-output norm (SION) for the exported product. DEPS credits can be used for any subsequent imports, regardless of whether they are consumed in the production of an export product. DEPS credits are valid for twelve months and are transferable after the foreign exchange is realized from the export sales on which the DEPS credits are earned. With respect to subject merchandise, exporters were eligible to earn credits equal to 14 percent of the FOB value of their export shipments during the fiscal year ending January 31, 2003. During the POR, Essar earned a DEPS credit on a sale of subject merchandise to the United States.
In
In October 2003, Essar switched the license it earned under the DEPS program to a license under the Duty Free Remission Certificate Scheme (DFRCS). Essar claims that the DFRCS program is similar to the Advance License program, a program under which duty exemptions are not countervailable provided that the input imported under the program is physically incorporated into the re-exported product. Essar further claims that it switched the license (after the POR) in order to avoid any countervailable duties associated with the DEPS program. Essar also claims that, as it did not use the DEPS license during the POR to receive duty exemption on imported inputs, the Department should not find that it received any benefits during the POR.
We disagree with Essar. We note that in
To derive the DEPS program rate, we first calculated the value of the credits that Essar earned for its export shipments of subject merchandise to the United States during the POR by multiplying the f.o.b. value of each export shipment by 14 percent, the percentage of DEPS credit allowed under the program for exports of subject merchandise. We then subtracted as an allowable offset the actual amount of application fees paid for each license in accordance with section 771(6) of the Act. Finally, we took this sum (the total value of the licenses net of application fees paid) and divided it by Essar's total exports of subject merchandise to the United States during the POR. On this basis, we determine the net countervailable subsidy from this program to be 14.06 percent ad valorem.
On September 12, 2003, the Department initiated separate investigations of the following programs: forgiveness of debt obligations, suspension and restructuring of interest payments, debt-to-equity conversions, preferential restructuring of loans, and guarantee and ultimate payment of certain debt.
The RBI and a group of lenders introduced the CDR Mechanism to restructure corporations' debt in August 2001. The Inter-Creditor Agreement (ICA) was signed in February 2002 to deal with the increasing amount of non-performing assets (NPAs) that banks where holding. The RBI and the CDR Standing Forum, which consisted of members from various banks in India reviewed other countries' restructuring programs, and ultimately based the CDR framework on the London Approach. The CDR is a non-statutory and voluntary organization whose members are bound by the ICA. Lender participation in the CDR is voluntary. However, when a restructuring package is accepted by at least 75 percent of the lenders, determined by value of their outstanding loans, the remaining 25 percent must either comply with the terms of the agreement, or, if they decide to opt out, must transfer their debts to another lender on terms set by the agreement.
The CDR has three levels; the CDR Core Group, the Empowered Group and the CDR Cell. During the POR, state banks, private banks and other financial institutions had representation on the CDR Core Group. Foreign banks did not. The Core Group is responsible for overseeing the CDR as a whole, while the Empowered Group is responsible for making the decision on the individual restructuring packages. The CDR Cell works with the company and oversees the restructuring package. The RBI is a party to the CDR Core Group; however, it does not have representation on the other two levels.
The objective of the CDR is to restructure a company's debt. The guidelines for the CDR are set forth in the RBI's circulars dated August 23, 2001 and February 5, 2003. The CDR began restructuring companies' debts in March 2002.
With respect to Essar, in October 2002, the IDBI proposed a CDR package for Essar under the CDR.
Essar's restructuring package included the extension of loan due dates until 2017, and a lowering of interest rates for all lenders who had not yet changed the interest rates that they were charging. If a lender did not want to extend the loan, it could accept a one-time settlement, in which Essar would pay out its obligation at a discount. Another option presented to the lenders would be to convert debt to rupees and extend the due date to 2017.
Based on the record evidence provided by the GOI and Essar as well as information obtained during verification, we preliminarily determine that the restructuring plan for Essar under the CDR did not take effect until after the POR. As a result, we preliminarily determine that Essar did not use this program during the POR.
The Duty Free Remission Certificate (DFRC) scheme was introduced by the GOI in 2001. The DFRC is administered by the Director-General for Foreign Trade (DGFT), and is applicable to manufacturing exporters. Eligibility is not conditioned on any sector or region, but is conditioned on export. The GOI characterizes the DFRC as an extension of the Advance License scheme. The DFRC also uses the same Standard Input Output Norms (SION) as the Advance License program.
In October 2003, Essar switched from a DEPS to a DFRC.
Passed in 1987, the Sick Industrial Company Act (SICA) is administered by the Board for Industrial and Financial Reconstruction (BIFR). It was designed for companies whose accumulated losses surpass the net equity of share capital. Companies in such a financial situation must refer themselves to the BIFR within sixty days of finalizing their audited financial statements. The
On September 30, 2002, Essar's accumulated losses exceeded its net worth of equity capital. However, these results were not officially adopted until March 2003 by Essar's shareholders. Between September 2002 and March 2003, Essar's net worth exceeded its losses. The company had also entered its restructuring process under the CDR. As the company was in the process of rehabilitating its financial condition, the company sought an opinion as to whether it was necessary to refer itself, as a sick company, to the BIFR. The BIFR concluded that referral was not necessary, since the company's net worth became positive before the required notification period. Thus, Essar was never officially declared to be a “sick company” by the BIFR.
Consequently, we conclude that Essar never invoked protection under the BIFR, and therefore, we preliminarily find that Essar did not use this program during the POR.
Furthermore, we preliminarily find that Essar did not use the following programs during the POR.
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an individual subsidy rate for Essar subject to this administrative review, for 2001 and 2002. We preliminarily determine the total estimated net countervailable subsidy rate is 1.69 percent
If the final results of this review remain the same as these preliminary results, the Department intends to instruct the CBP, within 15 days of publication, to liquidate shipments of hot rolled steel from India entered, or withdrawn from warehouse, for consummption from April 20, 2001 through August 18, 2001 as well as from December 3, 2001 through December 31, 2001 at 1.69 percent
Because the Uruguay Round Agreements Act (URAA) replaced the general rule in favor of a country-wide rate with a general rule in favor of individual rates for investigated and reviewed companies, the procedures for establishing countervailing duty rates, including those for non-reviewed companies, are now essentially the same as those in antidumping cases, except as provided for in section 777A(e)(2)(B) of the Act. A requested review will normally cover only those companies specifically named.
We will instruct the CBP to continue to collect cash deposits for non-reviewed companies at the most recent company-specific or country-wide rate applicable to the company. Accordingly, the cash deposit rates that will be applied to non-reviewed companies covered by this order are those established in the most recently completed administrative proceeding conducted under the URAA.
Pursuant to 19 CFR 351.224(b), the Department will disclose to parties to the proceeding any calculations performed in connection with these preliminary results within five days after the date of the public announcement of this notice. Pursuant to 19 CFR 351.309, interested parties may submit written comments in response to these preliminary results. Unless otherwise indicated by the Department, case briefs must be submitted within 30 days after the date of publication of this notice, and rebuttal briefs, limited to arguments raised in case briefs, must be submitted no later than five days after the time limit for filing case briefs, unless otherwise specified by the Department. Parties who submit argument in this proceeding are requested to submit with the argument: (1) a statement of the issue, and (2) a brief summary of the argument. Parties submitting case and/or rebuttal briefs are requested to provide the Department copies of the public version on disk. Case and rebuttal briefs must be served on interested parties in accordance with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310, within 30 days of the date of publication of this notice, interested parties may request a public hearing on arguments to be raised in the case and rebuttal briefs. Unless the Secretary specifies otherwise, the hearing, if requested, will be held two days after the date for submission of rebuttal briefs, that is, thirty-seven days after the date of publication of these preliminary results.
Representatives of parties to the proceeding may request disclosure of proprietary information under administrative protective order no later than 10 days after the representative's client or employer becomes a party to the proceeding, but in no event later than the date the case briefs, under 19 CFR 351.309(c)(ii), are due. The Department will publish the final results of this administrative review, including the results of its analysis of arguments made in any case or rebuttal briefs.
This administrative review is issued and published in accordance with sections 751(a)(1) and 777(I)(1) of the
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of public meeting.
The Mid-Atlantic Fishery Management Council (Council) and its Protected Resources Committee, will hold a public meeting.
The meeting will be held on Tuesday, January 20, 2004, from 1 p.m. to 3 p.m.
The meeting will be held at the Old Town Holiday Inn Select, 480 King Street, Old Town Alexandria, VA; telephone: 703-549-6080.
Daniel T. Furlong, Executive Director, Mid-Atlantic Fishery Management Council; telephone: 302-674-2331, ext. 19.
The purpose of the meeting is to provide an update on the status of bottlenose dolphin and right whale Take Reduction Team (TRT) activities.
Although non-emergency issues not contained in this agenda may come before the Council for discussion, these issues may not be the subject of formal Council action during this meeting. Council action will be restricted to those issues specifically listed in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Act, provided the public has been notified of the Council's intent to take final actions to address such emergencies.
This meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Joanna Davis at the Council (see
Environmental Protection Agency (EPA).
Notice.
EPA has received specific exemption requests from the Kansas Department of Agriculture and the Oklahoma Department of Agriculture, Food, and Forestry to use the pesticide propoxycarbazone-sodium (CAS No. 181274-15-7) to treat up to 1,200,000 acres (Kansas) and 150,000 (Oklahoma) acres of wheat to control
Comments, identified by docket identification (ID) number OPP-2003-0395, must be received on or before January 22, 2004.
Comments may be submitted electronically, by mail, or through hand delivery/courier. Follow the detailed instructions as provided in Unit I. of the
Libby Pemberton, Registration Division (7505C), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001; telephone number: (703) 308-9364; fax number: (703) 308-5433; e-mail address:
You may be potentially affected by this action if you are a Federal or State government agency involved in administration of environmental quality programs (i.e., Departments of Agriculture, Environment, etc). Potentially affected entities may include, but are not limited to:
• Federal or State Government Entity, (NAICS 9241), i.e., Departments of Agriculture, Environment, etc.
This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under
1.
2.
An electronic version of the public docket is available through EPA's electronic public docket and comment system, EPA Dockets. You may use EPA Dockets at
Certain types of information will not be placed in EPA's Dockets. Information
For public commenters, it is important to note that EPA's policy is that public comments, whether submitted electronically or in paper, will be made available for public viewing in EPA's electronic public docket as EPA receives them and without change, unless the comment contains copyrighted material, CBI, or other information whose disclosure is restricted by statute. When EPA identifies a comment containing copyrighted material, EPA will provide a reference to that material in the version of the comment that is placed in EPA's electronic public docket. The entire printed comment, including the copyrighted material, will be available in the public docket.
Public comments submitted on computer disks that are mailed or delivered to the docket will be transferred to EPA's electronic public docket. Public comments that are mailed or delivered to the Docket will be scanned and placed in EPA's electronic public docket. Where practical, physical objects will be photographed, and the photograph will be placed in EPA's electronic public docket along with a brief description written by the docket staff.
You may submit comments electronically, by mail, or through hand delivery/courier. To ensure proper receipt by EPA, identify the appropriate docket ID number in the subject line on the first page of your comment. Please ensure that your comments are submitted within the specified comment period. Comments received after the close of the comment period will be marked “late.” EPA is not required to consider these late comments. If you wish to submit CBI or information that is otherwise protected by statute, please follow the instructions in Unit I.D. Do not use EPA Dockets or e-mail to submit CBI or information protected by statute.
1.
i.
ii.
iii.
2.
3.
Do not submit information that you consider to be CBI electronically through EPA's electronic public docket or by e-mail. You may claim information that you submit to EPA as CBI by marking any part or all of that information as CBI (if you submit CBI on disk or CD ROM, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is CBI). Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.
In addition to one complete version of the comment that includes any information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket and EPA's electronic public docket. If you submit the copy that does not contain CBI on disk or CD ROM, mark the outside of the disk or CD ROM clearly that it does not contain CBI. Information not marked as CBI will be included in the public docket and EPA's electronic public docket without prior notice. If you have any questions about CBI or the procedures for claiming CBI, please consult the person listed under
You may find the following suggestions helpful for preparing your comments:
1. Explain your views as clearly as possible.
2. Describe any assumptions that you used.
3. Provide copies of any technical information and/or data you used that support your views.
4. If you estimate potential burden or costs, explain how you arrived at the estimate that you provide.
5. Provide specific examples to illustrate your concerns.
6. Offer alternative ways to improve the notice.
7. Make sure to submit your comments by the deadline in this document.
8. To ensure proper receipt by EPA, be sure to identify the docket ID number assigned to this action in the subject line on the first page of your response. You may also provide the name, date, and
Under section 18 of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) (7 U.S.C. 136p), at the discretion of the Administrator, a Federal or State agency may be exempted from any provision of FIFRA if the Administrator determines that emergency conditions exist which require the exemption. The Kansas Department of Agriculture and the Oklahoma Department of Agriculture, Food, and Forestry have requested the Administrator to issue a specific exemption for the use of propoxycarbazone-sodium on wheat to control
As part of these requests, the applicants assert that in many winter wheat production areas infestations of
The applicants propose to make no more than one application by ground or air at a maximum of 0.9 ounce product (70% active ingredient) per acre to a maximum of 1,200,000 acres of winter wheat in Kansas and 150,000 acres of winter wheat in Oklahoma. The proposed use period is from February 1, 2004 through April 30, 2004.
This notice does not constitute a decision by EPA on the application itself. The regulations governing section 18 of FIFRA require publication of a notice of receipt of an application for a specific exemption proposing:
1. “Use of a new chemical (i.e., an active ingredient) which has not been registered by EPA.” The notice provides an opportunity for public comment on the application.
2. The Agency, will review and consider all comments received during the comment period in determining whether to issue the specific exemption requested by the Kansas Department of Agriculture and the Oklahoma Department of Agriculture, Food, and Forestry.
Environmental protection, Pesticides and pests.
Environmental Protection Agency (EPA).
Notice.
EPA has granted experimental use permits (EUP) to the following pesticide applicant. An EUP permits use of a pesticide for experimental or research purposes only in accordance with the limitations in the permit.
Mike Mendelsohn, Biopesticides and Pollution Prevention Division (7511C), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001; telephone number: (703) 308-8715; e-mail address:
This action is directed to the public in general. Although this action may be of particular interest to those persons who conduct or sponsor research on pesticides, the Agency has not attempted to describe all the specific entities that may be affected by this action. If you have any questions regarding the information in this action, consult the person listed under
1.
2.
An electronic version of the public docket is available through EPA's electronic public docket and comment system, EPA Dockets. You may use EPA Dockets at
EPA has issued the following EUPs:
In the
7 U.S.C. 136c.
Environmental protection, Experimental use permits.
Environmental Protection Agency (EPA).
Notice.
EPA has granted an experimental use permit (EUP) to the following pesticide applicant. An EUP permits use of a pesticide for experimental or research purposes only in accordance with the limitations in the permit.
Mike Mendelsohn, Biopesticides and Pollution Prevention Division (7511C), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001; telephone number: (703) 308-8715; e-mail address:
This action is directed to the public in general. Although this action may be of particular interest to those persons who conduct or sponsor research on pesticides, the Agency has not attempted to describe all the specific entities that may be affected by this action. If you have any questions regarding the information in this action, consult the person listed under
1.
2.
An electronic version of the public docket is available through EPA's electronic public docket and comment system, EPA Dockets. You may use EPA Dockets at
EPA has issued the following EUP:
In the
7 U.S.C. 136c.
Environmental protection, Experimental use permits.
Environmental Protection Agency.
Notice of availability.
This notice announces the availability of a final report titled, “The Feasibility of Performing Cumulative Risk Assessments for Mixtures of Disinfection By-Products in Drinking Water (EPA/600/R-03-051F),” which was prepared by the U.S. Environmental Protection Agency's (EPA) National Center for Environmental Assessment (NCEA) of the Office of Research and Development (ORD).
This document will be available on or about January 7, 2004.
The document will be made available electronically through the NCEA Web site (
The Technical Information Staff, National Center for Environmental Assessment/Cincinnati, Ohio office (MS-117), U.S. Environmental Protection Agency, 26 W. Martin Luther King Drive, Cincinnati, OH 45268. Telephone: 513-569-7257; fax: 513-569-7475; e-mail:
In 1996, the Safe Drinking Water Act Amendments were passed, requiring the EPA to consider the risk assessment of contaminant mixtures in drinking water and prompting this current research on disinfection by-product (DBP) mixtures. Humans are exposed daily to hundreds of DBPs via oral, dermal, and inhalation routes. Some positive epidemiologic studies suggest cancer and reproductive/developmental effects are associated with consumption of chlorinated drinking water. However, in other epidemiologic studies significant health effects have not been observed, and current single-chemical toxicology studies fail to corroborate epidemiologic findings. Furthermore, human health risk estimates made using animal data based only on oral exposures do not reflect the same magnitude of risks found in positive epidemiologic studies. Thus, it is hypothesized that this difference can be accounted for by evaluating simultaneous exposures to multiple DBPs via all three exposure routes. This report addresses the feasibility of such an assessment, yielding the following interim results:
• Exposure estimates are made for an adult female and an adult male, each of reproductive age, and for a child (age 6) of total absorbed doses inclusive of exposures via oral, dermal and inhalation routes.
• Estimates are made for 13 major DBPs, accounting for human activity patterns that affect contact time with drinking water (
• A novel cumulative risk assessment method, Cumulative Relative Potency Factors, is advanced that integrates the principles of dose addition and response addition to produce multiple-route, chemical mixture risk estimates using total absorbed doses.
The report acknowledges the need for additional research, such as, to conduct a more complete uncertainty and sensitivity analysis on the exposure estimates, and to conduct a more comprehensive analysis of toxic mode of action for the DBPs. This report makes two significant contributions to the science. First, external exposure modeling is conducted and linked with physiologically-based pharmacokinetic modeling to produce internal dose measures of drinking water disinfection by-products (DBPs) for multiple route exposures to be used in mixture risk assessments. Thus, a comprehensive exposure estimate is made for 13 of the major DBPs of concern, including the four trihalomethanes and five haloacetic acids that are currently regulated. Second, a mixtures risk assessment method, based on additivity concepts is proposed to logically evaluate human health risks using total internal doses and oral toxicology dose-response data based on knowledge or assumptions regarding toxic mode of action. This new method is a novel approach to evaluating multiple route exposures that can be generalized for the evaluation of other environmental mixtures.
Environmental Protection Agency.
Notice of availability.
This notice announces the availability of a final report titled, “Developing Relative Potency Factors for Pesticide Mixtures: Biostatistical Analyses of Joint Dose-Response (EPA/600/R-03-052F),” which was prepared by the U.S. Environmental Protection Agency's (EPA) National Center for Environmental Assessment (NCEA) of the Office of Research and Development (ORD).
This document will be available on or about January 7, 2004.
The document will be made available electronically through the NCEA Web site (
The Technical Information Staff, National Center for Environmental Assessment/Cincinnati Office (MS-117), U.S. Environmental Protection Agency, 26 W. Martin Luther King Drive, Cincinnati, OH 45268. Telephone: 513-569-7257; fax: 513-569-7475; e-mail:
In 1996, the Food Quality Protection Act and the Safe Drinking Water Act Amendments were passed, each requiring the EPA to consider the risk assessment of chemical mixtures. This report responds to the need for risk assessment research on pesticide mixtures and on chemicals of concern in drinking water. The Relative Potency Factor (RPF) approach is a general methodology for applying dose addition to mixtures of chemicals that produce toxicity by the same toxic mode of action. The current report develops biological concepts and statistical procedures for improving applications of the RPF approach, advancing the theoretical basis for RPF-based risk assessments. New quantitative methods that extend the application of RPFs are shown, addressing the important question of how to assess a mixture containing some chemicals that share a common toxic mode of action and other chemicals that do not. This research was undertaken to continue exploring and developing mixture risk assessment strategies beyond current applications and is intended to enrich the available library of mixture risk assessment methods for future applications of RPF-based risk assessments. This report provides a new set of methods to handle groups of chemicals with more than one toxic mode of action represented. Dose-response modeling techniques are shown, and two algorithms are provided for grouping chemicals into mode of action subclasses that can be modeled with a common slope parameter. The report details approaches to estimate health risks based on the mode of action subclasses and shows a conceptual approach for estimating a Reference Dose for a mixture using these methods.
Environmental Protection Agency.
Notice of availability.
This notice announces the availability of a final report titled, Analysis of Laboratory and Field Studies of Reproductive Toxicity in Birds Exposed to Dioxin-Like Compounds for Use in Ecological Risk Assessment (EPA/600/R-03/114F), which was prepared by the U.S. Environmental Protection Agency's (EPA) National Center for Environmental Assessment (NCEA) of the Office of Research and Development (ORD).
This document will be available on or about January 7, 2004.
The document will be made available electronically through the NCEA Web site (
The Technical Information Staff, National Center for Environmental Assessment/Cincinnati Office (MS-117), U.S. Environmental Protection Agency, 26 W. Martin Luther King Drive, Cincinnati, OH 45268. Telephone: 513-569-7257; fax: 513-569-7475; e-mail:
Coplanar PCBs and other dioxin-like chemicals are common environmental contaminants and risks to wildlife are a significant issue as demonstrated by
The Commission hereby gives notice of the filing of the following agreements under the Shipping Act of 1984. Interested parties can review or obtain copies of agreements at the Washington, DC offices of the Commission, 800 North Capitol Street, NW., Room 940. Interested parties may submit comments on an agreement to the Secretary, Federal Maritime Commission, Washington, DC 20573, within 10 days of the date this notice appears in the
By Order of the Federal Maritime Commission.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The application also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States. Additional information on all bank holding companies may be obtained from the National Information Center website at
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than January 30, 2004.
Board of Governors of the Federal Reserve System, December 31, 2003.
The notificants listed below have applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board’s Regulation Y (12 CFR 225.41) to acquire a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices also will be available for inspection at the office of the Board of Governors. Interested persons may express their views in writing to the Reserve Bank indicated for that notice or to the offices of the Board of Governors. Comments must be received not later than January 20, 2004.
Board of Governors of the Federal Reserve System, December 31, 2003.
In compliance with the requirement of section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995, the Center for Medicare and Medicaid Services (CMS), Department of Health and Human Services, is publishing the following summary of proposed collections for public comment. Interested persons are invited to send comments regarding this burden estimate or any other aspect of this collection of information, including any of the following subjects: (1) The necessity and utility of the proposed information collection for the proper performance of the agency's functions; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
We are, however, requesting an emergency review of the information collection referenced below. In compliance with the requirement of section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995, we have submitted to the Office of Management and Budget (OMB) the following requirements for emergency review. We are requesting an emergency review because the collection of this information is needed before the expiration of the normal time limits under OMB's regulations at 5 CFR Part 1320. We cannot reasonably comply with the normal clearance procedures because of possible public harm.
CMS is proposing to minimize disruption to State operations and the reduction of unnecessary expenditures to the Federal government by modifying the collection requirements associated with the CMS-37 information collection package. In particular, CMS will begin to require the States to submit up-front documentation to support the budget and expenditure information currently captured on the CMS-37 “Medicaid Program Budget Report”. This will enable CMS to identify and resolve any potential funding and/or expenditure issues with the States prior to the budget actually being formulated and/or implemented and the expenditures actually paid and claimed by the States.
CMS is requesting OMB review and approval of this collection by January 9, 2004, with a 180-day approval period. Written comments and recommendations will be accepted from the public if received by the individuals designated below by January 8, 2004.
We have submitted a copy of this notice to OMB for its review of these information collections. To obtain copies of the supporting statement and any related forms for the proposed paperwork collections referenced above, E-mail your request, including your address, phone number, OMB number, and CMS document identifier, to
Interested persons are invited to send comments regarding the burden or any other aspect of these collections of information requirements. However, as noted above, comments on these information collection and recordkeeping requirements must be mailed and/or faxed to the designees referenced below, by January 8, 2004:
Notice.
The Food and Drug Administration (FDA) is announcing that the proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995 (the PRA).
Fax written comments on the collection of information by February 6, 2004.
The Office of Management and Budget is still experiencing significant delays in the regular mail, including first class and express mail, and messenger deliveries are not being accepted. To ensure that comments on the information collection are received, OMB recommends that written comments be faxed to the Office of Information and Regulatory Affairs, OMB, Attn: Fumie Yokota, Desk Officer for FDA, FAX 202-395-6974.
Denver Presley, Office of Management Programs (HFA-250), Food and Drug Administration, 5600 Fishers Lane, Rockville, MD 20857, 301-827-1472.
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance
Congress enacted the Animal Drug Availability Act of 1996 (ADAA) (Public Law 104-250) on October 9, 1996. As directed by ADAA, FDA published a regulation under § 514.4(a) (21 CFR 514.4(a)), to further define substantial evidence in a manner that encourages the submission of new animal drug applications (NADAs) and supplemental NADAs and encourages dose range labeling. Under ADAA, substantial evidence is the standard that a sponsor must meet to demonstrate the effectiveness of a new animal drug for its intended use under the conditions suggested in its proposed labeling. Section 514.4(a) gives FDA greater flexibility to make case-specific scientific determinations regarding the number and types of adequate and well-controlled studies that will provide, in an efficient manner, substantial evidence that a new animal drug is effective. FDA believes this regulation will reduce the number of adequate and well-controlled studies necessary to demonstrate the effectiveness of certain combination new animal drugs, will eliminate the need for an adequate and well-controlled dose titration study, and may, in limited instances, reduce or eliminate the number of adequate and well-controlled field investigations necessary to demonstrate by substantial evidence the effectiveness of a new animal drug. Table 1 of this document represents the estimated burden of meeting the substantial evidence standard.
In the
FDA estimates the burden of this collection of information as follows:
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act of 1995 (the PRA), Federal agencies are required to publish notice in the
Submit written or electronic comments on the collection of information by March 8, 2004.
Submit electronic comments on the collection of information to:
JonnaLynn P. Capezzuto, Office of Management Programs (HFA-250), Food and Drug Administration, 5600 Fishers Lane, Rockville, MD 20857, 301-827-4659.
Under the PRA (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal agencies to provide a 60-day notice in the
With respect to the following collection of information, FDA invites comments on these topics: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.
Section 505 of the Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 355), requires that important safety information relating to all human prescription drug products be made available to FDA so that it can take appropriate action to protect the public health when necessary. Section 702 of the act (21 U.S.C. 372) authorizes investigational powers to FDA for enforcement of the act. Under section 519 of the act (21 U.S.C. 360i), FDA is authorized to require manufacturers to report medical device-related deaths, serious injuries, and malfunctions to FDA, and to require user facilities to report device-related deaths directly to FDA and to manufacturers, and to report serious injuries to the manufacturer. Section 522 of the act (21 U.S.C. 360l) authorizes FDA to require manufacturers to conduct postmarket surveillance of medical devices. Section 705(b) of the act (21 U.S.C. 375(b)) authorizes FDA to collect and disseminate information regarding medical products or cosmetics in situations involving imminent danger to health or gross deception of the consumer. Section 903(d)(2) of the act (21 U.S.C. 393(d)(2)) authorizes the Commissioner of Food and Drugs to implement general powers (including conducting research) to carry out effectively the mission of FDA. These sections of the act enable FDA to enhance consumer protection from risks associated with medical products usage that are not foreseen or apparent during the premarket notification and review process. FDA's regulations governing application for agency approval to market a new drug (21 CFR part 314) and regulations governing biological products (21 CFR part 600) implement these statutory provisions. Currently FDA monitors medical product related postmarket adverse events via both the mandatory and voluntary MedWatch reporting systems using FDA Forms 3500 and 3500A (OMB control number 0910-0291) and the vaccine adverse event reporting system. FDA is seeking OMB clearance to collect vital information via a series of rapid response surveys. Participation in these surveys will be voluntary. This request covers rapid response surveys for community based health care professionals, general type medical facilities, specialized medical facilities (those known for cardiac surgery, obstetrics/gynecology services, pediatric services, etc.), other health care professionals, patients, consumers, and risk managers working in medical facilities. FDA will use the information gathered from these surveys to obtain quickly vital information about medical product risks and interventions to reduce risks so the agency may take appropriate public health or regulatory action including dissemination of this information as necessary and appropriate.
FDA projects 30 emergency risk-related surveys per year with a sample of between 50 and 200 respondents per survey. FDA also projects a response time of 0.5 hours per response. These estimates are based on the maximum sample size per questionnaire that FDA can analyze in a timely manner. The annual frequency of response was determined by the maximum number of questionnaires that will be sent to any individual respondent. Some respondents may be contacted only 1 time per year, while other respondents may be contacted several times annually, depending on the human drug, biologic, or medical device under evaluation. It is estimated that, given the expected type of issues that will be addressed by the surveys, it will take 0.5 hours for a respondent to gather the requested information and fill in the answers.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is providing notice of a memorandum of understanding (MOU) between the Food and Drug Administration and Customs and Border Protection (CBP), Department of Homeland Security to allow FDA to commission CBP officers.
The agreement became effective December 3, 2003.
Deborah Ralston, Office of Regional Operations (HFC-100), Food and Drug Administration, 5600 Fishers Lane, Rockville, MD 20857, 301-443-6230.
In accordance with 21 CFR 20.108(c), which states that all written agreements and MOUs between FDA and others shall be published in the
Food and Drug Administration.
Notice.
The Food and Drug Administration (FDA) is announcing the availability of a draft guidance for industry entitled “Drug Substance: Chemistry, Manufacturing, and Controls Information.” This draft guidance provides recommendations on the chemistry, manufacturing, and controls (CMC) information for drug substances that should be submitted to support original new drug applications (NDAs), abbreviated new drug applications (ANDAs), new animal drug applications (NADAs), and abbreviated new animal drug applications (ANADAs). The draft guidance is structured to facilitate the preparation of applications submitted in Common Technical Document (CTD) format.
Submit written or electronic comments on the draft guidance by July 5, 2004. General comments on agency guidance documents are welcome at any time.
Submit written requests for single copies of the draft guidance to the Division of Drug Information (HFD-240), Center for Drug Evaluation and Research, Food and Drug Administration, 5600 Fishers Lane, Rockville, MD 20857, or to the Office of Communication, Training, and Manufacturers Assistance (HFM-40), Center for Biologics Evaluation and Research, Food and Drug Administration, 1401 Rockville Pike, Rockville, MD 20852-1448. Send one self-addressed adhesive label to assist that office in processing your requests. Submit written comments on the draft guidance to the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852. Submit electronic comments to
FDA is announcing the availability of a draft guidance for industry entitled “Drug Substance: Chemistry, Manufacturing, and Controls Information.” This draft guidance provides recommendations on the drug substance information to be submitted in NDAs, ANDAs, NADAs, and ANADAs to ensure continued drug substance and drug product quality (i.e., the identity, strength, quality, purity, and potency). Recommendations are provided on the information that should be included for: (1) Nomenclature, structure, and general drug substance properties, (2) manufacture, (3) characterization, (4) control of drug substance, (5) reference standards or materials, (6) container closure system, and (7) stability. The draft guidance is structured to facilitate the preparation of applications submitted in CTD format. The draft guidance, when finalized, will replace the guidance entitled “Submitting Supporting Documentation in Drug Applications for the Manufacture of Drug Substance” (February 1987).
This guidance contains information collection provisions that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collection of information in this guidance was approved under OMB control numbers 0910-0001 and 0910-0032.
This draft guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The draft guidance represents the
Interested persons may submit to the Division of Dockets Management (see
Persons with access to the Internet may obtain the document at
Food and Drug Administration, HHS.
Notice; correction.
The Food and Drug Administration (FDA) is correcting a document that appeared in the
Submit written or electronic comments on the SECGs at any time.
Submit written comments concerning these SECGs to the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852. Submit electronic comments on the SECGs to
Submit requests for single copies of one or both SECGs to the Prior Notice help desk by telephone at 1-800-216-7331 (within the United States) or 301-575-0156 (outside the United States), by FAX: 301-210-0247, or by e-mail: furls@fda.gov. See the
Questions Concerning Registration: Nina Adler, Division of Compliance Policy (HFC-230), Office of Enforcement, Office of Regulatory Affairs, Food and Drug Administration, 5600 Fishers Lane, Rockville, MD 20857, 301-827-0417, FAX 301-827-0482; or Judith Gushee, Center for Food Safety and Applied Nutrition (HFS-605), Food and Drug Administration, 5100 Paint Branch Pkwy., College Park, MD, 20740, 301-436-2417.
Questions Concerning Prior Notice: Deborah Ralston, Office of Regulatory Affairs, Office of Regional Operations (HFC-100), Food and Drug Administration, 5600 Fishers Lane, Rockville, MD 20857, 301-443-6230.
In the
We examined the economic implications of these interim rules as required by the Regulatory Flexibility Act (5 U.S.C. 601-612) and determined that they would have a significant economic impact on a substantial number of small entities.
In compliance with section 212 of the Small Business Regulatory Enforcement Fairness Act (Public Law 104-121), we are making available these SECGs that explain the requirements of these regulations.
FDA is issuing these SECGs as level 2 guidance consistent with FDA's good guidance practices regulation (21 CFR 10.115(c)(2)). These SECGs restate, in simplified format and language, FDA's current requirements for Registration of Food Facilities and Prior Notice of Imported Food. As guidance, these documents are not binding on either FDA or the public. FDA notes, however, that the regulations that serve as the basis for these guidance documents establish requirements for all covered activities. For this reason, FDA strongly recommends that affected parties consult the regulations at 21 CFR part 1, subparts H and I, in addition to reading these SECGs.
Interested persons may submit to the Division of Dockets Management (see
Persons with access to the Internet may obtain these SECGs at
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. Appendix 2), notice is hereby given of a meeting of the Secretary's Advisory Committee on Xenotransplantation (SACX).
The meeting will be open to the public as indicated below, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the meeting.
Information is also available on the Office's home page:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. Appendix 2), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
This notice is being published less than 15 days prior to the meeting due to the timing limitations imposed by the review and funding cycle.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. Appendix 2), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
This notice is being published less than 15 days prior to the meeting due to the timing limitations imposed by the review and funding cycle.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. appendix 2), notice is hereby given of a meeting of the National Advisory Council on Drug Abuse.
The meeting will be open to the public as indicated below, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. Appendix 2), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The contract proposals and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the contract proposals, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Periodically, the Substance Abuse and Mental Health Services Administration (SAMHSA) will publish a summary of information collection requests under OMB review, in compliance with the Paperwork Reduction Act (44 U.S.C. Chapter 35). To request a copy of these documents, call the SAMHSA Reports Clearance Officer on (301) 443-7978.
These regulations provide guidance to States regarding the Substance Abuse Prevention and Treatment Block Grant legislation, including the information collection requirements regarding the sale or distribution of tobacco products to individuals under age eighteen. The rule implements the reporting and recordkeeping requirements of 42 U.S.C. 300x21-35 and 51-64 by specifying the content of the States' annual reports on and application for block grant funds. The reporting burden hours are counted towards the total burden for the Substance Abuse Prevention and Treatment Block Grant Application Format (OMB No. 0930-0080) and the Substance Abuse Prevention and Treatment Block Grant Synar Report Format (OMB No. 0930-0222) for which separate approval is obtained. The total annual reporting and recordkeeping burden estimate is shown below:
Written comments and recommendations concerning the proposed information collection should be sent within 30 days of this notice to: SAMHSA Desk Officer, Human Resources and Housing Branch, Office of Management and Budget, New Executive Office Building, Room 10235, Washington, DC 20503; due to potential delays in OMB's receipt and processing of mail sent through the U.S. Postal Service, respondents are encouraged to submit comments by fax to: 202-395-6974.
Fish and Wildlife Service, Interior.
Notice of 90-day petition finding.
We, the U.S. Fish and Wildlife Service (Service), announce a 90-day finding for a petition to list the eastern subspecies of the greater sage-grouse (
The finding announced in this document was made on January 2, 2004. You may submit new information concerning this species for our consideration at any time.
The complete file for this finding is available for inspection, during normal business hours, at the Wyoming Ecological Services Field Office, U.S. Fish and Wildlife Service, 4000 Airport Parkway, Cheyenne, Wyoming 82001. Submit new information, materials, comments, or questions concerning this taxon to the Service at the above address.
Brian T. Kelly, at the address given in the
Section 4(b)(3)(A) of the Endangered Species Act of 1973, as amended (Act) (16 U.S.C. 1531
On July 3, 2002, the Institute for Wildlife Protection submitted a petition requesting that we list the eastern subspecies of the greater sage-grouse (
Previously, on January 24, 2002, the Institute for Wildlife Protection submitted a petition requesting that we list the western subspecies of the greater sage-grouse (
In a letter dated March 19, 2003, the petitioner acknowledged (but did not agree with) our position that there is no basis for recognizing subspecies of the greater sage-grouse, and requested that the Service combine the petitions for the western and eastern subspecies of the greater sage-grouse into one petition to list the species as endangered. We have treated this request as a new petition to list the greater sage-grouse. In addition, we have two other petitions to list the greater sage-grouse. One of those petitions was from Mr. Craig C. Dremann, dated June 18, 2002, to list the greater sage-grouse as endangered. Mr. Dremann's petition summarizes several threats to the species based on his review of Barrett
This 90-day petition finding is made in accordance with a court order that requires us to complete a finding on the petition to list the eastern subspecies of the greater sage-grouse within 90 days of October 3, 2003 (
Our 90-day petition finding on the western subspecies of greater sage-grouse, dated February 7, 2003 (68 FR 6500), presented detailed information regarding the description, natural history, and distribution of the greater sage-grouse (
Sage-grouse depend on a variety of shrub-steppe habitats throughout their life cycle, and are particularly tied to several species of sagebrush (
During the spring breeding season, male sage-grouse gather together and perform courtship displays on display areas called leks. Areas of bare soil, short-grass steppe, windswept ridges, exposed knolls, or other relatively open sites may serve as leks. Leks, which often are surrounded by denser shrub-steppe cover, range in size from less than 0.4 hectare (ha) (1 acre (ac)) to over 40 ha (100 ac). Some leks are used for many years. These “historic” leks are typically larger than, and often surrounded by, smaller “satellite” leks, which may be less stable in size and location. A group of leks where males and females may interact within a breeding season or between years is called a lek complex. Males defend individual territories within leks. Relatively few dominant males account for the majority of breeding on a given lek (Schroeder
Females may travel up to 35 km (22 mi) after mating. They typically select nest sites under sagebrush cover, although other shrub or bunchgrass species are sometimes used (Connelly
Prior to European expansion into western North America, sage-grouse were believed to occur in 16 States and 3 Canadian provinces: Washington, Oregon, California, Nevada, Idaho, Montana, Wyoming, Colorado, Utah, South Dakota, North Dakota, Nebraska, Arizona, New Mexico, Kansas, Oklahoma, British Columbia, Alberta, and Saskatchewan (Schroeder
Rangewide estimates of sage-grouse abundance prior to European settlement in western North America vary (65 FR 51578, August 24, 2000). The WSSCSTGTC (1999) estimated that there may have been about 1.1 million birds in 1800. Much of the overall decline in sage-grouse abundance apparently occurred from the late 1800s
Eastern and western subspecies of sage-grouse were first described in 1946 by Aldrich. Aldrich (1946) examined 11 specimens collected in Washington (3), Oregon (7), and California (1) and, on the basis of slight color differences in the plumage, concluded that 2 subspecies existed: one with a more limited distribution in the northwestern portion of the range of the greater sage-grouse and one in the eastern portion of the range. The distribution of the western subspecies was described as occurring from north to central-southern British Columbia; west to central Washington, central Oregon, and northeastern California; south to northeastern California; east to southeast-central and northeastern Oregon (possibly central-western Idaho) and central-eastern Washington (Aldrich 1946). The eastern subspecies was considered to comprise the remainder of the range of the greater sage-grouse, extending from southern Idaho to western North and South Dakota, southwesterly to western Colorado, and west through central Utah and Nevada (Johnsgard 1973). The distribution of western sage-grouse was modified to reclassify sage-grouse in northwestern Nevada and northern California as an intermediate form (Aldrich and Duvall 1955; AOU 1957; Aldrich 1963).
The validity of the taxonomic separation between an eastern and a western subspecies has been questioned (Johnsgard 1983; Johnsgard 2002; Benedict
In our 90-day finding on the petition to list the western subspecies of the greater sage-grouse (February 7, 2003; 68 FR 6500), we concluded there is no basis to recognize the eastern or western subspecies of the greater sage-grouse due to relatively recent information concerning the lack of distinct genetic differences between the two, lack of ecological or physical factors that might indicate differentiation between the populations, and evidence that birds freely cross the supposed boundary zone between the subspecies. That finding provides more detailed information, but a brief synopsis follows.
The boundary between the western and eastern subspecies was generally described as occurring along a line starting on the Oregon-Nevada border south of Hart Mountain National Wildlife Refuge and ending near Nyssa, Oregon (Aldrich and Duvall 1955; Aldrich 1963). No physical barriers exist that would preclude the movement of birds across the proposed boundary separating the two subspecies, and studies involving radio-tagged sage-grouse have documented movements back and forth across the proposed boundary (Crawford and Gregg 2001).
In 1990, protein and deoxyribonucleic acid (DNA) studies were initiated to clarify the status of sage-grouse subspecies in Oregon. Preliminary results indicated no differentiation among birds collected from different areas (Drut 1994). However, because the sample size was small, these results were never published (Michael Pope, Oregon State University, pers. comm. with Oregon Field Office of FWS 2002). Recently, Benedict
We are unaware of any information documenting that either of the two putative subspecies exhibits any unique behavioral or ecological traits, other than those described for the Columbia Basin DPS due to its isolation resulting from habitat fragmentation and loss. (On May 7, 2001 (66 FR 22984), we determined that listing of the Washington population of sage-grouse as a distinct population segment, termed the Columbia Basin DPS, was warranted but precluded by higher priority listing actions; the Columbia Basin DPS is currently a candidate for listing (67 FR 40657)).
Based on the lack of distinct genetic differences between the two putative subspecies, lack of ecological or physical factors that might contribute to population isolation, and evidence that birds freely cross the supposed boundary zone between the putative subspecies, we continue to conclude that neither the eastern nor western sage-grouse is a valid subspecies of the greater sage-grouse.
Because we no longer consider the eastern sage-grouse to be a valid subspecies, we must then consider whether the petitioned entity might constitute a valid Distinct Population Segment (DPS) under our DPS policy (61 FR 4722). Under our DPS policy, we use two elements to assess whether a vertebrate population may be recognized as a DPS: (1) A population segment's discreteness from the remainder of the species to which it belongs; and (2) the significance of the population segment to the species to which it belongs. If we determine that a population being considered for listing meets the discreteness and significance criteria, and thus may represent a DPS, we then consider the population segment's conservation status in relation to the Act's standards for listing (
Under our DPS policy, a population segment of a vertebrate species may be considered discrete if it satisfies either of the following two conditions. The first condition is whether the population segment “ * * * is markedly separated from other populations of the same taxon as a consequence of physical, physiological, ecological, or behavioral factors. Quantitative measures of genetic or morphological discontinuity may provide evidence of this separation.” The second condition is whether the population segment is “delimited by international governmental boundaries within which differences in control of exploitation, management of habitat, conservation status, or regulatory mechanisms exist that are significant in light of section 4(a)(1)(D) of the Act” (61 FR 4722; February 7, 1996).
In our 90-day finding on the petition to list the western subspecies of the
Although the greater sage-grouse occurs in Canada, the petitioned entity is not “delimited by international governmental boundaries.” Therefore, the second condition related to discreteness does not apply in this situation.
In summary, neither the information presented in the petition nor that available in Service files presents substantial scientific or commercial information to demonstrate that the eastern population of sage-grouse is discrete from the remainder of the taxon. Accordingly, we are unable to define a listable entity of the eastern sage-grouse within the greater sage-grouse taxon. Therefore, we did not address the second element for determining a DPS, which is the potential significance of the eastern sage-grouse population to the remainder of the taxon. Finally, since the eastern population of sage-grouse cannot be defined as a DPS at this time, we did not evaluate its status as endangered or threatened on the basis of either the Act's definitions of those terms or the factors in section 4(a) of the Act.
The Service has reviewed the petition, literature cited in the petition, other pertinent literature, and information available in Service files. After reviewing the best scientific and commercial information available, the Service finds the petition does not present substantial information to indicate that the petitioned action may be warranted. This finding is based on the lack of evidence to support a separation of the greater sage-grouse into eastern and western subspecies, and our determination that the eastern population of the greater sage-grouse does not constitute a DPS.
A complete list of all references cited herein is available upon request from the Wyoming Field Office (see
The authority for this action is the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
International Trade Commission.
Institution of investigation pursuant to 19 U.S.C. 1337.
Notice is hereby given that a complaint was filed with the U.S. International Trade Commission on December 1, 2003, under section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, on behalf of Eaton Corporation of Cleveland, Ohio. A supplement to the Complaint was filed on December 3, 2003. The complaint, as supplemented, alleges violations of section 337 in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain automated mechanical transmissions for medium-duty and heavy-duty trucks, and components thereof, by reason of infringement of claim 15 of U.S. Patent No. 4,899,279, claims 1-20 of U.S. Patent No. 5,335,566, claims 2-4 and 6-16 of U.S. Patent No. 5,272,939, claims 1-13 of U.S. Patent No. 5,624,350, claims 1, 3, 4, 6-9, 11, 13, 14, 16, and 17 of U.S. Patent No. 6,149,545, and claims 1-16 of U.S. Patent No. 6,066,071. The complaint further alleges that an industry in the United States exists as required by subsection (a)(2) of section 337.
The complainant requests that the Commission institute an investigation and, after the investigation, issue a permanent exclusion order and a permanent cease and desist order.
The complaint, except for any confidential information contained therein, is available for inspection during official business hours (8:45 a.m. to 5:15 p.m.) in the Office of the Secretary, U.S. International Trade Commission, 500 E Street, SW., Room 112, Washington, DC 20436, telephone 202-205-2000. Hearing impaired individuals are advised that information on this matter can be obtained by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its Internet server at
Jay H. Reiziss, Esq., Office of Unfair Import Investigations, U.S. International Trade Commission, telephone 202-205-2579.
The authority for institution of this investigation is contained in section 337 of the Tariff Act of 1930, as amended, and in section 210.10 of the Commission's rules of practice and procedure, 19 CFR 210.10 (2003).
(1) Pursuant to subsection (b) of section 337 of the Tariff Act of 1930, as amended, an investigation be instituted to determine whether there is a violation of subsection (a)(1)(B) of section 337 in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain automated mechanical transmission systems for medium-duty and heavy-duty trucks, or components thereof by reason of infringement of claim 15 of U.S. Patent No. 4,899,279, claims 1-20 of U.S. Patent No. 5,335,566, claims 2-4 and 6-16 of U.S. Patent No. 5,272,939, claims 1-13 of U.S. Patent No. 5,624,350, claims 1, 3, 4, 6-9, 11, 13, 14, 16, or 17 of U.S. Patent No. 6,149,545, or claims 1-16 of U.S. Patent No. 6,066,071 and whether an industry in the United States exists as required by subsection (a)(2) of section 337.
(2) For the purpose of the investigation so instituted, the following are hereby named as parties upon which this notice of investigation shall be served:
(a) The complainant is—
Eaton Corporation, Eaton Center, 1111 Superior Avenue, Cleveland, OH 44114-2584.
(b) The respondents are the following companies alleged to be in violation of section 337, and are parties upon which the complaint is to be served:
ZF Meritor LLC, 22021 Skyway Church Road, Maxton, NC 28364;
ZF Friedrichshafen AG, Allmannsweilerstrasse 25, 88046 Friedrichshafen, Germany;
ArvinMeritor, Inc., 2135 West Maple Road, Troy, MI 48084.
(c) Jay H. Reiziss, Esq., Office of Unfair Import Investigations, U.S. International Trade Commission, 500 E Street, SW., Suite 401, Washington, DC 20436, who shall be the Commission investigative attorney, party to this investigation; and
(4) For the investigation so instituted, the Honorable Paul J. Luckern is designated as the presiding administrative law judge.
A response to the complaint and the notice of investigation must be submitted by the named respondents in accordance with section 210.13 of the Commission's rules of practice and procedure, 19 CFR 210.13. Pursuant to 19 CFR 201.16(d) and 210.13(a), such responses will be considered by the Commission if received not later than 20 days after the date of service by the Commission of the complaint and the notice of investigation. Extensions of time for submitting the responses to the complaint and the notice of investigation will not be granted unless good cause therefor is shown.
Failure of a respondent to file a timely response to each allegation in the complaint and in this notice may be deemed to constitute a waiver of the right to appear and contest the allegations of the complaint and this notice, and to authorize the administrative law judge and the Commission, without further notice to the respondent, to find the facts to be as alleged in the complaint and this notice and to enter a final determination containing such findings, and may result in the issuance of a limited exclusion order or cease and desist order or both directed against such respondent.
By order of the Commission.
International Trade Commission.
Institution of investigation pursuant to 19 U.S.C. 1337.
Notice is hereby given that a complaint was filed with the U.S. International Trade Commission on December 1, 2003, under section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, on behalf of Jens E. Sorensen, as Trustee of the Sorensen Research and Development Trust, of San Diego, California, and Jens Ole Sorensen of Rancho Santa Fe, California. A supplement to the Complaint was filed on December 18, 2003. The complaint, as supplemented, alleges violations of section 337 in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain automobile tail light lenses and products incorporating same by reason of infringement of claims 1, 6, 8 and 10 of U.S. Patent No. 4,935,184. The complaint further alleges that an industry in the United States exists as required by subsection (a)(2) of section 337.
The complainants requests that the Commission institute an investigation and, after the investigation, issue a permanent exclusion order and a permanent cease and desist order.
The complaint, except for any confidential information contained therein, is available for inspection during official business hours (8:45 a.m. to 5:15 p.m.) in the Office of the Secretary, U.S. International Trade Commission, 500 E Street, SW., Room 112, Washington, DC 20436, telephone 202-205-2000. Hearing impaired individuals are advised that information on this matter can be obtained by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server at
Juan Cockburn, Esq., Office of Unfair Import Investigations, U.S. International Trade Commission, telephone 202-205-2572.
(1) Pursuant to subsection (b) of section 337 of the Tariff Act of 1930, as amended, an investigation be instituted to determine whether there is a violation of subsection (a)(1)(B) of section 337 in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain automobile tail light lenses or products incorporating same by reason of infringement of claims 1, 6, 8 or 10 of U.S. Patent No. 4,935,184 and whether an industry in the United States exists as required by subsection (a)(2) of section 337.
(2) For the purpose of the investigation so instituted, the following are hereby named as parties upon which this notice of investigation shall be served:
(a) The complainants are—
(b) The respondents are the following companies alleged to be in violation of section 337, and are parties upon which the complaint is to be served:
(c) Juan Cockburn, Esq., Office of Unfair Import Investigations, U.S. International Trade Commission, 500 E Street, SW., Suite 401, Washington, DC 20436, who shall be the Commission investigative attorney, party to this investigation; and
(4) For the investigation so instituted, the Honorable Sidney Harris is designated as the presiding administrative law judge.
A response to the complaint and the notice of investigation must be submitted by the named respondents in accordance with section 210.13 of the Commission's Rules of Practice and
Failure of a respondent to file a timely response to each allegation in the complaint and in this notice may be deemed to constitute a waiver of the right to appear and contest the allegations of the complaint and this notice, and to authorize the administrative law judge and the Commission, without further notice to the respondent, to find the facts to be as alleged in the complaint and this notice and to enter a final determination containing such findings, and may result in the issuance of a limited exclusion order or cease and desist order or both directed against such respondent.
By order of the Commission.
Under 28 CFR 50.7, notice is hereby given that on December 22, 2003, a proposed consent decree in
In this action the United States is seeking response costs pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. 9601
The Department of Justice will receive for a period of thirty (30) days from the date of this publication comments relating to the consent decree. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, P.O. Box 7611, U.S. Department of Justice, Washington, DC 20044-7611, and should refer to
The proposed consent decree may be examined at the Office of the United States Attorney, Horne Building, 1100 Main Street Suite 200, Wheeling, WV 26003, and at U.S. EPA Region III, 1650 Arch Street, Philadelphia, PA 19103. During the public comment period, the proposed consent decree, may also be examined on the following Department of Justice Web site,
In requesting a copy from the Consent Decree Library, please enclose a check in the amount of $8.50 (25 cents per page reproduction cost) payable to the U.S. Treasury. Exhibits to the consent decree may be obtained for an additional charge.
Under 28 CFR 50.7, notice is hereby given that on December 15, 2003, a proposed Consent Decree in
In this action, the United States asserted claims against Stepan Company: (1) Under Section 106(b)(1) of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. 9606(b)(1), for civil penalties for Stepan's failure to comply with an administrative order issued by EPA requiring the performance of a soil investigation at the D'Imperio Property Superfund Site in Hamilton Township, New Jersey (Site) and (2) under Section 107(a) of CERCLA, 42 U.S.C. 9607(a), for recovery of response costs incurred regarding the Site. The proposed consent decree embodies an agreement with Stepan to pay a $30,000 civil penalty and $35,000 of response costs. The decree provides Stepan with a covenant not to sue under Sections 106(b)(1) and 107(a) of CERCLA.
The Department of Justice will receive for a period of thirty (30) days from the date of this publication comments relating to the Consent Decree. Comments should be addressed to the Assistant Attorney General, Environmental and Natural Resources Division, P.O. Box 7611, U.S. Department of Justice, Washington, DC 20044-7611, and should refer to
The Consent Decree may be examined at the Office of the United States Attorney, United States Courthouse, Rm. 2070, 4th & Cooper Streets, Camden, NJ 08101, and at the Region II Office of the U.S. Environmental Protection Agency, Region II Records Center, 290 Broadway, 17th Floor, New York, NY 10007-1866. During the public comment period, the Consent Decree also may be examined on the following Department of Justice Web site,
Under 28 CFR 50.7, notice is hereby given that on December 30, 2003, a proposed consent decree in
In this action the United States sought response costs pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. 9601
The Department of Justice will receive for a period of thirty (30) days from the date of this publication comments relating to the proposed consent decree. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, P.O. Box 7611, U.S. Department of Justice, Washington, DC 20044-7611, and should refer to
The proposed consent decree may be examined at the Office of the United States Attorney, 615 Chestnut Street, Suite 1250, Philadelphia, PA 19106, and at U.S. EPA Region III, 1650 Arch Street, Philadelphia, PA 19103. During the public comment period, the proposed consent decree may also be examined on the following Department of Justice Web site,
On November 14, 2003, the Department issued an affirmative determination regarding application on reconsideration applicable to workers and former workers of the subject firm. The notice will soon be published in the
The Department's negative determination notice was signed on August 29, 2003, and was published in the
On review of new information provided by the petitioner and the company official, it has been determined that the subject worker group are engaged in the production of router switches, that a significant portion of their functions included testing, repair, and re-packaging, and that a significant portion of this production was shifted from the subject facility to Canada, impacting workers of the subject firm.
After careful review of the additional facts obtained on reconsideration, I conclude that the shift of production to Canada of articles like or directly competitive with those produced at the subject form contributed importantly to the declines in sales or production and to the total or partial separation of workers at the subject firm. In accordance with the provisions of the Act, I make the following certification:
All workers of Alcatel Internetworking (PE), Spokane, Washington, who became totally or partially separated from employment on or after August 5, 2002, through two years from the date of this certification, are eligible to apply for adjustment assistance under section 223 of the Trade Act of 1974.
In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273) and Section 246 of the Trade Act of 1974, as amended, the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on October 15, 2003, applicable to workers of American Bag Corporation; a Division of Milliken & Company; Winfield, Tennessee. The notice was published in the
At the request of a state agency representative, the Department reviewed the certification for workers of the subject firm. The workers produce airbags.
The investigation review shows that workers of the subject firm were covered by a previous certification, TA-W-38,870, that did not expire until August 29, 2003.
In order to avoid an overlap in worker group coverage, the Department is amending the impact date for this certification, changing it from September 17, 2002, to August 30, 2003.
The amended notice applicable to TA-W-53,124 is hereby issued as follows:
“All workers of American Bag Corporation, a Division of Milliken & Company, Winfield, Tennessee, who became totally or partially separated from employment on or after August 30, 2003, through October 15, 2005, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974, as amended.”
Pursuant to section 221 of the Trade Act of 1974, as amended, an investigation was initiated on December 10, 2003, in response to a petition filed on behalf of workers at Authentic Fitness Corporation, Commerce, California.
The petitioning group of workers is covered by an active certification issued on November 6, 2003, and which remains in effect (TA-W-53,132). Consequently, further investigation in this case would serve no purpose, and the investigation has been terminated.
Pursuant to section 221 of the Trade Act of 1974, as amended, an investigation was initiated on December 9, 2003, in response to a petition filed by the Tennessee AFL-CIO on behalf of workers at Citation Corporation, Camden, Tennessee. Workers at the subject firm produced ductile iron castings.
The Department of Labor issued negative determinations applicable to the petitioning group of workers on June 16, 2003 (TA-W-51,871). No new information or change in circumstances is evident which would result in a reversal of the Department's previous determination. Consequently, further investigation would serve no purpose, and the investigation has been terminated.
In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and under Section 246 of the Trade Act of 1974, as amended, the Department of Labor issued a Certification of Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on December 3, 2003, applicable to workers of Cone Mills Corporation, Carlisle Plant Division located in Carlisle, South Carolina, Cone Rutherford County, LLC Division located in Cliffside, North Carolina, and Cone White Oak, LLC Division located in Greensboro, North Carolina. The notice will soon be published in the
At the request of a company official, the Department reviewed the certification for workers of the subject firm. The workers of Cone Mills Corporation produce textiles. New information provided by a company official show that worker separations have occurred at the subject firm's corporate office in Greensboro, North Carolina, and at the company's warehouse in Salisbury, North Carolina.
Workers at the corporate office and warehouse provide services in support of the production of textiles at the firm's Cone White Oak, LLC Division in Greensboro, North Carolina, as well as other Cone Mill Corporation plants, whose workers have been certified eligible to apply for adjustment assistance.
Furthermore, the conclusion section of the certification omitted that workers are eligible to apply for alternative trade adjustment assistance (ATAA) under Section 246 of the Trade Act of 1974, as amended.
It is the Department's intent to include all workers of Cone Mills Corporation adversely affected by increased imports of textiles. Therefore, the Department is amending the certification to include workers of the Corporate Office in Greensboro, North Carolina, add workers of Cone Mills Corporation, Salisbury, North Carolina, and include for all locations worker eligibility to apply for ATAA.
The amended notice applicable to TA-W-53,291 is hereby issued as follows:
“All workers of Cone Mills Corporation, of Cone Mills Corporation, Carlisle Plant Division, Carlisle, South Carolina (TA-W-53,291), Cone Mills Corporation, Cone Rutherford County, LLC Division, Cliffside, North Carolina (TA-W-53,291A), Cone Mills Corporation, Cone White Oak, LLC Division and Corporate Headquarters, Greensboro, North Carolina (TA-W-53,291B), and Cone Mills Corporation, Salisbury, North Carolina (TA-W-53,291C), who became totally or partially separated from employment on or after October 14, 2002, through December 3, 2005, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974, as amended.”
On November 18, 2003, the Department issued an Affirmative Determination Regarding Application for Reconsideration for the workers and former workers of the subject firm. The notice will soon be published in the
The Department initially denied TAA to workers of Kulicke and Soffa Industries, Austin, Texas because the “contributed importantly” and shift of production group eligibility
In the request for reconsideration, the petitioner alleged that the subject company shifted production to China.
During the reconsideration investigation, the Department requested additional information from the subject company regarding the alleged shift of production.
The investigation revealed that the subject company shifted production from the subject facility to another Texas facility in 2001, and shifted production from Texas to California in 2003.
Further, while the subject company has sent two employees to China, the employees are assisting in a shift of production from California to China and the shift will not occur until 2004.
After reconsideration, I affirm the original notice of negative determination of eligibility to apply for worker adjustment assistance for workers and former workers of Kulicke and Soffa Industries, Austin, Texas.
Pursuant to Section 221 of the Trade Act of 1974, as amended, an investigation was initiated on November 19, 2003 in response to a worker petition filed by a company official on behalf of workers at Mac Brad Wholesale Flowers, Inc., Pasadena, Texas.
The petitioner has requested that the petition be withdrawn. Consequently, the investigation has been terminated.
In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273) the Department of Labor issued a Notice of Revised Determination on Remand on June 25, 2003, applicable to workers of the ME International, Inc., Duluth, Minnesota. The notice was published in the
At the request of the State agency, the Department reviewed the revised determination for workers of the subject firm. The workers are engaged in the production of metal linings for grinding mills.
New information shows that ME International was purchased by Elecmetal in November 2001 and is now known as ME Global. Workers separated from employment as the subject firm had their wages reported under a separated unemployment insurance (UI) tax account for ME Global.
Accordingly, the Department is amending this certification to properly reflect this matter.
The intent of the Department's certification is to include all workers of ME International, Duluth, Minnesota who were adversely affected by increased imports.
The amended notice applicable to TA-W-39,162 is hereby issued as follows:
“All workers of ME International, Inc., now known as ME Global, Duluth, Minnesota, who became totally or partially separated from employment on or after April 9, 2000, through June 25, 2005, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974.
Pursuant to section 221 of the Trade Act of 1974, as amended, an investigation was initiated on December 9, 2003, in response to a petition filed on behalf of workers at Motorola, Inc., Radio Support Center, Rockford, Illinois.
The Department issued a negative determination applicable to the petitioning group of workers on December 3, 2003 (TA-W-53,470). No new information or change in circumstances is evident which would result in a reversal of the Department's previous determination. Consequently, further investigation would serve no purpose, and the investigation has been terminated.
In accordance with section 223 of the Trade Act of 1974 (19 U.S.C. 2273) the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance on July 25, 2003, applicable to workers of Multilayer Technology (Multek), Inc., a division of Flextronics International, Roseville, Minnesota. The notice was published in the
At the request of the State agency, the Department reviewed the certification for workers of the subject firm. Information provided by the company shows that temporary workers of Atlas Staffing, Inc. were employed at Multilayer Technology (Multek), Inc. to
Based on these findings, the Department is amending this certification to include temporary workers of Atlas Staffing, Inc. working at Multilayer Technology (Multek), Inc., Roseville, Minnesota.
The intent of the Department's certification is to include all workers of Multilayer Technology (Multek), Inc. who were adversely affected by the shift in production to Brazil, Germany and China.
The amended notice applicable to TA-W-52,152 is hereby issued as follows:
All workers of Multilayer Technology (Multek), Inc., a division of Flextronics International, Roseville, Minnesota, and temporary workers of Atlas Staffing, Inc., Minneapolis, Minnesota producing printed circuit boards at Multilayer Technology (Multek), Inc., Roseville, Minnesota, who became totally or partially separated from employment on or after June 25, 2002, through July 25, 2005, are eligible to apply for adjustment assistance under section 223 of the Trade Act of 1974.
Pursuant to section 221 of the Trade Act of 1974, an investigation was initiated on December 9, 2003, in response to a petition filed on behalf of workers at Phillips Plastics Corporation, Eau Claire, Wisconsin.
This petitioning group of workers is covered by an earlier petition filed on December 8, 2003 (TA-W-53,735), that is the subject of an ongoing investigation for which a determination has not yet been issued. Consequently, further investigation in this case would serve no purpose, and the investigation has been terminated.
In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273) the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance on October 17, 2003, applicable to workers of RadioShack Corp., TDP Electronics Div., an operating entity of North American Manufacturing, Swannanoa, North Carolina. The notice was published in the
At the request of a company official, the Department reviewed the certification for workers of the subject firm. The workers are engaged in the production of household audio and video equipment.
New information shows that some workers separated from employment at the subject firm had their wages reported under a separate unemployment insurance (UI) tax account for TE Electronics, Division of RadioShack Corporation, Tandy Distributor Products.
Accordingly, the Department is amending the certification to properly reflect this matter.
The intent of the Department's certification is to include all workers of RadioShack Corporation, TE Electronics, Division of RadioShack Corporation, Tandy Distributor Products, Swannanoa, North Carolina who were adversely affected by increased imports.
The amended notice applicable to TA-W-52,906 is hereby issued as follows:
“All workers of RadioShack Corporation, TE Electronics, Division of RadioShack Corporation, Tandy Distributor Products, Swannanoa, North Carolina, who became totally or partially separated from employment on or after September 10, 2002, through October 17, 2005, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974.”
In accordance with section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and under section 246 of the Trade Act of 1974, as amended, the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on November 20, 2003, applicable to workers of Rayovac Corporation, Manufacturing Division, located in Fennimore, Wisconsin. The notice will soon be published in the
At the request of the State Agency, the Department reviewed the certification for workers of the subject firm. The workers produce batteries.
The review shows that all workers of Rayovac Corporation, Fennimore, Wisconsin, were previously certified eligible to apply for adjustment assistance under petition number TA-W-39,005, which expired on April 17, 2003.
Therefore, in order to avoid an overlap in worker group coverage, the Department is amending the October 2, 2003 impact date established for TA-W-53,150, to read April 18, 2003.
The amended notice applicable to TA-W-53,150 is hereby issued as follows:
All workers of Rayovac Corporation, Manufacturing Division, Fennimore, Wisconsin, who became totally or partially separated from employment on or after April 18, 2003, through November 20, 2005, are eligible to apply for adjustment assistance under section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under section 246 of the Trade Act of 1974, as amended.
In accordance with section 223 of the Trade Act of 1974 (19 U.S.C. 2273) the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance on April 4, 2003, applicable to workers of Siemens Energy & Automation, Residential Infrastructure Division, including leased workers of Randstad North America, CDI Corporation, and Peak Technical Services, Miami, Florida. The notice was published in the
At the request of the State agency, the Department reviewed the certification for workers of the subject firm. New information shows that leased workers of Randstad Staffing Services were employed at Siemens Energy & Automation, Residential Infrastructure Division to produce meter sockets and enclosure for the electrical equipment industry at the Miami, Florida location of the subject firm.
Based on these findings, the Department is amending this certification to include leased workers of Randstad Staffing Services working at Siemens Energy & Automation, Residential Infrastructure Division, Miami, Florida.
The intent of the Department's certification is to include all workers of Siemens Energy & Automation, Residential Infrastructure Division who were adversely affected by the shift in production to Mexico.
The amended notice applicable to TA-W-51,170 is hereby issued as follows:
All workers of Siemens Energy & Automation, Inc., Residential Infrastructure Div, Miami, Florida, and leased workers of Randstad North America, CDI Corporation, Peak Technical Services and Randstad Staffing Services producing meter sockets and enclosure at Siemens Energy & Automation, Inc., Residential Infrastructure Division, Miami, Florida, who became totally or partially separated from employment on or after March 14, 2002, through April 4, 2005, are eligible to apply for adjustment assistance under section 223 of the Trade Act of 1974.
On November 3, 2003, the Department issued an Affirmative Determination Regarding Application for Reconsideration for the workers and former workers of the subject firm. The notice will soon be published in the
The Department initially denied TAA to workers of Silicon Graphics, Inc., Worldwide Manufacturing Organization (WMO), Chippewa Falls, Wisconsin because the “contributed importantly” and shift of production group eligibility requirements of section 222(3) of the Trade Act of 1974, as amended, were not met. The investigation revealed that neither the subject company nor its customers increased import purchases of computer products during the relevant period and that there was no shift of production.
In the request for reconsideration, the petitioner alleged that both the subject company and one of its major customers increased import purchases during the relevant time period.
During the reconsideration investigation, the Department requested additional information from the subject company regarding the allegations.
The investigation revealed that the subject company did not increase imports during the relevant time period and that sales to the identified customer constituted only a negligible amount of total subject company sales during the relevant time period.
After reconsideration, I affirm the original notice of negative determination of eligibility to apply for worker adjustment assistance for workers and former workers of Silicon Graphics, Inc., Worldwide Manufacturing Organization (WMO), Chippewa Falls, Wisconsin and temporary workers of Kelly Services working at the subject facility.
By electronic mail dated October 22, 2003, the State of Michigan requested administrative reconsideration regarding Alternative Trade Adjustment Assistance (ATAA). The request was made because the Department certified the workers of the subject firm regarding only eligibility to apply for worker adjustment assistance. The certification was signed on November 5, 2003. The notice will soon be published in the
The Department issued the limited certification because it did not investigate if workers met the eligibility requirement of Alternative Trade Adjustment Assistance (ATAA), since a copy of the request for determination of eligibility to apply for the ATAA program for Older Workers was not attached to the petition.
Because the State provided documentation that a request for ATAA consideration was properly submitted, an investigation was conducted to determine if workers are eligible to apply for ATAA. The investigation revealed that a significant number of workers at the firm are age 50 or over and possess skills that are not easily transferable and that competitive conditions within the industry are adverse.
After careful review of the additional facts obtained on reconsideration, I conclude that there was a shift of production from the workers' firm or subdivision to Mexico of articles like or directly competitive with those produced by the subject firm. In accordance with the provisions of the Act, I make the following certification:
All workers of Steelcase, Inc., Grand Rapids, Michigan, who became totally or partially separated from employment on or after August 12, 2002, through two years from the date of this certification, are eligible to apply for adjustment assistance under section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under section 246 of the Trade Act of 1974.
Pursuant to section 221 of the Trade Act of 1974, as amended, an investigation was initiated on December 8, 2003, in response to a worker petition filed on behalf of workers at Tibbetts Industries, Inc., Camden, Maine.
The petitioner has requested that the petition be withdrawn. Consequently, the investigation has been terminated.
Pursuant to section 221 of the Trade Act of 1974, as amended, an investigation was initiated on December 2, 2003, in response to a worker petition filed by Transportation-Communications International Union on behalf of workers at TMH, Portage, Indiana.
The petitioning group of workers is covered by an active certification issued on July 9, 2003, and which remains in effect (TA-W-53,685). Consequently, further investigation in this case would serve no purpose, and the investigation has been terminated.
Pursuant to section 221 of the Trade Act of 1974, as amended, an investigation was initiated on November 23, 2003, in response to a petition filed on behalf of workers at United States Postal Service, Remote Encoding Center, Cohoes, New York.
The petitioning worker group is included in a petition filed on November 17, 2003 (TA-W-53,711), that is the subject of an ongoing investigation. Consequently, further investigation in this case would serve no purpose, and the investigation has been terminated.
In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273) the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance on October 2, 2001, applicable to workers of Zexel Valeo Compressor USA, Decatur, Illinois. The notice was published in the
At the request of a company official, the Department reviewed the certification for workers of the subject firm. The workers were engaged in the production of automotive air conditioning compressors until the company ceased production by the end of 2001.
New information shows that workers were retained at the subject firm beyond the October 2, 2003 expiration date of the certification. These employees will complete the close-down process until their termination on December 31, 2003. Based on these findings, the Department is amending the certification to extend the October 2, 2003 expiration date for TA-W-39,953 to read December 31, 2003.
The intent of the Department's certification is to include all workers of Zexel Valeo Compressor USA who were adversely affected by increased imports.
The amended notice applicable to TA-W-39,953 is hereby issued as follows:
“All workers of Zexel Valeo Compressor USA, Inc., Decatur, Illinois, who became totally or partially separated from employment on or after August 17, 2000, through December 31, 2003, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974.”
Dominion Nuclear Connecticut, Inc. (DNC or the licensee) is the holder of Facility Operating License Nos. DPR-65 and NPF-49, which authorize operation of Millstone Power Station, Unit Nos. 2 and 3 (MP2 and MP3), respectively. The licenses provide, among other things, that the licensee is subject to all rules, regulations, and orders of the U.S.
The facility consists of two pressurized-water reactors (PWRs) located in New London County in Connecticut; this exemption addresses only MP3. The nuclear steam system supplier for MP2 is Combustion Engineering, and the supplier for MP3 is Westinghouse Electric Corporation.
Title 10 of the
DNC, however, requested by application dated December 13, 2002, as supplemented by letters dated April 28, 2003, and September 3, 2003, a schedular exemption from the 20-year restriction specified in 10 CFR 54.17(c) to allow it to submit a renewal application for MP3 earlier than 20 years before expiration of its operating license. Such an exemption would allow DNC to submit one application for renewal of the operating licenses of both MP2 and MP3, with the goal of attaining efficiencies for preparation and review of the application. The current operating license for MP2 (DPR-65) expires on July 31, 2015, whereas the current operating license for MP3 (NPF-49) expires on November 25, 2025. At the time the exemption request was filed, MP2 had more than 29 years of operating experience and MP3 had more than 18 years experience.
Pursuant to 10 CFR 54.15, the Commission may, upon application by any interested person or upon its own initiative, grant exemptions from the requirements of 10 CFR part 54, in accordance with the provisions of 10 CFR 50.12, when (1) The exemptions are authorized by law, (2) will not present an undue risk to public health or safety, and (3) are consistent with the common defense and security. However, an exemption will not be granted unless special circumstances are present, as defined in Section 50.12(a)(2).
The Commission's basis for establishing the 20-year limit contained in 10 CFR 54.17(c) is discussed in the 1991 Statements of Consideration for part 54 of 10 CFR (56 FR 64963). The limit was established to ensure that substantial operating experience was accumulated by a licensee before a renewal application is submitted such that any plant-specific concerns regarding aging would be disclosed. In amending the rule in 1995, the Commission sought public comment on whether the 20-year limit should be reduced. The Commission determined that sufficient basis did not exist to generically reduce the 20-year limit. However, the Commission did indicate in the Statements of Consideration for the amended rule (60 FR 22488), that it was willing to consider plant-specific exemption requests by applicants who believe that sufficient information is available to justify applying for license renewal prior to 20 years from expiration of the current license. DNC's exemption request is consistent with the Commission's intent to consider plant-specific requests and is permitted by 10 CFR 54.15.
The current operating licenses for MP2 and MP3, were issued in accordance with the Atomic Energy Act of 1954, as amended (AEA), and 10 CFR 50.51 which limit the duration of an operating license to a maximum of 40 years. In accordance with 10 CFR 54.31, the renewed license will be of the same class as the operating license currently in effect and cannot exceed a term of 40 years. Therefore, the terms of the renewed licenses for MP2 and MP3, are limited both by law and the Commission's regulations to 40 years. Additionally, 10 CFR 54.31(b) states that:
The potential exists that because DNC's decision to apply early for license renewal for MP3, DNC may not obtain the maximum 20-year period of extended operation permitted by 10 CFR 54.31(b). Any actual reduction will depend on the date the renewed licenses are issued. If a reduction in the 20-year extension is required, and DNC desires further extension of MP3's operating licenses in the future, an additional renewal application can be submitted in accordance with 10 CFR part 54.
Therefore, should the Commission determine to renew the MP3 operating license, the term of the license will not exceed 40 years, and granting of MP3's exemption request will not result in violation of the AEA or the Commission's regulations.
DNC's exemption request seeks only schedular relief regarding the date of submittal, and not substantive relief from the requirements of 10 CFR parts 51 or 54. DNC must still conduct all environmental reviews required by 10 CFR part 51 and all safety reviews and evaluations required by 10 CFR part 54 when preparing the applications for MP2 and MP3. The staff's review will verify that all applicable Commission regulations have been met before issuing the renewed licenses. Therefore, the staff finds that granting this schedular exemption will not represent an undue risk to public health and safety.
As discussed previously, the exemption requested is only a schedular exemption. The NRC staff will review the license renewal application DNC submits pursuant to the requested exemption, to determine whether all applicable requirements are fully met. Accordingly, granting the requested exemption will be consistent with the common defense and security.
An exemption will not be granted unless special circumstances are present as defined in 10 CFR 50.12(a)(2). Specifically, 10 CFR 50.12(a)(2)(ii) states that a special circumstance exists when “application of the regulation in the particular circumstances * * * is not necessary to achieve the underlying purpose of the rule.” In initially promulgating 10 CFR 54.17(c) in 1991, the Commission stated that the purpose of the time limit was “to ensure that substantial operating experience is accumulated by a licensee before it submits a renewal application” (56 FR 64963). At that time, the NRC found that 20 years of operating experience provided a sufficient basis for renewal applications. However, in issuing the amended 10 CFR part 54 in 1995, the Commission indicated it would consider an exemption to this requirement if sufficient information was available on a plant-specific basis to justify submission of an application to renew a license before completion of 20 years of operation (60 FR 22488).
The 20-year limit was imposed by the NRC to ensure that sufficient operating experience was accumulated to identify any plant-specific aging concerns. As set forth below, MP2 is sufficiently similar to MP3, such that the operating experience for MP2 applies to MP3. In
DNC states that the two units at the Millstone site are similar in materials of construction and operating environments, many of the aging analyses to be performed for the structures, systems, and components (SSCs) of MP2 will be directly applicable to the SSCs of MP3. Both units are PWR units that utilize recirculating, U-tube type steam generators that produce saturated steam to drive turbine-generators. DNC states that the materials of construction for SSCs on both units are typically identical or similar. The materials used and the environments to which these materials are subjected determine the existence of aging effects. Both units at the Millstone site share common facilities/environments and have many similar components and materials.
DNC also stated that many of the procedures that govern site activities are not unit-specific and require the consideration of operating experience at both Millstone units. Both units share many of the same maintenance activities and other existing aging management programs, making them more effective by relying on the experience at both units. The Millstone site organization shares a common operating experience review department, such that operating experience and corrective actions are continually shared between the units. The Millstone site also utilizes their Corrective Action Program (CAP), in which a multi-disciplinary team reviews Condition Reports (CRs). As part of this review, the team identifies CRs that could affect other operating units and that need to be evaluated for both units. The direct exchange of operating experience by this common operating experience review and by the CAP ensures the evaluation of MP2 aging issues that could be applicable to MP3. The shared operating experience and dedicated system engineering responsibilities also result in a continual evaluation of the effectiveness of plant programs used to manage the effects of aging of plant equipment for both units.
While the units at the Millstone site have common operation, maintenance, use of operating experience, and environment, MP2 and MP3 are of different PWR design. MP2 is a Combustion Engineering PWR design and MP3 is a Westinghouse 4-Loop PWR design. The nuclear steam supply system (NSSS) design, thermal output, containment and Category 1 structures, of these two designs are significantly different. In a letter dated April 28, 2003, the applicant provided supplemental information to justify the applicability of MP2's operating experience as the basis for the exemption request or to discuss how industry-wide Westinghouse 4-Loop operating experience can supplement MP3's operating experience. In addition, on July 18, 2003, the NRC requested additional information to justify the applicability of MP2's containment and Category 1 structures operating experience as the basis for the exemption or to discuss how industry-wide operating experience can supplement MP3's operating experience.
The staff reviewed the supplemental information provided by the applicant in its letter to the NRC dated April 28, 2003. DNC compared the MP2 and MP3 NSSS SSCs to those in the applicable sections of the Generic Aging Lessons Learned (GALL) Report and listed the comparative results in the attachment to the letter. Based on Section II.A of the attachment and its related discussions, the applicant stated that the operating experience from MP2 is applicable to MP3 with regard to identifying NSSS-related aging effects. The staff reviewed the contents of Section II.A and determined that although there are differences in NSSS design and configuration between MP2 and MP3, both units do exhibit similar aging effects, and their aging effects are comparable to those of the GALL Report. The staff also reviewed the applicant's assertions that: (1) MP3 has the benefit of industry operating experience, particularly for those PWRs that have the same NSSS design (Surry and North Anna); (2) as of the date of their submittal, nine Westinghouse 4-Loop PWRs have accumulated at least 20 years of operating experience and five other plants have close to 20 years of operating experience; and (3) the MP3 license renewal application (LRA) will also reflect industry experience identified in the GALL Report as well as other industry programs.
The staff finds that the justifications provided by the applicant for these assertions are based on factual information and are reasonable. Based on the above discussion, the staff concludes that with respect to MP2 and MP3 NSSS design, configuration, and management of NSSS-related aging effects, the applicant has provided adequate justifications for the NRC consideration of granting MP3's request for exemption from the requirements of 10 CFR 54.17(c)
The staff reviewed the supplemental response provided by the applicant in its letter to the NRC dated April 28, 2003. The staff noted that DNC compared MP2 and MP3 thermal outputs, which results in differences in neutron flux and fluence to which the reactor vessels and the reactor vessel internals (RVI) are exposed. DNC indicated that the differences in thermal output do not significantly affect the reactor coolant temperature. In addition, it was noted that the MP2 and MP3 reactor vessel operating temperatures are similar and closely match those specified in the GALL Report for the PWR reactor vessel environment. The staff compared the operating temperatures through the reactor vessel integrity database with those in the GALL Report and found that the licensee's justification was reasonable.
In addition, DNC indicated that the higher core power density and correspondingly, a higher fluence for MP3 which may result in the emergence of certain aging effects earlier in plant life than would be the case for MP2. However, it was noted that there are no unique aging effects for the MP3 RVI and that the same aging effects would require management for both units.
The licensee also stated that on an industry-wide basis, the Electric Power Research Institute (EPRI) Materials Reliability Program (MRP) addresses aging effects associated with PWR RVI. It was noted that the EPRI MRP reviewed the function of each internal PWR component (including Westinghouse and CE). For those internals that could impact safety, the EPRI MRP considered the aging mechanisms that could cause degradation of RVI component and is developing strategies to manage the resulting aging effects. Therefore, the licensee indicated that the operating experience gained from the EPRI MRP could be applied to MP3 in assisting in the identification of plant-specific concerns regarding aging. The staff finds this approach acceptable.
The staff finds that the justification provided by the applicant for these assertions are based on factual information and are reasonable. Based on the above discussion, the staff concludes that with respect to MP2 and MP3 thermal output differences, the applicant has provided adequate justification for the staff's consideration of granting the MP3 request for
The staff reviewed the additional information provided by the applicant in its letter to the NRC dated September 3, 2003. In the attachment to the letter, DNC compared the MP2 and MP3 containment and Category 1 structures and components in Table 1; MP3 and other Stone and Webster Engineering Corp. plants' containment and Category 1 structures and components in Table 2; and MP3 and the applicable sections of the GALL Report containment and Category 1 structures and components in Table 3. Based on the Table 1 comparisons and its related discussions, the applicant stated that the operating experience from MP2 is applicable to MP3 with identifying containment and Category 1 structure-related aging effects, except when there were differences such as in the architect-engineer, containment type, and groundwater protection. For the differences previously noted, the applicant relied on the operating experience from plants (Table 2) that have the same architect-engineer, containment type, and groundwater protection such as North Anna Units 1 and 2, Surry Units 1 and 2, Beaver Valley Unit 1, and Haddam Neck. Even though these plants have the same architect-engineer, containment type, and groundwater protection as MP3, the environments are different. MP3 is located in a coastal area and the other plants are located in inland environments. For the environmental difference, the applicant relied on the GALL Report for additional operating experience. The staff reviewed the applicant's assertions that MP3 also has the benefit of industry operating experience, particularly for those PWRs with the same architect engineer, containment type, and groundwater protection; and the MP3 LRA will also reflect industry experience identified in the GALL Report, as well as other industry programs.
The staff finds that the justifications provided by the applicant for these assertions are based on factual information and are reasonable. Based on the above discussion, the staff concludes that, with respect to MP2 and MP3 containment and Category 1 structures design, structural configuration and management of structural-related aging effects, the applicant has provided adequate justifications for the NRC's consideration of granting MP3's request for exemption from the requirements of 10 CFR 54.17(c).
Therefore, sufficient combined operating experience from MP2 and industry exists to satisfy the intent of 10 CFR 54.17(c), and the application of the regulation in this case is not necessary to achieve the underlying purpose of the rule. The staff finds that DNC's request meets the requirement, in 10 CFR 50.12(a)(2), that special circumstances exist to grant the exemption.
Based on the foregoing, the staff finds that the requested exemption is acceptable in that it is authorized by law; will not present an undue risk to public health and safety; is consistent with the common defense and security; and that special circumstances are present, under 10 CFR 50.12(a)(2)(ii). Should DNC submit an application to renew the licenses for MP2 and MP3, the application must demonstrate full compliance with 10 CFR parts 51 and 54 for both units and include information addressing the similarity in design, operation, maintenance, operating experience, and environments of the units to support submittal of the dual-unit application. In the course of its review of an application to renew the licenses for the units at the Millstone site, the NRC staff will examine how the actual operating experience, available from both units and from industry, applies to the particular SSCs evaluated.
Accordingly, the Commission has determined that, pursuant to 10 CFR 50.12(a), the exemption is authorized by law, will not present an undue risk to the public health and safety, and is consistent with the common defense and security. Also, special circumstances are present. Therefore, the Commission hereby grants DNC a schedular exemption from the requirements of 10 CFR 54.17(c). Specifically, this schedular exemption allows DNC to apply for a renewed license for MP3 earlier than 20 years before the expiration of the operating license currently in effect.
Pursuant to 10 CFR 51.32, the Commission has determined that the granting of this exemption will not have a significant effect on the quality of the human environment (68 FR 7529).
This exemption is effective upon issuance.
Dated at Rockville, Maryland, this 30th day of December, 2003.
The U.S. Nuclear Regulatory Commission (NRC or the Commission) has granted the request of PSEG Nuclear LLC (the licensee) to withdraw its July 9, 2003, application, as supplemented by its August 14, 2003, letter, for a proposed amendment to Facility Operating License No. NPF-57 for the Hope Creek Generating Station, Unit No. 1, located in Salem County, New Jersey.
The proposed amendment would have revised the facility's Technical Specifications by extending the time allowed to complete repairs or upgrades to the control room emergency filtration (CREF) system up to 30 days.
The Commission had previously issued a Notice of Consideration of Issuance of Amendment published in the
For further details with respect to this action, see the application for amendment dated July 10, 2003, as supplemented by letter dated August 14, 2003, and the licensee's letter dated November 21, 2003, which withdrew the application for license amendment. Documents may be examined, and/or copied for a fee, at the NRC's Public Document Room (PDR), located at One White Flint North, Public File Area O1 F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible electronically from the Agencywide Documents Access and Management Systems (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site,
For the Nuclear Regulatory Commission.
2 p.m., Thursday, January 22, 2004.
Offices of the Corporation, Twelfth Floor Board Room, 1100 New York Avenue, NW., Washington, DC.
Hearing open to the Public at 2 p.m.
Annual public hearing and hearing in to afford an opportunity for any person to present views regarding the activities of the Corporation.
Individuals wishing to address the hearing orally must provide advance notice to OPIC's Corporate Secretary no later than 5 p.m., Friday, January 16, 2004. The notice must include the individual's name, organization, address, and telephone number, and a concise summary of the subject matter to be presented.
Oral presentations may not exceed ten (10) minutes. The time for individual presentations may be reduced proportionately, if necessary, to afford all participants who have submitted a timely request to participate an opportunity to be heard.
Participants wishing to submit a written statement for the record must submit a copy of such statement to OPIC's Corporate Secretary no later than 5 p.m., Friday, January 16, 2004. Such statements must be typewritten, double-spaced and may not exceed twenty-five (25) pages.
Upon receipt of the required notice, OPIC will prepare an agenda for the hearing identifying speakers, setting forth the subject on which each participant will speak, and the time allotted for each presentation. The agenda will be available at the hearing.
A written summary of the hearing will be compiled, and such summary will be made available, upon written request to OPIC's Corporate Secretary, at the cost of reproduction.
Information on the hearing may be obtained from Connie M. Downs at (202) 336-8438, via facsimile at (202) 218-0136, or via email at
OPIC is a U.S. Government agency which provides, on a commercial basis, political risk insurance and financing in friendly developing countries and emerging democracies for environmentally sound projects which confer positive development benefits upon the project country while creating employment in the U.S. OPIC is required by section 231A(c)(1) of the Foreign Assistance Act of 1961, as amended (“the Act”) to hold at least one public hearing each year; and by section 231A(c)(2) to hold a public hearing in conjunction with the quarterly meeting of the Board of Directors.
Among other issues, OPIC's annual public hearing has, in previous years, provided a forum for testimony concerning section 231 A(a) of the Act. This section provides that OPIC may operate its programs only in those countries that are determined to be “taking steps to adopt and implement laws that extend internationally recognized worker rights * * * to workers in that country (including any designated zone in that country).”
Based on consultations with Congress, OPIC complies with annual determinations made by the Executive Branch with respect to worker rights for countries that are eligible for the Generalized System of Preferences (“GSP”). Any country for which GSP eligibility is revoked on account of its failure to take steps to adopt and implement internationally recognized worker rights is subject concurrently to the suspension of OPIC programs until such time as a favorable worker rights determination can be made.
For non-GSP countries in which OPIC operates its programs, OPIC reviews any country which is the subject of a formal challenge at its annual public hearing. To qualify as a formal challenge, testimony must pertain directly to the worker rights requirements of the law as defined in OPIC's 1985 reauthorizing legislation (Pub. L. 99-204) with reference to the Trade Act of 1974, as amended, and be supported by factual information.
1 p.m., Thursday, January 22, 2004.
Offices of the Corporation, Twelfth Floor Board Room, 1100 New York Avenue, NW., Washington, DC.
Hearing open to the Public at 1 p.m.
Annual Public Hearing in conjunction with each meeting of OPIC's Board of Directors, to afford an opportunity for any person to present views regarding the activities of the Corporation.
Individuals wishing to address the hearing orally must provide advance notice to OPIC's Corporate Secretary no later than 5 p.m., Friday, January 16, 2004. The notice must include the individual's name, organization, address, and telephone number, and a concise summary of the subject matter to be presented.
Oral presentations may not exceed ten (10) minutes. The time for individual presentations may be reduced proportionately, if necessary, to afford all participants who have submitted a timely request to participate an opportunity to be heard.
Participants wishing to submit a written statement for the record must submit a copy of such statement to OPIC's Corporate Secretary no later than 5 p.m., Friday, January 16, 2004. Such statements must be typewritten, double-spaced and may not exceed twenty-five (25) pages.
Upon receipt of the required notice, OPIC will prepare an agenda for the hearing identifying speakers, setting forth the subject on which each participant will speak, and the time allotted for each presentation. The agenda will be available at the hearing.
A written summary of the hearing will be compiled, and such summary will be made available, upon written request to OPIC's Corporate Secretary, at the cost of reproduction.
Information on the hearing may be obtained from Connie M. Downs at (202) 336-8438, via facsimile at (202) 218-0136, or via e-mail at
Metropolitan Mortgage & Securities Co., Inc., a Washington corporation (“Issuer”), has filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”)
The Issuer stated in its application that it has met the requirements of Amex Rule 18 by complying with all applicable laws in the State of Washington, in which it is incorporated, and with the Amex's rules governing an issuer's voluntary withdrawal of a security from listing and registration.
The Board of Directors (“Board”) of the Issuer unanimously approved a resolution on December 23, 2003 to withdraw the Issuer's Security from listing on the Amex and to list such Security on the OTC Bulletin Board. The Board states that the following reason factored into its decision to withdraw the Security from listing and registration on the Amex: on December 22, 2003, the Issuer received notice from the Exchange that the Issuer was not in compliance with the Exchange's continued listing standards pursuant to Sections 1003 and 1009 of the Exchange's Company Guide.
The Issuer's application relates solely to the withdrawal of the Securities from listing on the Amex and from registration under Section 12(b) of the Act
Any interested person may, on or before January 28, 2004, submit by letter to the Secretary of the Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609, facts bearing upon whether the application has been made in accordance with the rules of the Amex and what terms, if any, should be imposed by the Commission for the protection of investors. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Newtek Business Services, Inc., a New York corporation (“Issuer”), has filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”)
The Issuer stated in its application that it has met the requirements of Amex Rule 18 by complying with all applicable laws in the State of New York, in which it is incorporated, and with the Amex's rules governing an issuer's voluntary withdrawal of a security from listing and registration.
The Board of Directors (“Board”) of the Issuer unanimously approved a resolution on December 19, 2003 to withdraw the Issuer's Security from listing on the Amex. The Board states that the following reasons factored into its decision to withdraw the Security from listing and registration on the Amex and the apply to list its Security on the Nasdaq National Market System (“NMS”): (i) Listing on the NMS is likely to increase the visibility of the Issuer among investors, particularly institutional investors, and (ii) listing on the NMS will assist in the Issuer's efforts to attract additional analyst coverage for its Security and ultimately add to the value of the Issuer's Security by increasing the liquidity of the investment.
The Issuer's application relates solely to the withdrawal of the Securities from listing on the Amex and from registration under Section 12(b) of the Act
Any interested person may, on or before January 28, 2004, submit by letter to the Secretary of the Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609, facts bearing upon whether the application has been made in accordance with the rules of the Amex and what terms, if any, should be imposed by the Commission for the protection of investors. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Summit Securities, Inc., an Idaho corporation (“Issuer”), has filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”)
The Issuer stated in its application that it has met the requirements of Amex Rule 18 by complying with all
The Board of Directors (“Board”) of the Issuer unanimously approved a resolution on December 23, 2003 to withdraw the Issuer's Security from listing on the Amex and to list such Security on the OTC Bulletin Board. The Board states that the following reason factored into its decision to withdraw the Security from listing and registration on the Amex: On December 22, 2003, the Issuer received notice from the Exchange that the Issuer was not in compliance with the Exchange's continued listing standards pursuant to Sections 1003 and 1009 of the Exchange's Company Guide.
The Issuer's application relates solely to the withdrawal of the Securities from listing on the Amex and from registration under Section 12(b) of the Act
Any interested person may, on or before January 28, 2004, submit by letter to the Secretary of the Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609, facts bearing upon whether the application has been made in accordance with the rules of the Amex and what terms, if any, should be imposed by the Commission for the protection of investors. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
National Highway Traffic Safety Administration, DOT.
Notice.
In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Comments must be submitted on or before February 6, 2004.
Kevin Ball at the National Highway Traffic Safety Administration, Office of the Chief Information Officer, (NPO-400), 202-366-5649, 400 Seventh Street, SW., Room 6132, Washington, DC 20590.
National Highway Traffic Safety Administration
Send comments, within 30 days, to the Office of Information and Regulatory Affairs, Office of Management and Budget, 725-17th Street, NW., Washington, DC 20503, Attention NHTSA Desk Officer.
A Comment to OMB is most effective if OMB receives it within 30 days of publication.
Office of the Comptroller of the Currency (OCC), Treasury; Board of Governors of the Federal Reserve System; and Federal Deposit Insurance Corporation.
Notice.
The Federal Financial Institutions Examination Council (FFIEC), of which the agencies are members, has approved the agencies' publication of this notice announcing the voluntary testing and mandatory enrollment for a new method of submitting the Consolidated Reports of Condition and Income (Call Report; FFIEC 031 and 041). Testing will be conducted in three phases (a functional pilot, and end-to-end test, and a 100+ bank test), after which there will be mandatory global enrollment in the new system for all institutions that file the Call Report.
TESTING TIMEFRAME: Second and third quarters 2004.
OCC: John Ference, Acting OCC Clearance Officer, or Camille Dixon, (202) 874-5090, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
Board: Cynthia M. Ayouch, Board Clearance Officer, (202) 452-2204, Division of Research and Statistics, Board of Governors of the Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551. Telecommunications Device fort he Deaf (TDD) users may call (202) 263-4869.
FDIC: Steven F. Hanft, (202) 898-3907, Room MB-3064, Legal Division, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
Banks file Call Report data with the agencies each quarter for the agencies' use in monitoring the condition, performance, and risk profile of reporting banks and the industry as a whole. In addition, Call Report data provide the most current statistical data available for evaluating bank corporate applications such as mergers, for identifying areas of focus for both on-site and off-site examinations, and for monetary and other public policy purposes. Call Report data are also used to calculate all banks' deposit insurance and Financing Corporation assessments and national banks' semiannual assessment fees.
The FFIEC has contracted with the Unisys Corporation and its development team to build a Central Data Repository (CDR) for the collection, validation, and distribution of Call Report data submitted by banks. The FFIEC anticipates that implementation of the new CDR system will start with the Call Reports for September 30, 2004. Under this new system, all institutions will be required to file their Call Report data via the Internet using software that contains the FFIEC edits for validating Call Report data prior to submission. Call Report software vendors are currently modifying their software to incorporate these edits.
This notice announces the voluntary testing and mandatory enrollment for the new CDR System. As discussed below, the testing will be conducted in three phases (Functional Pilot, End-to-End Test, and 100+ Bank Test) and will be followed by a mandatory Global Enrollment phase.
• Functional Pilot: This testing phase would include fifteen banks beginning in approximately April 2004 and would use only test data (from the past five quarters). As part of this phase of testing each participating bank would be expected to sign a “Letter of Intent” signup system to set up user IDs and passwords. After enrollment the bank would work with its software vendor to install and test software that is compatible with the new CDR system. Simultaneously, the agencies would distribute testing instructions to each participating bank while the vendors distribute the new taxonomies and text data files to the banks. The banks would then prepare and submit their test Call Report data and subsequently participate in a validity edit failure resolution test. Finally, each bank would participate in feedback discussions regarding the results of the first phase of testing.
• End-to-End Test: This phase of testing would include thirty banks (the original fifteen banks plus fifteen additional banks) beginning in approximately May 2004, and would use both test data (from the past nine quarters) and a sample of the banks' actual data. The new banks would be required to complete the same procedures as the original banks in the Functional Pilot except for the enrollment portion, which would be completed through the Global Enrollment at a later time. At the commencement of phase two all thirty banks would have the new software release installed by the software. The banks would also participate in a test of the three helpdesks (software vendor helpdesks, CDR helpdesk, and Call Report Analyst assistance).
• 100+ Bank Test (Volume Test): This phase of testing would include 100 banks (the thirty banks from the End-to-End phase and seventy additional banks) beginning in approximately August 2004 and would use the banks' most recent quarter-end data. All participating banks would be required to complete the same procedures as were required in the first two test phases. In addition, this phase would require all participating banks to submit Call Report data twice, once via the legacy Electronic Data Systems Corporation process and once via the new CDR system. This type of testing is referred to as “side-by-side testing,” which enables the agencies to test whether identical and accurate results are received. Prior to the data transmission, banks will receive directions on the date and time for the submission of Call Report data to help ensure peak volume testing.* Global Enrollment: Enrollment will be available in approximately late August or early September 2004 for all banks. This phase is mandatory for all banks that file Call Report data with the agencies. (Only the original fifteen test banks that completed the enrollment process during the Functional Pilot will be fully exempt from the Global Enrollment.) Banks that participated in testing phases two and three would only be required to enroll (provide contact information and set up user IDs and passwords) via the CDR website. All other banks would be required to use the CDR website to enroll and download test data and would subsequently submit test Call Report data.
At the end of each testing phase the comments and recommendations received from the participating banks will be analyzed to determine the extent to which the FFIEC should modify the proposed testing and enrollment process.
[This signature page pertains to the joint notice]
Office of Surface Mining Reclamation and Enforcement, Interior.
Proposed rule.
We, the Office of Surface Mining Reclamation and Enforcement (OSM), are proposing to amend our regulations to accomplish two basic goals: Minimizing the adverse environmental effects stemming from the construction of excess spoil fills; and clarifying the circumstances in which mining activities, such as the construction of excess spoil fills, may be allowed within the stream buffer zone (SBZ),
More specifically, we intend to minimize the environmental effects from excess spoil fill construction by requiring that the coal operator demonstrate to the satisfaction of the regulatory authority that, to the extent possible, the volume of excess spoil is minimized; excess spoil fills associated with a mine are designed to be no larger than needed to accommodate the anticipated volume of excess spoil from that mine; alternative configurations for excess spoil disposal, including alternative sizes, numbers and locations of fill are considered; and the proposed excess spoil disposal plan minimizes, to the extent possible, adverse impacts to the prevailing hydrologic balance, fish, wildlife, and related environmental values.
We also propose to amend the regulation commonly referred to as the SBZ rule to more closely align with its basis in SMCRA and our experience in implementing the rule. These changes will require the applicant to demonstrate, to the satisfaction of the regulatory authority, that the mining operation has been designed, to the extent possible, to minimize impacts on hydrology, fish and wildlife, and related environmental values and to prevent additional contributions of sediment to streams prior to allowing mining within 100 feet of a perennial or intermittent stream. We intend to revise rule language that is evidently confusing, has given rise to divergent, conflicting interpretations, has led to litigation, and has raised concern over restrictions that are not required by SMCRA and that might conflict with regulations under the CWA.
Finally, we propose to amend our stream diversion regulation to comport with the proposed changes to the SBZ rule.
If you wish to comment, you may submit your comments on this proposed rule by one of three methods. You may mail or hand carry comments to the Office of Surface Mining Reclamation and Enforcement, Administrative Record, Room 101, 1951 Constitution Avenue, NW., Washington, DC 20240, or you may send comments via electronic mail to
If you wish to comment on the information collection aspects of this proposed rule, you may submit your comments to the Office of Management and Budget, Office of Information and Regulatory Affairs, Attention: Interior Desk Officer, via e-mail to
You may submit a request for a public hearing orally or in writing to the person and address specified under
David G. Hartos, Office of Surface Mining Reclamation and Enforcement, U.S. Department of the Interior, 3 Parkway Center, Pittsburgh, PA 15220; Telephone: 412-937-2909. E-mail address:
When coal is mined by surface mining methods, rock and soil that overlie the coal must be removed and stored temporarily outside of the immediate mining area. The rock is broken as it is removed, and the broken rock is referred to as “spoil.” Because the broken rock incorporates voids and air, spoil is less dense than undisturbed rock; so the volume of spoil removed during mining becomes greater than the volume of rock that was in place prior to mining. After coal removal, the mine operator returns the spoil to the mined-out area for reclamation.
The operator grades the spoil so that it closely resembles the pre-mining topography. We refer to this as returning
Regardless of whether an operator reclaims the mine to AOC or shapes it to support an alternative postmining land use, there are situations, particularly in steep terrain, where the volume of spoil is more than sufficient and more than is technically feasible to return to the mined-out area when reclaiming the site. Surplus spoil material disposed of in locations other than the mined-out area, except for material used to blend spoil with surrounding terrain in achieving AOC in non-steep slope areas, is referred to as “excess spoil”.
In Appalachia, on steep terrain, the mine operator may place the excess spoil either in adjacent valleys or on previously mined sites. Our rules at 30 CFR 816.71-74 provide flexibility in design and construction of several types of steep-slope fills: “valley”, “head-of-hollow”, and “durable rock”. Valley and head-of-hollow fills are limited by definition in 30 CFR 701.5 to steep slope areas (valley side slopes of greater than 20 degrees or valley profile [stream] gradient of greater than 10 degrees). Durable rock fills are not limited to steep slopes, but in practice have been the most common fill construction technique in steep slope areas.
Surface coal mining activities other than excess spoil fills may also involve disturbance of stream channels. Coal deposits underlie many streams at shallow depths, and mining activities routinely divert and relocate a watercourse to remove the coal.
Underground mining development involves excavating rock and soil on the surface to expose the coal seam and to provide access for people, equipment, and ventilation for the underground mining operation. This process is referred to as “facing up.” In steep terrain, excavated material from these “face-up” areas may result in small fills if the excavation is limited to providing coal seam access, or larger fills if facilities such as miners' bathhouses, office buildings, coal storage or coal preparation areas are needed. Some face-up fills are constructed on valley hillsides, and other face-up fills must be placed in adjacent valleys. Underground mining may also involve excavating non-coal waste rock underground. Because underground mining typically brings this waste rock material to the surface, the mine operator typically constructs fills to accommodate the material.
The mine operator may have to place fill in small streams adjacent to the preparation facility or within embankments or impoundments, in order to dispose of coal waste from the cleaning and preparation of coal. Similarly, the operator of a preparation facility may need an impoundment in an adjacent stream valley for withdrawal of cleaning process water. In order to minimize sedimentation and comply with CWA or State effluent standards, an operator of a surface or underground coal mine may need to place sediment control structures or ponds in streams below the mine.
Because of such mining necessities, SMCRA and the implementing regulations on protecting the hydrologic balance and on other subjects, recognize that certain stream impacts may be necessary during coal mining. However, such impacts must be carefully and thoughtfully evaluated, planned for, and minimized to assure the environment is protected during and after mining.
Section 201(c)(2) of SMCRA, 30 U.S.C. 1211(c)(2), directs the Secretary of the Interior (the Secretary), acting through OSM, to publish and promulgate such rules and regulations as may be necessary to carry out the purposes and provisions of SMCRA. Section 501(b) of SMCRA, 30 U.S.C. 1251(b), directs the Secretary to “promulgate and publish in the
Since the early 1970's, large-scale surface mining has become a more prevalent means of coal extraction in the central Appalachian coalfields. Most surface coal mining in the mountainous terrain of central Appalachian coalfields unavoidably generates excess spoil. This excess spoil is often placed in the upper reaches of valleys adjacent to the mine. In the Appalachian coalfields, even the upper reaches of valleys may contain stream channels or watercourses with continual (perennial) or intermittent flow. For example, the United States Geologic Survey studied a sample of streams in West Virginia and found that, on average, perennial streams may begin in watersheds of 40.8 acres and intermittent streams in watersheds of 14.5 acres. [Paybins, 2003, p.1 (citations in this preamble to the reference materials listed at I.C. of the preamble, are set out in brackets)].
An OSM inventory of fills in the central Appalachian coalfields (eastern Kentucky, Tennessee, southwestern Virginia and southern West Virginia) identified about 5700 excess spoil fills constructed between 1985 and 2001. [U.S. Environmental Protection Agency (USEPA), 2003, p. III. K-15] Spoil from these fills covered approximately 1.2 percent of the small streams (724 of the estimated 59,000 miles of streams) in the inventory region. [
As the population and the cumulative surface extent of surface mines and excess spoil fills have increased, so have the concerns regarding the adverse environmental effects from the construction of excess spoil fills. In the summer of 1998, the West Virginia Highlands Conservancy—an environmental organization—and several citizens filed suit in Federal court against the West Virginia Division of Environmental Protection (WVDEP) alleging that the State was not administering its SMCRA-based coal regulatory program in compliance with State requirements.
In addition to suing the WVDEP, the plaintiffs in
In December 1998, the parties reached an agreement, which addressed all outstanding counts directed at the USCOE in
The agencies designed the EIS to consider developing agency policies, guidance, and coordinated agency decision-making processes to minimize the adverse effects stemming from mountaintop mining/valley fills in the Appalachian coalfields. The agencies released the draft EIS for public comment on May 29, 2003.
While work towards finalizing that EIS continues, we recognized the need to revise and clarify our national rules to address environmental effects from the construction of excess spoil fills.
As part of our oversight activities and separate from the EIS, we conducted studies in Kentucky, Virginia and West Virginia to determine how the regulatory authorities were administering SMCRA programs regarding AOC and postmining land use requirements. [USDOI-OSM, May 1999; USDOI-OSM, September 1999; USDOI-OSM, May 2000] When we examined permit files and reclaimed mines, we found it difficult to distinguish between the reclamation configuration of mines that were not to be reclaimed to AOC and the reclamation configuration of mines that were to be reclaimed to AOC. There were no clear differences in the number and size of the excess spoil fills, although we anticipated that non-AOC mines would typically have larger or more numerous fills. We determined that typically, coal mine operators could have retained more spoil on mined-out areas under applicable AOC requirements than they were actually retaining.
We also found that, in many instances, coal mine operators were overestimating the anticipated volume of excess spoil. As a result, we concluded that coal companies were designing fills larger than necessary to accommodate the anticipated excess spoil. Where fills are larger than needed, more land outside the coal extraction area is disturbed than is necessary. We attributed these problems, in part, to inadequate regulatory guidance. Therefore, we recommended that each regulatory authority work with us to develop enhanced guidance on material balance determinations, spoil management, and AOC. Kentucky, Virginia and West Virginia have developed such guidance; we also developed such guidance for the Tennessee Federal program. We continue to review the implementation and effectiveness of this guidance.
Most excess spoil is attributed to surface mining in the steep terrain of the central Appalachian coalfields, and we commend Kentucky, Virginia and West Virginia for their improvements in addressing AOC and the volume of excess spoil. However, we believe there is also a need to revise the national regulations concerning excess spoil placement, because surface mining throughout the country may generate excess spoil. Our existing regulations pertaining to excess spoil fill construction are primarily focused on ensuring that fills are safe and stable. However, these regulations, with minor exceptions, do not explicitly address how the applicants must demonstrate consideration and minimization of the environmental effects of fill construction.
Existing regulatory requirements primarily address the need to ensure that excess spoil fills are not subject to erosion, are stable, and do not cause landslides or washouts. However, SMCRA section 515(b)(22)(I) requires that operators place all excess spoil material so that all other provisions of SMCRA are met. Under this requirement, hydrologic balance, water quality, revegetation, and other performance standards must be addressed in excess spoil design and construction plans.
Accounting for the volume of excess spoil material is standard engineering practice in mine design, and is clearly envisioned by section 515(b)(3) of SMCRA. Concerning thick overburden, this section requires the operator to demonstrate that, due to volumetric expansion of the overburden and other spoil and waste material, more than sufficient material is available to reclaim the site to AOC. In response to a comment on the proposed rule adopted in 1983 on thick overburden performance standards, at 30 CFR 816.105, we stated:
In a thick-overburden situation the operator must meet all of the performance standards of the rules except that the operator, after achieving AOC, may exceed the AOC requirement. The amount of excess overburden is a site-specific condition and easily documented. Therefore, each permit application requesting consideration under this section should be evaluated by the regulatory authority.
For all of the above reasons, we believe that national rulemaking is needed to make explicit the requirements that the volume of excess spoil be minimized by returning as much mine spoil to the mined out area as possible, and that excess spoil fills be designed and constructed to minimize the adverse effects to the hydrologic balance, fish, wildlife, and other environmental resources.
There is no provision in SMCRA requiring establishment or protection of stream buffer zones. We adopted the concept of a “buffer zone” around intermittent and perennial streams as a means “to protect stream channels from abnormal erosion” from nearby upslope mining activities. 42 FR 62652 (December 13,1977).
The current Federal SBZ rule has been in effect since June 30, 1983. State regulatory programs include similar requirements. These SBZ requirements were implemented for nearly twenty years before the
In addition to the concerns expressed in
The plaintiffs also argued that valley fills (excess spoil fills) violate the SBZ requirements because such fills bury and destroy substantial portions of intermittent or perennial streams. Plaintiffs contended that, by their very nature, such fills adversely affect the normal flow or gradient of the stream, adversely affect fish migration and related environmental values, materially damage the water quantity and quality of the stream, and cause or contribute to violations of applicable State water quality standards in the segment of the stream actually filled.
In reply to plaintiffs' allegations in
In August 1999, USEPA, USCOE, OSM, and WVDEP signed a memorandum of understanding (MOU) to clarify the application of the SBZ regulations to the placement of excess spoil fills in waters of the United States. The agencies agreed that the CWA section 404(b)(1) Guidelines (40 CFR Part 230), promulgated by USEPA and used by USCOE in administering the CWA section 404 program, contain requirements comparable to the SBZ regulations. For example, the Guidelines require, among other things, that a discharge shall not be authorized if it will cause or contribute to a violation of State water quality standards or result in significant degradation of waters of the U.S. (40 CFR 230.10(b) and (c)). The MOU states that OSM and WVDEP believe that, if a proposed fill is consistent with the requirements of the CWA section 404(b)(1) Guidelines and applicable requirements for State certification under CWA section 401, the proposed mining operation has satisfied the requirements for a buffer zone waiver under SMCRA and WVDEP regulations.
On October 20, 1999, Judge Haden issued a decision in
The October 20, 1999, decision in
The district court granted summary judgment for the plaintiffs on the SBZ issues, and held that the Director of WVDEP has a non-discretionary duty under the buffer zone rule to deny variances for valley fills in intermittent and perennial streams because they necessarily adversely affect stream flow, stream gradient, fish migration, related environmental values, water quality and quantity, and because they violate State and Federal water quality standards. He also granted the plaintiffs' motion to permanently enjoin the Director of WVDEP from further violations of the non-discretionary duties discussed above and from approving any further surface mining permits under current law that would authorize placement of excess spoil in intermittent and perennial streams for the purpose of waste disposal.
On October 21, 1999, the Director of WVDEP issued an order that no new fill permits would be issued, and no existing fills or permitted fills could be advanced. The coal industry and labor officials expressed considerable concern about the
WVDEP and USCOE appealed Judge Haden's October 1999 decision and order, and were granted a temporary stay of the order pending a decision by the Court of Appeals for the Fourth Circuit. October 29, 1999, Memorandum Opinion and Order Granting Stay at 5,
The U.S. Department of Justice (DOJ) filed a brief on behalf of Federal Appellants in the
The district court also correctly granted summary judgment on Count 3, holding that the burial of substantial portions of intermittent or perennial streams in valley fills causes adverse environmental impact in the filled stream segments and therefore cannot be authorized consistent with the stream buffer zone rule. The uncontested evidence demonstrates that the burial of substantial portions of intermittent or perennial streams causes adverse environmental effects to the filled stream segments, as such fill eliminates all aquatic life that inhabited those segments.
April 17, 2000, Brief for the Federal Appellants at 25, filed in
However, DOJ qualified the Government's endorsement of the district court's remedy:
By prohibiting the placement of any excess spoil in intermittent or perennial streams, the district court stripped WVDEP of authority to approve much more modest spoil disposal activities than those challenged by Bragg. The district court's injunction prohibits even minor spoil disposal activities that do not involve the filling of stream segments. Indeed, the district court's injunction would prohibit the placement of even
OSM was not a party to the
Nonetheless, because of the DOJ brief, on April 17, 2000, the Solicitor of the Department of the Interior and the acting Director of OSM sent a letter to the Director of WVDEP informing WVDEP that the August 1999 MOU does not represent the Federal government's current interpretation of the SBZ rule. The letter stated that the Department had reconsidered its position and no longer felt compliance with CWA 404(b)(1) guidelines and CWA 401 certification equated to compliance with the SBZ requirements.
On May 22, 2000, the acting Director of OSM sent letters to the regulatory authorities in Kentucky, Virginia and West Virginia. The letters stated that OSM would develop guidance to explain that findings made in applying the CWA section 404(b)(1) Guidelines cannot be used as a substitute for the finding required to grant a SBZ waiver for the disposal of excess spoil in intermittent or perennial streams. The letter further advised that the guidance would state that the SBZ waiver finding must be applied to each segment of an intermittent or perennial stream in which fill will be placed.
The acting Director of OSM went on to say in the May 22, 2000, letter:
Pending completion and issuance of that guidance, we believe that permitting decisions regarding whether an activity is entitled to a waiver of the buffer zone requirement must be made on a case-by-case basis, as a part of the stream buffer zone analysis for activities impacting either an intermittent or a perennial stream. This analysis must consider all factors identified in the approved SMCRA program for granting the waiver, including the SBZ regulation found at 30 CFR 816.57.
Neither the brief filed on April 17, 2000, nor the May 22, 2000, letter from the acting Director of OSM to certain regulatory authorities precludes us from reconsidering those interpretations based on the entire record before us, including subsequent developments in
On April 24, 2001, the Court of Appeals for the Fourth Circuit overturned the district court's October 20, 1999, decision in
In two later opinions, Judge Haden again addressed the relationship between the SBZ regulation and the CWA in
In SMCRA, when Congress dealt specifically with surface coal mining overburden, it reinforced its plan that fills were appropriate where, and only where, they were justified by some constructive end use and purpose served by the fill itself. Otherwise, such overburden is just waste, to be returned to the mine site to recreate the AOC of the landscape mined. SMCRA contains no provisions authorizing disposal of overburden waste in streams, a conclusion further supported by the stream buffer zone rule.
These opinions were appealed. The Court of Appeals for the Fourth Circuit rejected the district court's comments on the SBZ rule, noting that:
[R]egardless of whether the fill has a beneficial purpose, SMCRA does not prohibit the discharge of surface coal mining excess spoil in waters of the United States.
The appeals court further stated:
Indeed, it is beyond dispute that SMCRA recognized the possibility of placing excess spoil material in waters of the United States even though those materials do not have a beneficial purpose. Section 515(b)(22)(D) of SMCRA authorizes mine operators to place excess spoil material in “springs, natural water courses or wet weather seeps” so long as “lateral drains are constructed from the wet areas to the main underdrains in such a manner that filtration of the water into the spoil pile will be prevented.” 30 U.S.C. 1265(b)(22)(D). In addition, section 515(b)(24) requires surface mine operators to “minimize disturbances and adverse impacts of the operation on fish, wildlife, and related environmental values, and achieve enhancement of such resources where practicable,” implying the placement of fill in the waters of the United States. 30 U.S.C. 1265(b)(24). It is clear that SMCRA anticipates the possibility that excess spoil material could and would be placed in waters of the United States, and the fact cannot be juxtaposed with section 404 of the Clean Water Act to provide a clear intent to limit the term “fill material” to material deposited for a beneficial primary purpose.
In light of all the questions and concerns that have been raised concerning SBZ requirements, we are proposing amendments to the SBZ rule to clarify the circumstances in which mining activities such as the construction of excess spoil fills may be allowed within the SBZ.
As previously explained, there are no provisions in SMCRA requiring establishment or protection of a stream buffer zone. We adopted the concept of a “buffer zone” around intermittent and perennial streams
No land within 100 feet of an intermittent or perennial stream shall be disturbed by surface coal mining and reclamation operations unless the regulatory authority specifically authorizes surface coal mining and reclamation operations through such a stream. The area not to be disturbed shall be designated a buffer zone and marked as specified in § 715.12.
The 1977 regulation, which is still in effect, does not specify the conditions under which the regulatory authority could waive the SBZ requirement. We confirmed in the preamble to the 1977 rule that, “if operations can be conducted within 100 feet of a stream in
We published our permanent program regulations in the
We explained in the preamble to the 1979 final rule: “Buffer zones are required to protect streams from adverse effects of sedimentation and from gross disturbance of stream channels.” 44 FR 15176 (March 13, 1979) The bulk of the discussion in that preamble focused on protecting streams from sedimentation.
The 1979 SBZ rule specified conditions under which the regulatory authority could grant an exemption to the SBZ restriction. The permanent program rule also replaced the term “intermittent stream” with “stream with a biological community.” The 1979 permanent program rule provided that, in order to grant an exemption from the SBZ restriction, the regulatory authority had to find:
(1) That the original stream channel will be restored; and
(2) During and after the mining, the water quantity and quality from the stream section within 100 feet of the surface mining activities shall not be adversely affected.
It is important to note that the second finding required for granting an SBZ waiver requires the regulatory authority to evaluate effects on water quantity and quality, not at the location of the mining activity, but within 100 feet of the activity. This concept was not expressly retained in the 1983 version of the SBZ rule. However, the 1983 rule language does not preclude OSM's practice since 1979 of not requiring evaluation of effects on the segment of stream directly affected by surface mining activities. Instead, when acting on waivers for the buffer zone, OSM has required an evaluation of the effects anticipated within the stream section within 100 feet downstream of the surface mining activities, and outside the area affected by surface mining activities.
On March 30, 1982, our current SBZ regulations were published in the
The 1983 amendments reinstated use of the term “intermittent stream” in place of “streams with a biological community.” The amended regulation also changed the conditions for authorizing an exemption to the SBZ restriction, to require that:
(1) Surface mining activities will not cause or contribute to the violation of applicable State or Federal water quality standards, and will not adversely affect the water quantity and quality or other environmental resources of the stream; and
(2) If there will be a temporary or permanent stream channel diversion, it will comply with § 816.43.
We reaffirmed the basic purpose of the SBZ rule in the preamble to the June 30, 1983, amendments: to protect streams from sedimentation and from gross disturbances of the stream channel. We said that SBZs are effective means, in conjunction with sediment ponds and other measures, to prevent excessive sedimentation of streams by runoff from disturbed surface areas. We also said that the new rules recognize that intermittent and perennial streams have environmental resource values worthy of protection under section 515(b)(24) of SMCRA. 48 FR 30312 (June 30, 1983).
Several commenters recommended that a new phrase in the March 1982 proposed rule “as determined by State or Federal water quality standards” be deleted or clarified. To address the commenters' concerns and to eliminate regulatory uncertainty, we adopted the phrase “will not cause or contribute to violation of applicable State or Federal water quality standards.” We explained that operators would be required to comply with all “non-Act requirements for water” protection under proposed hydrologic balance protection regulations at § 816.41 (§ 816.41 was proposed in the
In the preamble to the 1983 final rule, our response to a comment indirectly elaborated on the requirement that SMCRA mining operations “will not adversely affect the water quantity and quality or other environmental resources of the stream.” We implicitly recognized that this condition does not require that “no adverse” effects occur, but rather requires that these effects be minimized, when we stated:
Alteration of streams may have adverse aquatic and ecological impacts on both diverted stream reaches and other downstream areas. However, final § 816.57(a) will minimize these impacts* * *
Finally, in response to a comment on the 1983 SBZ rule, we explained that the clause “will not adversely affect * * * related environmental resources” was added to the conditions for a SBZ exemption to more accurately reflect the objectives of sections 515(b)(10) and (24) of SMCRA. 48 FR 30316 (June 30, 1983).
The January 1983 final environmental statement “OSM-EIS-1: Supplement” provided the NEPA support for the 1983 SBZ rule. The following excerpt illustrates our recognition that some small streams would be impacted by mining under the revised SBZ rule:
The draft final regulations on the stream buffer zone (section 816.57) would provide essentially the same protection to water quality of streams as the current regulations. The draft final regulations, however, would provide protection to perennial and intermittent streams, whereas, the current regulations protect perennial streams and streams with a biological community. The
In the 1983 EIS, we went on to discuss the impacts of more environmentally protective alternatives to the 1983 SBZ rule:
OSM could eliminate the exemption from the general stream buffer zone requirements (section 816.57), and all mining would be prohibited within 100 feet of any perennial or intermittent stream. Although this would provide maximum protection to streams, the potential impacts on coal recovery could be significant in those areas with large coal reserves and extensive water resources.
OSM could redefine “intermittent stream” in current section 701.5.
This definition is not being revised under the preferred alternative. A broader definition of intermittent stream consistent with that of the Army Corps of Engineers' definition would allow regulatory authorities to protect smaller streams (those draining less than 1 square mile) with buffer zones where necessary. This would mitigate the potential impacts identified for the draft final regulations on stream buffer zones.
These paragraphs further illustrate that we did not intend the SBZ rule as an absolute prohibition of mining in the buffer zone. It also shows that we did not anticipate regulatory authorities to apply the SBZ to watercourses in small watersheds (less than 1 square mile).
The 1983 SBZ rule was challenged in U.S. District Court, District of Columbia, by both the coal industry and the National Wildlife Federation and successfully defended by OSM.
For convenience, where the discussion concerns the SBZ regulation at 30 CFR 816.57 (surface mining) and 30 CFR 817.57 (underground mining), or the regulation pertaining to diversions at 30 CFR 816.43 (surface mining) and 30 CFR 817.43 (underground mining), these sections are cited together in the heading as §§ 816.[ ]/817.[ ], but in most cases only part 816 is referenced in the text. The changes to permitting requirements in part 780 and the performance standards in § 816.71 would apply only to surface mines, and corresponding changes to the regulations for underground mines are not being proposed. We decided not to propose changes to the excess spoil regulations applicable to underground mining because the current regulations in this regard are satisfactorily working, and the size and number of excess spoil fills associated with underground mining are small.
Section 780.18(b)(3) requires a permit application to contain a plan for backfilling, soil stabilization, compacting and grading, with contour or cross-section maps that show the anticipated final surface configuration of the proposed permit area, in accordance with the applicable performance standards. Authority for this section stems from SMCRA sections 507(b)(14), 508(a)(5) and (10), 515(b)(3) through (6), (8), (10), (11), (13), (17), and (22).
In essence, § 780.18(b)(3) requires that the application show how all spoil and soil from the mine site will be managed. While excess spoil is not specifically discussed, it would certainly be integral to, and encompassed by, this plan. Because of the growing concerns regarding the volume of excess spoil and the size of excess spoil fills, we propose to amend this regulation to require the applicant to include sufficient supporting information in the plan to demonstrate, to the satisfaction of the regulatory authority, that the applicant has taken necessary steps to avoid the generation of excess spoil and has minimized the volume of excess spoil to the maximum extent possible. Minimizing the volume of excess spoil is fundamentally important to ensure that adverse environmental effects stemming from the construction of excess spoil fills are minimized.
Section 780.35 requires the operator provide necessary plans describing the sites and structures to be used in the disposal of excess spoil. Section 780.35(a) states:
Each application shall contain descriptions, including appropriate maps and cross section drawings, of the proposed disposal site and design of the spoil disposal structures according to 30 CFR 816.71-816.74. * * *
The authority for § 780.35 is sections 102, 210, 501, 503, 507, 508, 510, and 515 of SMCRA. Principally, this section establishes the overall requirements for a plan for handling excess spoil in compliance with the performance standards at section 515(b)(22) of SMCRA. Section 816.71 establishes the general performance standards to implement section 515(b)(22).
We propose to further strengthen regulations at § 780.35 and § 816.71 to more explicitly address the direct impacts associated with excess spoil fill construction. In § 780.35, we propose requiring that each permit application (for which excess spoil is anticipated) contain alternative analyses of the environmental impacts of constructing fills in different locations and under different configurations, with different sizes and numbers of fills to accommodate the excess spoil. OSM anticipates that this analysis will
In § 816.71, we propose to add a requirement in subsection (c)(2) to ensure that fills are located so as to minimize, to the extent possible, adverse impacts to the prevailing hydrologic balance, fish, wildlife, and related environmental values (after considering alternative fill locations, sizes, and numbers). In addition, § 816.71 would be revised to add a required demonstration that cumulative volume of fill for an operation is no larger than necessary to accommodate the cumulative volume of excess spoil from the operation. The purpose of this latter change is to make it clear that operators should not design excess spoil fills to be inordinately oversized, and to require operators to minimize the area disturbed by spoil fill, in relation to the volume of excess spoil disposed. As the operator decreases the size of the fill footprint, the operator will reduce the extent to which fills cover stream reaches. Decreasing the fill footprint will also reduce the area of forest and riparian vegetation disturbed.
In order to reduce the regulatory uncertainty regarding the interpretation of our SBZ requirements, we propose to revise the language that has led to varying interpretations. The proposed language aligns more closely with the statutory basis for the SBZ rule. The existing SBZ rule for surface mining activities is found at 30 CFR 816.57. The SBZ rule for underground mining is found at 30 CFR 817.57. We are proposing essentially the same changes for both regulations. The SBZ rule for surface mining activities provides:
30 CFR 816.57 Hydrologic balance: Stream buffer zones.
(a) No land within 100 feet of a perennial stream or an intermittent stream shall be disturbed by surface mining activities, unless the regulatory authority specifically authorizes surface mining activities closer to, or through, such a stream. The regulatory authority may authorize such activities only upon finding that—
(1) Surface mining activities will not cause or contribute to the violation of applicable State or Federal water quality standards, and will not adversely affect the water quantity and quality or other environmental resources of the stream; and
(2) If there will be a temporary or permanent stream-channel diversion, it will comply with § 816.43.
(b) The area not to be disturbed shall be designated as a buffer zone, and the operator shall mark it as specified in § 816.11.
We propose to revise the language of paragraph (a)(1) above by requiring two findings by the regulatory authority that would be conditions for granting an SBZ waiver. The first finding would be that the surface mining activities will “prevent, to the extent possible using best technology currently available (BTCA), additional contributions of suspended solids to the stream section within 100 feet downstream of the surface mining activity, and outside of the area of the surface mining activity.”
We believe that the first condition comports with a principal goal of the SBZ rule that has been stated throughout the history of the rule: to protect streams outside of the mining permit area from sedimentation. The change would align with the requirement of SMCRA section 515(b)(10)(B)(i) that the operation: “prevent, to the extent possible using the best technology currently available, additional contributions of suspended solids to stream flow, or runoff outside the permit area.” This change would also make the SBZ rule more consistent with other SMCRA regulations, as well as with the CWA. For example, the proposed language would be more consistent with 30 CFR 816.41(a), which states:
All surface mining and reclamation activities shall be conducted to minimize disturbance to the hydrologic balance within the permit and adjacent areas, to prevent material damage to the hydrologic balance outside of the permit area * * *
Further, the proposed change would not affect, but would eliminate redundancy with, the requirements of 30 CFR 816.42, which would continue to apply to surface mining activities. Section 816.42 requires that:
Discharges of water from areas disturbed by surface mining activities shall be made in compliance with applicable State and Federal water quality laws and regulations and with effluent limitations for coal mining promulgated by the U.S. Environmental Protection Agency set forth in 40 CFR 434.
The change would have no effect on a mining operator's obligation to comply with other statutes, such as the CWA. The proposed change is intended to avoid the possibility that the SBZ rule could be misinterpreted to supersede the CWA by prohibiting an activity because of water quality standards that would otherwise be authorized under the CWA. Thus, the proposed rule would also be consistent with section 702 of SMCRA (30 U.S.C. 1292), which requires that nothing in SMCRA “shall be construed as superseding, amending, modifying, or repealing” the CWA or “any rule or regulation promulgated thereunder.”
The second condition would require a regulatory authority finding that the surface mining activities will “minimize, to the extent possible using BTCA, disturbances and adverse impacts on fish, wildlife, and other related environmental values.” This change more closely aligns with SMCRA section 515(b)(24), which provides:
[T]o the extent possible using the best technology currently available, minimize disturbances and adverse impacts of the operation on fish, wildlife and related environmental values * * *
It is virtually impossible to conduct mining activities within 100 feet of an intermittent or perennial stream without causing some adverse impacts, even if those impacts are very small. We believe SMCRA recognizes that an absolute standard of “no adverse impacts” is unattainable. This is reflected in the fact that SMCRA in most cases requires the mining operation to minimize, rather than completely prevent, adverse environmental impacts. We invite comment on this position.
The history of the rule shows that we recognized some adverse impacts would occur at the site of the mining activity in the stream buffer zone. For example, in the analyses of the projected impacts associated with the 1983 rule, we assumed that streams occurring in small watersheds (less than 1 square mile) might be adversely impacted by mining, even though we knew that many of these streams would be likely to come within the definition of “intermittent” or “perennial” streams. Therefore, in this proposed rule, rather than prohibiting any adverse impacts, we would require that these impacts be minimized to the extent possible using the best technology currently available,
The Federal regulations at 30 CFR 701.5 define “best technology currently available” to mean:
* * * equipment, devices, systems, methods, or techniques which will (a) prevent, to the extent possible, additional contributions of suspended solids to stream flow or runoff outside the permit area, but in no event result in contributions of suspended solids in excess of requirements set by applicable State or Federal laws; and (b) minimize, to the extent possible, disturbances and adverse impacts on fish, wildlife and related environmental values, and achieve enhancement of those resources where practicable. The term includes equipment, devices, systems, methods, or techniques, which are currently available anywhere as determined by the Director, even if they are not in routine use. The term includes, but is not limited to, construction practices, siting requirements, vegetative selection and planting requirements, animal stocking requirements, scheduling of activities and design of sedimentation ponds in accordance with 30 CFR parts 816 and 817. Within the constraints of the permanent program, the regulatory authority shall have the discretion to determine the best technology currently available on a case-by-case basis, as authorized by the Act and this chapter.
We would expect that the regulatory authority would authorize a waiver of the SBZ requirements only if information and analysis in the permit application record demonstrates to the satisfaction of the regulatory authority that (1) the proposed volume of excess spoil would be minimized, (2) proposed excess spoil fills associated with a mine would be no larger than needed to accommodate the volume of spoil from the mine, and (3) alternative fill locations, sizes, and numbers have been analyzed and the proposed excess spoil disposal plan incorporates the alternatives that cause the least environmental harm. Further, we would expect that the regulatory authority, in performing these reviews and making findings, would consider all applications of BTCA that would minimize adverse impacts, consistent with the definition of BTCA at 30 CFR 701.5. This type of analysis complements the “no practical alternative” requirements for CWA section 404 applicants.
Although it was vacated on procedural grounds, the opinion rendered by the district court in
The current version of the regulation concerning the diversion of perennial and intermittent streams at § 816.43(b)(1) refers to the findings that the regulatory authority is required to make under the SBZ regulations:
Diversion of perennial and intermittent streams within the permit area may be approved by the regulatory authority after making the finding relating to the stream buffer zones that the diversion will not adversely affect the water quantity and quality and related environmental resources of the stream.
To comport with the proposed SBZ regulation and to eliminate redundancy, we propose to revise the above language by striking the words “that the diversion will not adversely affect the water quantity and quality and related environmental resources of the stream.” As noted above, other provisions of SMCRA and the implementing regulations address impacts of the mining operation on water quality and quantity.
Except for comments provided in an electronic format, you should submit three copies of your comments if practicable. We will not consider anonymous comments. Comments received after the close of the comment period (see
We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public inspection in their entirety.
Any person interested in participating in a hearing should inform Mr. David G. Hartos (see
The public hearing will continue on the specified date until all persons scheduled to speak have been heard. If you are in the audience and have not
This proposed rule is not a “significant regulatory action” under Executive Order 12866 for the following reasons:
a. This rule would not have an annual effect of $100 million or more on the economy. It would not adversely affect in a material way the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or Tribal governments or communities. As previously stated, the revisions contained in the rule are intended to clarify existing requirements to: (1) Minimize the adverse environmental effects stemming from the construction of excess spoil fills; and (2) reduce regulatory uncertainty concerning the circumstances in which mining activities, such as the construction of excess spoil fills, may be allowed within 100 feet of a perennial or intermittent stream. The revisions are not expected to have an adverse economic impact on States and Indian Tribes or the regulated industry.
Some of the regulatory changes will result in an increase in the costs and burdens placed on coal operators and on some primacy States. It is estimated that the total annual increase for operators would be approximately $240,500, and for the primacy States the total annual increase is estimated at approximately $24,200. These increases are due to the requirement to document the analyses and findings required by these regulatory changes. The estimated increase in costs will likely only affect those coal operators and States (Kentucky, Virginia, and West Virginia) located in the steep slope terrain of the central Appalachian coalfields, where the bulk of excess spoil is generated. Because all of the regulatory agencies in the Appalachian coalfields have implemented policies to minimize the volume of excess spoil, no significant additional costs of implementing these regulatory changes are anticipated other than those required to document the strengthened requirements to consider all alternative excess spoil construction and disposal sites. This rule would not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency.
b. This rule would not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency.
c. This rule would not alter the budgetary effects of entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients.
d. This rule would clarify existing regulatory requirements and does not raise novel legal or policy issues arising from legal mandates, Presidential priorities, or the principles set forth in the Executive Order.
This rule is not considered a significant energy action under Executive Order 13211. The revisions contained in this rule would not have a significant effect on the supply, distribution, or use of energy.
The Department of the Interior certifies that this rule would not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule, for the reasons stated above:
a. Would not have an annual effect on the economy of $100 million or more.
b. Would not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions.
c. Would not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises.
This rule would not impose an unfunded mandate on State, local, or Tribal governments or the private sector of more than $100 million per year. The rule would not have a significant or unique effect on State, Tribal, or local governments or the private sector. A statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1534) is not required.
In accordance with Executive Order 12630, the rule would not have significant takings implications.
In accordance with Executive Order 13132, the rule would not have significant Federalism implications to warrant the preparation of a Federalism Assessment for the reasons discussed above.
In accordance with Executive Order 12988, the Office of the Solicitor has determined that this rule would not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Order.
In accordance with Executive Order 13175, we have evaluated the potential effects of this rule on Federally recognized Indian Tribes and have determined that the proposed revisions pertaining to excess spoil and the stream buffer zone would not have substantial direct effects on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and
In accordance with 44 U.S.C. 3507(d), OSM has submitted the information collection and record keeping requirements of 30 CFR parts 780, 816 and 817 to the Office of Management and Budget (OMB) for review and approval.
Comments are invited on:
(a) Whether the proposed collection of information is necessary for the proper performance of OSM and State regulatory authorities, including whether the information will have practical utility;
(b) The accuracy of OSM's estimate of the burden of the proposed collection of information;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(d) Ways to minimize the burden of collection on the respondents.
Under the Paperwork Reduction Act, OSM must obtain OMB approval of all information and recordkeeping requirements. No person is required to respond to an information collection request unless the form or regulation requesting the information has a currently valid OMB control (clearance) number. These numbers appear in sections 780.10, 816.10, and 817.10 of 30 CFR parts 780, 816, and 817, respectively. To obtain a copy of OSM's information collection clearance requests, explanatory information, and related forms, contact John A. Trelease at (202) 208-2783 or by e-mail at
By law, OMB must respond to OSM within 60 days of publication of this proposed rule, but may respond as soon as 30 days after publication. Therefore, to ensure consideration by OMB, you must send comments regarding these burden estimates or any other aspect of these information collection and recordkeeping requirements by February 6, 2004, to the Office of Management and Budget, Office of Information and Regulatory Affairs, Attention: Interior Desk Officer, via e-mail to
We have prepared a draft environmental assessment (EA) of the proposed rule in accordance with the National Environmental Policy Act of 1969 and have made a tentative determination that this rule will not significantly affect the quality of the human environment. It is anticipated that a finding of no significant impact (FONSI) will be made for the final rule in accordance with Departmental procedures under NEPA. The EA is on file in our administrative record at the address specified previously
Executive Order 12866 requires each agency to write regulations that are easy to understand. We invite your comments on how to make this proposed rule easier to understand, including answers to questions such as the following: (1) Are the requirements in the proposed rule clearly stated? (2) Does the proposed rule contain technical language or jargon that interferes with its clarity? (3) Does the format of the proposed rule (grouping and order of sections, use of headings, paragraphing, etc.) aid or reduce its clarity? (4) Would the rule be easier to understand if it were divided into more (but shorter) sections (A “section” appears in bold type and is preceded by the symbol “§ ”and a numbered heading; for example, § 780.18 Reclamation Plan: General Requirements. (5) Is the description of the proposed rule in the
Reporting and record keeping requirements, Mines, Surface mining, Reclamation, Excess Spoil.
Environmental protection, Reporting and record keeping requirements, Mines, Surface mining, Reclamation, Excess spoil, Diversions, Stream buffer zone.
Environmental protection, Reporting and record keeping requirements, Mines, Underground mining, Reclamation, Excess spoil, Diversions, Stream buffer zone.
Accordingly, we propose revising 30 CFR parts 780, 816, and 817 as set forth below.
1. The authority citation for Part 780 continues to read as follows:
30 U.S.C. 1201
2. Section 780.10 is revised to read as follows:
(a) The collections of information contained in Part 780 have been approved by the Office of Management and Budget under 44 U.S.C. 3501
(b) Public Reporting Burden for this information is estimated to average 29 hours per response and non-labor costs of $8,855.00, including 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 collection of information, including suggestions for reducing the burden, to the Information Collection Clearance Officer, Office of Surface Mining Reclamation and Enforcement, 1951 Constitution Ave., NW., SIB 210, Washington, DC 20240. Please refer to OMB Control Number 1029-xxx1 in any correspondence.
3. In § 780.18 revise paragraph (b)(3) to read as follows:
(b) * * *
(3) A plan for backfilling, soil stabilization, compacting, and grading, with contour maps or cross sections that show the anticipated final surface configuration of the proposed permit area, in accordance with 30 CFR 816.102 through 816.107. If excess spoil is anticipated, the plan must demonstrate to the satisfaction of the regulatory authority that the volume of excess spoil will be minimized to the maximum extent possible;
4. In § 780.35, redesignate paragraphs (b) and (c) as paragraphs (c) and (d) and add new paragraph (b) to read as follows:
(b) Each application shall also describe the steps to be taken to minimize the adverse environmental effects stemming from the construction of excess spoil fills, and provide analyses of the environmental impacts of alternative disposal plans to accommodate the volume of excess spoil in which the configurations of fills, including fill location, number and size, vary.
5. The authority citation for Part 816 continues to read as follows:
30 U.S.C. 1201
6. Section 816.10 is revised to read as follows:
(a) The collections of information contained in Part 816 have been approved by the Office of Management and Budget under 44 U.S.C. 3501
(b) Public Reporting Burden for this information is estimated to average 10 hours per response and non-labor costs of $70.00, including 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 collection of information, including suggestions for reducing the burden, to the Information Collection Clearance Officer, Office of Surface Mining Reclamation and Enforcement, 1951 Constitution Ave., NW., SIB 210, Washington, DC 20240. Please refer to OMB Control Number 1029-xxx2 in any correspondence.
7. In § 816.43, revise paragraph (b)(1) to read as follows:
(b) * * *
(1) The regulatory authority may approve the diversion of perennial and intermittent streams within the permit area after making the finding required by § 816.57 of this chapter.
8. In § 816.57, redesignate paragraphs (a)(2) and (b) as (b) and (c), respectively and revise paragraph (a) to read as follows:
(a) No land within 100 feet of a perennial stream or an intermittent stream shall be disturbed by surface mining activities, unless the regulatory authority specifically authorizes such activities closer to or through the stream. The regulatory authority may authorize such activities only upon finding that the activities will, to the extent possible, using the best technology currently available—
(1) Prevent additional contributions of suspended solids to the stream section within 100 feet downstream of the surface mining activities, and outside of the area affected by surface mining activities; and
(2) Minimize disturbances and adverse impacts on fish, wildlife, and other related environmental values of the stream.
9. In § 816.71 revise paragraphs (a)(2), (a)(3) and (c) and add paragraph (a)(4) to read as follows:
(a) * * *
(2) Ensure mass stability and prevent mass movement during and after construction;
(3) Ensure that the final fill is suitable for reclamation and revegetation compatible with the natural surroundings and the approved postmining land use; and
(4) Ensure that the cumulative volume of excess spoil fills is no larger than necessary to accommodate the cumulative excess spoil volume generated.
(c) Location. (1) The disposal area shall be located on the most moderately sloping and naturally stable areas available, as approved by the regulatory authority, and shall be placed, where possible, upon or above a natural terrace, bench, or berm, if such placement provides additional stability and prevents mass movement; and
(2) After considering alternative fill locations and size fills, fills must also be located so as to minimize, to the extent possible, adverse impacts on the prevailing hydrologic balance, fish, wildlife, and related environmental values.
10. The authority citation for Part 817 continues to read as follows:
30 U.S.C. 1201
11. Section 817.10 is revised to read as follows:
(a) The collections of information contained in part 817 have been approved by Office of Management and Budget under 44 U.S.C. 3501
(b) Public reporting burden for this information is estimated to average 10 hours per response and non-labor costs of $70.00, including 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 collection of information, including suggestions for reducing the burden, to the Information Collection Clearance Officer, Office of Surface Mining Reclamation and Enforcement, 1951 Constitution Ave., NW., SIB 210, Washington, DC 20240. Please refer to OMB Control Number 1029-xxx2 in any correspondence.
12. In § 817.43, revise paragraph (b)(1) to read as follows:
(b) * * *
(1) The regulatory authority may approve the diversion of perennial and intermittent streams within the permit area after making the finding required by § 817.57 of this chapter.
13. In § 817.57 redesignate paragraphs (a)(2) and (b) as (b) and (c), respectively, and revise paragraph (a) to read as follows:
(a) No land within 100 feet of a perennial stream or an intermittent stream shall be disturbed by underground mining activities, unless the regulatory authority specifically authorizes such activities closer to or through, such a stream. The regulatory authority may authorize such activities only upon finding that the activities will, to the extent possible, using the best technology currently available—
(1) Prevent additional contributions of suspended solids to the stream section within 100 feet downstream of the underground mining activities, and outside the area affected by the underground mining activities; and
(2) Minimize disturbances and adverse impacts on fish, wildlife, and other related environmental values of the stream.
Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Summary presentation of final rules and technical amendments and corrections.
This document summarizes the Federal Acquisition Regulation (FAR) rules agreed to by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council in this Federal Acquisition Circular (FAC) 2001-19. A companion document, the Small Entity Compliance Guide (SECG), follows this FAC. The FAC, including the SECG, is available via the Internet at
For effective dates and comment dates, see separate documents which follow.
The FAR Secretariat at (202) 501-4755 for information pertaining to status or publication schedules. For clarification of content, contact the analyst whose name appears in the table below in relation to each FAR case or subject area. Please cite FAC 2001-19 and specific FAR case number(s). Interested parties may also visit our Web site at
Summaries for each FAR rule follow. For the actual revisions and/or amendments to these FAR cases, refer to the specific item number and subject set forth in the documents following these item summaries.
FAC 2001-19 amends the FAR as specified below:
This amendment to final rule, FAR Case 2000-608, New Consolidated Form for Selection of Architect-Engineer Contractors, changes the effective date from January 12, 2004, to June 8, 2004. This final rule was published in FAC 2001-018 in the
This interim rule amends FAR parts 5, 12, 13, 14, 17, 19, 22, 25, and 52 to implement new Free Trade Agreements with Chile and Singapore, as approved by Congress (Public Laws 108-77 and 108-78). These Free Trade Agreements are scheduled to go into effect January 1, 2004. Singapore is already a designated country under the Trade Agreements Act, but Chile was not previously a designated country. The threshold under these Free Trade Agreements for acquisition of end products and services is $58,550 and the threshold for construction contracts is $6,725,000. In acquisitions that exceed these thresholds and are subject to trade agreements, this rule allows the acquisition of end products or construction material from Chile or Singapore without application of the Buy American Act, and provides for certain procedures in the acquisition of services, unless the service is excluded from coverage by the trade agreement. The interim rule directs the contracting officer to determine the origin of a service by the country in which the firm providing the services is established. The interim rule also implements new dollar thresholds for application of trade agreements, as published by the U.S. Trade Representative in the
Federal Acquisition Circular (FAC) 2001-19 is issued under the authority of the Secretary of Defense, the Administrator of General Services, and the Administrator for the National Aeronautics and Space Administration.
Unless otherwise specified, all Federal Acquisition Regulation (FAR) and other directive material contained in FAC 2001-19 are effective January 7, 2004, except for Item II, which is effective January 1, 2004.
Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Final rule: delay of effective date.
The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed to delay the effective date of FAR Case 2000-608, New Consolidated Form for Selection of Architect-Engineer Contractors, which was published in FAC 2001-018, in the
The FAR Secretariat, Room 4035, GS Building, Washington, DC 20405, (202) 501-4755, for information pertaining to status or publication schedules. For clarification of content, contact Ms. Cecelia Davis, Procurement Analyst, at (202) 219-0202. Please cite FAC 2001-19, FAR Case 2000-608A.
An interagency ad hoc committee developed the SF 330.
It was based on the results of a joint Federal-industry survey of the existing Standard Forms (SFs) 254, Architect-Engineer and Related Services Questionnaire, and 255, Architect-Engineer and Related Services Questionnaire for Specific Project, conducted by the Standing Committee on Procurement and Contracting of the Federal Facilities Council (FCC) in 1995 and published in 1996 as FCC Report Number 130, entitled “Survey on the Use of Standard Forms 254 and 255 for Architect-Engineer Qualifications.” The survey's purpose was to evaluate the current use of the forms which are used for the submission of qualifications by architect-engineer (A-E) firms interested in Federal contracts, and to identify possible improvements which would enable the existing forms to better serve the needs of Federal agencies and the A-E industry. The SFs 254 and 255 have changed little since their introduction in 1975, although the variety of A-E services has greatly expanded and new technologies have dramatically changed the way A-E firms do business. The report states that Federal agencies and A-E industry overwhelmingly support a structured format for submitting A-E qualifications, because the structured format saves time and effort and allows efficient and consistent evaluations. It also recommends many specific changes to the existing forms to enhance their effectiveness and simplify their use. Both Federal and A-E industry practitioners believe that the forms need streamlining as well as updating to facilitate electronic usage. The objectives of the SF 330 are to merge the SFs 254 and 255 into a single streamlined form, expand essential information about qualifications and experience, reflect current architect-engineer disciplines, experience types and technology, eliminate information of marginal value, permit limitations on submission length, and facilitate electronic usage. A proposed FAR rule for a new Architect-Engineer Qualifications form was published in the
The Regulatory Flexibility Act analysis was completed and addressed in the final rule published in the
The Paperwork Reduction Act (Pub. L. 104-13) applies; however, this information was provided in the final rule published in the
Government procurement.
Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Interim rule with request for comments.
The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed on an interim rule amending the Federal Acquisition Regulation (FAR) to implement new Free Trade Agreements with Chile and Singapore, as approved by Congress. These Free Trade Agreements are scheduled to go into effect January 1, 2004. The interim rule also implements new dollar thresholds for application of trade agreements, as published by the U.S. Trade Representative in the
Submit written comments to—General Services Administration, FAR Secretariat (MVA), 1800 F Street, NW., Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.
Submit electronic comments via the Internet to—
Please submit comments only and cite FAC 2001-19, FAR case 2003-016, in all correspondence related to this case.
The FAR Secretariat at (202) 501-4755, for information pertaining to status or publication schedules. For clarification of content, contact Ms. Cecelia Davis, Procurement Analyst, at (202) 219-0202. Please cite FAC 2001-19, FAR case 2003-016.
This rule amends the FAR to implement new Free Trade Agreements with Chile and Singapore, as approved by Congress (Pub. L. 108-77 and 108-78). The Free Trade Agreements with Chile and Singapore waive the applicability of the Buy American Act for some foreign supplies and construction materials from Chile and Singapore, and specify procurement procedures designed to ensure fairness, applicable to the acquisition of supplies and services (
FAR 25.400(a)(3) has been revised to create the new concept of “Free Trade Agreements,” which includes the Chile Free Trade Agreement and the Singapore Free Trade Agreement, as well as the North American Free Trade Agreement (NAFTA). This list can be expanded as new Free Trade Agreements are negotiated. Likewise, definitions of “Free Trade Agreement country” and “Free Trade Agreement country end product” have replaced the definitions of “NAFTA country” and “NAFTA country end product” (25.003).
The interim rule modifies the term “eligible product” to include services, consistent with our trade agreements. Although services are not subject to the Buy American Act, the trade agreements require certain procedures in the acquisition of services, unless the service is excluded by the trade agreement (
Section 106 of Public Law 108-77 and Section 106 of Public Law 108-78 provide for arbitration of certain claims. The United States is authorized to resolve any claim against the United States covered by the section of the applicable Free Trade Agreement relating to Investor-State Disputes Settlement, pursuant to the investor-state dispute settlement procedures set forth in the applicable section (section B of chapter 10 for Chile; section C of chapter 15 for Singapore). The Councils invite comment on appropriate implementation of this authorization. Sections 106 of the same public laws also require that after the new trade agreements become effective, contracts must specify the law that will apply to resolve any breach of contract claim. The statement that “United States law will apply to resolve any claim of breach of contract” has been included in each of the trade agreements clauses (FAR 52.225-3, 52.225-5, and 52.225-11), rather than creating a separate clause.
The threshold for applicability of the new Free Trade Agreements with Chile and Singapore is $58,550 for supplies and services, and $6,725,000 for construction contracts. Singapore was already a signatory to the Agreement on Government Procurement, and therefore already included as a designated country under the Trade Agreements Act (FAR 25.003), with thresholds of $175,000 for supplies or services and $6,725,000 for construction. This interim rule also amends FAR 22.1503, 25.202, 25.601, 25.1103, and 52.222-19, to implement the new dollar threshold for applications of the Trade Agreements Act and NAFTA. Because of the increasing number of trade agreements and thresholds, the interim rule provides a table of the various thresholds at 25.402(b).
This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.
The interim rule is not expected to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,
The Paperwork Reduction Act (Pub. L. 104-13) applies because the interim rule affects the certification and information collection requirements in the provisions at FAR 52.212-3, 52.225-4, 52.225-6, and 52.225-11 currently approved under OMB clearances 9000-0130, 9000-0025, and 9000-0141, respectively. The impact, however, is negligible. In the certification provision FAR 52.225-4, Buy American Act—Free Trade Agreements—Israeli Trade Act Certificate, and the commercial item equivalent at FAR 52.212-3(g)(1), the offeror must now list offers of end products from Chile or Singapore as FTA country end products, rather than as “other foreign end products.” In the certification provision at 52.225-6, Trade Agreements Certificate, and the commercial equivalent at 52.212-3(4), Singapore was already a designated country under the Trade Agreements Act, but offerors no longer need to list products of Chile as “other end products.” However, offerors of the Chilean end products would have been unlikely to submit offers, because purchase of foreign products other than eligible products is prohibited by the Trade Agreements Act. In the clause at 52.225-11, Buy American Act—Construction Materials under Trade Agreements, an offeror planning to use Chilean construction material would no longer need to request a determination of inapplicability of the Buy American Act, thus also removing the need to submit the supporting data specified in paragraph (d) of the clause.
Submit comments, including suggestions for reducing this burden, not later than March 8, 2004, to: FAR Desk Officer, OMB, Room 10102, NEOB, Washington, DC 20503, and a copy to the General Services Administration, FAR Secretariat (MVR), 1800 F Street, NW., Room 4035, Washington, DC 20405.
Public comments are particularly invited on: whether this collection of information is necessary for the proper performance of functions of the FAR, and will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection
Requester may obtain a copy of the justification from the General Services Administration, FAR Secretariat (MVA), Room 4035, Washington, DC 20405, telephone (202) 501-4755. Please cite OMB Control Number 9000-0130, 9000-0025, and 9000-0141 in all correspondence.
A determination has been made under the authority of the Secretary of Defense (DoD), the Administrator of General Services (GSA), and the Administrator of the National Aeronautics and Space Administration (NASA) that urgent and compelling reasons exist to promulgate this interim rule without prior opportunity for public comment. This action is necessary because the Free Trade Agreements with Chile and Singapore, as approved by Congress (Pub. L. 108-77 and 108-78), are scheduled to go into effect January 1, 2004. However, pursuant to Public Law 98-577 and FAR 1.501, the Councils will consider public comments received in response to this interim rule in the formation of the final rule.
Government procurement.
40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).
(a)(1) * * *
(2) For acquisitions subject to the Trade Agreements Act or a Free Trade Agreement (see 25.408(a)(5)), agencies must include in notices given unsuccessful bidders from designated or Free Trade Agreement countries—
(1) Is wholly the growth, product, or manufacture of a Free Trade Agreement (FTA) country; or
(2) In the case of an article that consists in whole or in part of materials from another country, has been substantially transformed in an FTA country into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. The term refers to a product offered for purchase under a supply contract, but for purposes of calculating the value of the end product, includes services (except transportation services) incidental to the article, provided that the value of those incidental services does not exceed that of the article itself.
(c)
(a) * * *
(3) Free Trade Agreements (FTAs), consisting of—
(i) NAFTA (the North American Free Trade Agreement, as approved by Congress in the North American Free Trade Agreement Implementation Act of 1993 (19 U.S.C. 3301
(ii) Chile FTA (the United States-Chile Free Trade Agreement, as approved by Congress in the United States-Chile Free
(iii) Singapore FTA (the United States-Singapore Free Trade Agreement, as approved by Congress in the United States-Singapore Free Trade Agreement Implementation Act (Pub. L. 108-78));
(a) This subpart does not apply to—
(1) Acquisitions set aside for small businesses;
(2) Acquisitions of arms, ammunition, or war materials, or purchases indispensable for national security or for national defense purposes, including all services purchased in support of military forces located overseas;
(3) Acquisitions of end products for resale;
(4) Acquisitions under Subpart 8.6, Acquisition from Federal Prison Industries, Inc., and Subpart 8.7, Acquisition from Nonprofit Agencies Employing People Who Are Blind or Severely Disabled; and
(5) Other acquisitions not using full and open competition, if authorized by Subpart 6.2 or 6.3, when the limitation of competition would preclude use of the procedures of this subpart (but see 6.303-1(d)); or sole source acquisitions justified in accordance with 13.501(a).
(b) Acquisitions of the following services are excluded from coverage of the trade agreements indicated in parentheses. Federal Service Codes from the Federal Procurement Data System Product/Service Code Manual may also be indicated in parentheses for some services:
(1) Automatic data processing (ADP) telecommunications and transmission services (D304), except enhanced (
(2) ADP teleprocessing and timesharing services (D305), telecommunications network management services (D316), automated news services, data services or other information services (D317), and other ADP and telecommunications services (D399) (Chile FTA, NAFTA).
(3) Basic telecommunications network services,
(4) Dredging (TAA, all FTAs).
(5) Operation and management contracts of certain Government or privately owned facilities used for Government purposes, including Federally Funded Research and Development Centers (TAA, Singapore FTA).
(6) Operation of all Department of Defense, Department of Energy, or the National Aeronautics and Space Administration facilities; and all Government-owned research and development facilities or Government-owned environmental laboratories (Chile FTA and NAFTA).
(7) Maintenance, repair, modification, rebuilding and installation of equipment related to ships (Chile FTA and NAFTA).
(8) Nonnuclear ship repair (Chile FTA and NAFTA).
(9) Research and development (TAA, all FTAs).
(10) Transportation services (including launching services, but not including travel agent services) (TAA, all FTAs).
(11) Utility services (TAA, all FTAs).
(a) The trade agreements waive the applicability of the Buy American Act for some foreign supplies and construction materials from certain countries. The Trade Agreements Act and FTAs specify procurement procedures designed to ensure fairness. When the restrictions of the Buy American Act are waived for eligible products, offers of those products (eligible offers) receive equal consideration with domestic offers. Under the Trade Agreements Act, only U.S.-made end products or U.S. services or eligible products, including services, may be acquired (also see 25.403(c)). The contracting officer shall determine the origin of services by the country in which the firm providing the services is established. See Subpart 25.5 for evaluation procedures for supply contracts subject to trade agreements.
(b) The value of the acquisition is a determining factor in the applicability of trade agreements. Most of these dollar thresholds are subject to revision by the U.S. Trade Representative approximately every 2 years. The various thresholds are summarized as follows:
(a)
(1) Authorizes waiver of application of the Buy American Act to the end products and construction materials of designated countries;
(2) Prohibits discriminatory practices based on foreign ownership;
(3) Requires certain procurement procedures designed to ensure fairness (see 25.408).
(c)
(2) This restriction does not apply to purchases of supplies by the Department of Defense from a country with which it has entered into a reciprocal agreement, as provided in departmental regulations.
(a)
(b) The FTAs do not prohibit the purchase of other foreign end products or services.
(c) * * *
(3) For acquisitions valued at $6,725,000 or more, but less than $7,611,532, use the clause with its Alternate I. List in paragraph (b)(3) of the clause all foreign construction material excepted from the requirements of the Buy American Act, other than designated country or Chilean construction material.
(d) * * *
(3) For acquisitions valued at $6,725,000 or more, but less than $7,611,532, use the clause with its Alternate II.
(b) * * *
_ (14) 52.222-19, Child Labor—Cooperation with Authorities and Remedies (Jan 2004) (E.O. 13126).
_ (22)(i) 52.225-3, Buy American Act—Free Trade Agreements—Israeli Trade Act (Jan 2004) (41 U.S.C. 10a-10d, 19 U.S.C. 3301 note, 19 U.S.C. 2112 note, Pub. L. 108-77, 108-78).
_ (ii) Alternate I (Jan 2004) of 52.225-3.
_ (iii) Alternate II (Jan 2004) of 52.225-3.
_ (23) 52.225-5, Trade Agreements (Jan 2004) (19 U.S.C. 2501,
(a) * * *
(1) Is wholly the growth, product, or manufacture of a Free Trade Agreement (FTA) country; or
(2) In the case of an article that consists in whole or in part of materials from another country, has been substantially transformed in an FTA country into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. The term refers to a product offered for purchase under a supply contract, but for purposes of calculating the value of the end product includes services (except transportation services) incidental to the article, provided that the value of those incidental services does not exceed that of the article itself.
(c)
(d) United States law will apply to resolve any claim of breach of this contract.
(End of clause)
The revised text reads as follows:
(a)
(1) Is wholly the growth, product, or manufacture of a Free Trade Agreement (FTA) country; or
(2) In the case of an article that consists in whole or in part of materials from another country, has been substantially transformed in an FTA country into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. The term refers to a product offered for purchase under a supply contract, but for purposes of calculating the value of the end product includes services (except transportation services) incidental to the article, provided that the value of those incidental services does not exceed that of the article itself.
(c) United States law will apply to resolve any claim of breach of this contract.
(End of clause)
(a)
(1) Is wholly the growth, product, or manufacture of a Free Trade Agreement (FTA) country; or
(2) In the case of a construction material that consists in whole or in part of materials from another country, has been substantially transformed in a FTA country into a new and different construction material distinct from the materials from which it was transformed.
(b)
(e) United States law will apply to resolve any claim of breach of this contract.
(End of clause)
(1) Is wholly the growth, product, or manufacture of Chile; or
(2) In the case of a construction material that consists in whole or in part of materials from another country, has been substantially transformed in Chile into a new and different construction material distinct from the materials from which it was transformed.
(b)
(2) The Contractor shall use only domestic, designated country, or Chilean construction material in performing this contract, except as provided in paragraphs (b)(3) and (b)(4) of this clause.
(End of provision)
(a) Definitions.
(d)
(3) If the Government determines that a particular exception requested in accordance with paragraph (c) of FAR clause 52.225-11 does not apply, the Government will evaluate only those offers based on use of the equivalent domestic, designated country, or Chilean construction material, and the offeror shall be required to furnish such domestic, designated country, or Chilean construction material. An offer based on use of the foreign construction material for which an exception was requested—
Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Small Entity Compliance Guide.
This document is issued under the joint authority of the Secretary of Defense, the Administrator of General Services and the Administrator for the National Aeronautics and Space Administration. This
Laurie Duarte, FAR Secretariat, (202) 501-4225. For clarification of content, contact the analyst whose name appears in the table below.
This amendment to final rule, FAR Case 2000-608, New Consolidated Form for Selection of Architect-Engineer Contractors, changes the effective date from January 12, 2004, to June 8, 2004. This final rule was published in FAC 2001-018 in the
This interim rule amends FAR parts 5, 12, 13, 14, 17, 19, 22, 25, and 52 to implement new Free Trade Agreements with Chile and Singapore, as approved by Congress (Pub. L. 108-77 and 108-78). These Free Trade Agreements are scheduled to go into effect January 1, 2004. Singapore is already a designated country under the Trade Agreements Act, but Chile was not previously a designated country. The threshold under these Free Trade Agreements for acquisition of end products and services is $58,550 and the threshold for construction contracts is $6,725,000. In acquisitions that exceed these thresholds and are subject to trade agreements, this rule allows the acquisition of end products or construction material from Chile or Singapore without application of the Buy American Act, and provides for certain procedures in the acquisition of services, unless the service is excluded from coverage by the trade agreement. The interim rule directs the contracting officer to determine the origin of a service by the country in which the firm providing the services is established. The interim rule also implements new dollar thresholds for application of trade agreements, as published by the U.S. Trade Representative in the
Department of Veterans Affairs.
Final rule.
This document amends the Department of Veterans Affairs (VA) medical regulations with respect to charges used for the purpose of recovering from tortiously liable third parties the reasonable value of medical care and services provided by VA. The effect of this action is to amend VA's medical regulations to conform with the decision of the Director of the Office of Management and Budget regarding the charges that are to be used for this purpose.
David Cleaver, Chief Business Office (168), Veterans Health Administration, Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, (202) 254-0361. (This is not a toll free number.)
This document amends VA's medical regulations that are set forth at 38 CFR part 17. More specifically, we are amending the regulations with respect to charges used for the purpose of recovering from tortiously liable third parties the reasonable value of medical care and services provided by VA.
We are amending these regulations to reflect the decision of the Director of the Office of Management and Budget (OMB) to adopt the charges determined in accordance with the provisions of 38 CFR 17.101 for the purpose of recovering from tortiously liable third parties the reasonable value of medical care and services provided by VA under circumstances subject to the Federal Medical Care Recovery Act (FMCRA), 42 U.S.C. 2651-2653. Previously, the regulations stated that the rates generated by the methodology at 38 CFR 17.102(h) would be used for this purpose. Consistent with the OMB Director's decision, we are deleting that statement from § 17.102(h), and adding a note at the end of § 17.101 to indicate that OMB is prescribing the charges determined in accordance with that section for use for this purpose. Finally, we are adding a statement to § 17.102(h) indicating that either VA or OMB will publish in the
There are two basic reasons for this change. First, VA's community-based “reasonable charges” more accurately reflect the reasonable value of the medical care and treatment furnished by VA to the injured person, consistent with 42 U.S.C. 2651 and 2652, than do VA's cost-based
Second, VA's present dual-rate billing system (tort feasor and health plan), using significantly different charges, is confusing and difficult to justify. VA claims, for example, may be made both against the tort feasor who caused the injury, using the current FMCRA
This change has been agreed to by (1) the Department of Justice, which has jurisdiction over VA tort cases under the Federal Medical Care Recovery Act; (2) the Office of Management and Budget, which has the authority to prescribe the charges used for this purpose; and (3) the Department of Veterans Affairs.
Since the changes made in this regulatory amendment are informational or technical revisions conforming to the OMB decision described above, we have concluded that good cause exists for dispensing with the prior notice and comment and delayed effective date provisions of 5 U.S.C. 553. Under these circumstances, such procedures would be impracticable, unnecessary, and contrary to the public interest.
The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before developing any rule that may result in an expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more in any given year. This rule would have no such effect on State, local, or tribal governments, or the private sector.
This document contains no provisions constituting a collection of information under the Paperwork Reduction Act (44 U.S.C. 3501-3521).
This document has been reviewed by the Office of Management and Budget under Executive Order 12866.
The Secretary hereby certifies that this regulatory amendment will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This amendment would directly affect only individual tort feasors. Accordingly, pursuant to 5 U.S.C. 605(b), this amendment is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.
The Catalog of Federal Domestic Assistance numbers for the programs affected by this rule are 64.005, 64.007, 64.008, 64.009, 64.010, 64.011, 64.012, 64.013, 64.014, 64.015, 64.016, 64.018, 64.019, 64.022, and 64.025.
Administrative practice and procedure, Alcohol abuse, Alcoholism, Claims, Day care, Dental health, Drug abuse, Foreign relations, Government contracts, Grant programs—health, Grant programs—veterans, Health care, Health facilities, Health professions, Health records, Homeless, Medical and dental schools, Medical devices, Medical research, Mental health programs, Nursing homes, Philippines, Reporting and recordkeeping requirements, Scholarships and fellowships, Travel and transportation expenses, Veterans.
38 U.S.C. 501, 1721, unless otherwise noted.
The charges generated by the methodology set forth in this section are the same charges prescribed by the Office of Management and Budget for use under the Federal Medical Care Recovery Act, 42 U.S.C. 2651-2653.
Office of Management and Budget, Executive Office of the President.
Notification of charges to tortiously liable third parties for hospital, medical, surgical, and dental care and treatment furnished by the Department of Veterans Affairs.
By virtue of the authority vested in the President by section 2(a) of the Federal Medical Care Recovery Act, Public Law 87-693 (76 Stat. 593; 42 U.S.C. 2652), and delegated to the Director of the Office of Management and Budget by Executive Order No. 11541 of July 1, 1970 (35 FR 10737), the charges to tortiously liable third parties for hospital, medical, surgical, and dental care and treatment (including prostheses and medical appliances) furnished by the Department of Veterans Affairs are the “reasonable charges” generated by the methodology set forth in 38 CFR 17.101 and published from time to time in the
There are two basic reasons for this change. First, VA's community-based “reasonable charges” more accurately reflect the reasonable value of the medical care and treatment furnished by VA to the injured person, consistent with 42 U.S.C. 2651 and 2652, than do VA's cost-based
Second, VA's present dual-rate billing system (tort feasor and health plan), using significantly different charges, is confusing and difficult to justify. VA claims, for example, may be made both against the tort feasor who caused the injury, using the current FMCRA
Beginning on January 7, 2004, the charges prescribed herein supercede those established by the Director of the Office of Management and Budget for the Department of Veterans Affairs on November 1, 1999 (64 FR 58862).
Office of Management and Budget, Executive Office of the President and the Department of Veterans Affairs.
Notice.
This document provides cost-based and interagency billing rates for medical care or services provided by the Department of Veterans Affairs (VA):
(a) In error or on tentative eligibility;
(b) In a medical emergency;
(c) To pensioners of allied nations;
(d) For research purposes in circumstances under which VA medical care appropriation is to be reimbursed by VA research appropriation; and
(e) To beneficiaries of the Department of Defense or other Federal agencies, when the care or service provided is not covered by an applicable sharing agreement.
In addition, until such time as charges for outpatient dental care and prescription drugs are implemented under the provisions of 38 CFR 17.101, the applicable cost-based billing rates provided in this notice will be used for collection or recovery by VA for outpatient dental care and prescription drugs provided under circumstances covered by that section. This notice is issued jointly by the Office of Management and Budget and the Department of Veterans Affairs.
The rates set forth herein are effective January 7, 2004, and until further notice.
David Cleaver, Chief Business Office (168), Veterans Health Administration, Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, (202) 254-0361. (This is not a toll free number.)
VA's medical regulations at 38 CFR 17.102(h) set forth a methodology for computing rates for medical care or services provided by VA:
(a) In error or on tentative eligibility;
(b) In a medical emergency;
(c) To pensioners of allied nations;
(d) For research purposes in circumstances under which VA medical care appropriation is to be reimbursed by VA research appropriation; and
(e) To beneficiaries of the Department of Defense or other Federal agencies, when the care or service provided is not covered by an applicable sharing agreement.
Two sets of rates are obtained via application of this methodology: Cost-Based Rates, for use for purposes (a) through (d), above, and Interagency Rates, for use for purpose (e), above. Government employee retirement benefits and return on fixed assets are not included in the Interagency Rates, and the Interagency Rates are not broken down into three components (Physician; Ancillary; and Nursing, Room, and Board), but in all other respects the Interagency Rates are the same as the Cost-Based Rates.
When medical care or service is obtained at the expense of the Department of Veterans Affairs from a non-VA source under circumstances in which the Cost-Based or Interagency Rates would apply if the care or service had been provided by VA, then the charge for such care or service will be the actual amount paid by VA for that care or service.
Inpatient charges will be at the per diem rates shown for the type of bed section or discrete treatment unit providing the care. Prescription Filled charge in lieu of the Outpatient Visit rate will be charged when the patient receives no service other than the Pharmacy outpatient service. This charge applies whether the patient receives the prescription in person or by mail.
Current rates obtained via the above methodology are as follows:
Beginning on the effective date indicated herein, these rates supercede those established for the Department of Veterans Affairs by the Director of the Office of Management and Budget on November 1, 1999 (64 FR 58862).
Office of Vocational and Adult Education, Department of Education.
Notice of proposed requirements, priorities, and selection criteria for Fiscal Year (FY) 2003 and subsequent years funds.
The Assistant Secretary for Vocational and Adult Education proposes requirements, priorities, and selection criteria under the Smaller Learning Communities (SLC) Program. The Assistant Secretary will use these requirements, priorities, and selection criteria for a competition using fiscal year (FY) 2003 funds and may use them in later years.
We must receive your comments on or before February 6, 2004.
Address all comments about these proposed requirements, priorities, and selection criteria to Deborah Williams, U.S. Department of Education, OVAE, MES Room 5518, 400 Maryland Avenue SW., Washington, DC 20202-7100. If you prefer to send your comments through the Internet, use the following address:
Deborah Williams. Telephone: (202) 205-0242 or via Internet:
If you use a telecommunications device for the deaf (TDD), you may call the Federal Information Relay Service (FIRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an alternative format (
We invite you to submit comments regarding these proposed requirements, priorities, and selection criteria. To ensure that your comments have maximum effect in developing the notice of final requirements, priorities, and selection criteria, we urge you to identify clearly the specific proposed requirement, priority, or selection criterion that each comment addresses.
We invite you to assist us in complying with the specific requirements of Executive Order 12866 and its overall requirement of reducing regulatory burden that might result from these proposed requirements, priorities, and selection criteria. Please let us know of any further opportunities we should take to reduce potential costs or increase potential benefits while preserving the effective and efficient administration of the program.
During and after the comment period, you may inspect all public comments about these proposed requirements, priorities, and selection criteria in Room 5518, 330 C Street, SW., Washington, DC, between the hours of 8:30 a.m. and 4 p.m., Eastern time, Monday through Friday of each week except Federal holidays.
On request, we will supply an appropriate aid, such as a reader or print magnifier, to an individual with a disability who needs assistance to review the comments or other documents in the public rulemaking record for these proposed requirements, priorities, and selection criteria. If you want to schedule an appointment for this type of aid, please contact Deborah Williams. Telephone: (202) 205-0242 or via Internet:
The Smaller Learning Communities program is authorized under Title V, Part D, Subpart 4 of the Elementary and Secondary Education Act of 1965 (ESEA) (20 U.S.C. 7249), as amended by Public Law 107-110, the No Child Left Behind Act of 2001.
The No Child Left Behind Act of 2001 is the most sweeping reform of Federal education policy in a generation. It is designed to implement the President's agenda to improve America's public schools by: (1) Ensuring accountability for results, (2) providing unprecedented flexibility in the use of Federal funds in implementing education programs, (3) focusing on proven educational methods, and (4) expanding educational choice for parents. Since the enactment of the original ESEA in 1965, the Federal Government has spent more than $130 billion to improve public schools. Unfortunately, this investment in education has not yet eliminated the achievement gap between affluent and lower-income students or between minority students and non-minority students.
The U.S. Department of Education (Department) has developed a strategic plan that serves as the roadmap for all Departmental activities and investments. The plan specifically focuses on, among other areas, improving the performance of all high school students and holding schools accountable for raising the academic achievement level of all students. The Department will work with States to ensure that students attain the strong academic knowledge and skills necessary for future success in postsecondary education and adult life. The Department will encourage students to take more rigorous courses, especially in the areas of math and science. In addition, the Department is committed to ensuring that our Nation's schools are safe environments conducive to learning.
One strategy that holds promise for improving the academic performance of our Nation's young people is the establishment of smaller learning communities as components of comprehensive high school improvement plans. The problems of large high schools and the related question of optimal school size have been debated for the last 40 years and are of growing interest today. Approximately 50 percent of American high schools enroll 1,000 or more students; nearly 70 percent of high school students attend schools enrolling more than 1,500 students. Some students attend schools enrolling as many as 4,000 to 5,000 students.
While the research on school size to date has been largely non-experimental, there is a growing body of evidence that suggests that smaller schools may have advantages over larger schools. Research suggests that the positive outcomes associated with smaller schools stem from the schools' ability to create close, personal environments in which teachers can work collaboratively, with each other and with a small set of students, to challenge students and support learning. A variety of structures and operational strategies are thought to provide important supports for smaller learning environments; some data suggest that these approaches offer substantial advantages to both teachers and students (Ziegler 1993; Caroll 1994).
Structural changes for recasting large schools as a set of smaller learning communities are described in the Conference Report for the Consolidated Appropriations Act, 2000 (Pub. L. 106-113, H.R. Conference Report No. 106-479, at 1240 (1999)). Such methods include establishing small learning clusters, “houses,” career academies, magnet programs, and schools-within-a-school. Other activities may include: Freshman transition activities, advisory and adult advocate systems, academic teaming, multi-year groupings, “extra
These proposed requirements are in addition to the content that all Smaller Learning Communities grant applicants must include in their applications as required by the program statute under Title V, Part D, Subpart 4, Section 5441(b) of the ESEA. Local educational agencies (LEAs), including schools funded by the Bureau of Indian Affairs, applying on behalf of large public high schools, are eligible to apply for a planning or implementation grant. A discussion of each proposed application requirement follows:
We propose that, to be considered for funding, LEAs must identify in their applications the name(s) of the eligible school(s) and the number of students enrolled in each school. Enrollment figures must be based upon data from the current school year or data from the most recently completed school year. We will not accept applications from LEAs applying on behalf of schools that are being constructed and do not have an active student enrollment at the time of application.
The Department needs this information to determine if each school identified in an application meets the proposed definition of a large high school and to ensure that an LEA is not applying for more than 10 schools. Further, the Department requires schools have an enrollment of over 1,000 students in grades 9 through 12. Schools under construction do not have actual enrollment data to be used to determine eligibility.
We propose to require that LEAs provide, for each school included in the application, the most recent “report card” produced by the State or the LEA to inform the public about the characteristics of the school and its students and student academic achievement and other student outcomes. These “report cards” must include, at a minimum, the information that LEAs are required to report for each school under section 1111(h)(2)(B)(ii) of the ESEA: (1) Whether the school has been identified for school improvement; and (2) information that shows how the academic assessments and other indicators of adequate yearly progress compare to students in the LEA and the State performance of the school's students on the statewide assessment as a whole.
The Department needs the “report cards” to verify the accuracy of information the LEA provides in its application about student academic achievement and other student outcomes at each school.
We propose awarding two types of grants in this competition: (1) Planning grants, which will be awarded to support planning, design, and other preparatory activities that culminate in the development of a detailed plan for the implementation of a smaller learning communities program in a school; and (2) implementation grants, which will be awarded to applicants to support the implementation of a new smaller learning community program within each targeted high school, or to expand an existing smaller learning community program.
Planning grants will be awarded for a period up to 12 months, and implementation grants will be awarded for a period up to 36 months. We propose to require that applicants for implementation grants provide detailed, yearly budget information for the total grant period requested. Understanding the unique complexities of implementing a program that affects a school's organization, physical design, curriculum, instruction, and preparation of teachers, we anticipate awarding the entire grant amount for implementation projects at the time of the initial award.
Effectively implementing a smaller learning community program requires significant prior planning and preparation, as well as extensive consultation with, and participation by, school personnel, parents, students, and community leaders. It requires fundamentally rethinking how a school is organized and how instruction and other direct services to students are delivered. It is not a discrete activity that can be carried out by a handful of teachers and school personnel without the involvement of the larger school community. We are proposing to award planning grants to those LEAs that may need additional resources to carry out these essential preparatory activities. Implementation grants would be available to those LEAs that have engaged in extensive planning activities and developed plans for implementing or expanding a smaller learning community program at one or more high schools.
In an effort to encourage systemic, district-level reform efforts, we propose permitting an individual LEA to submit only one planning grant application and one implementation grant application in a competition, specifying in each application which high schools the LEA intends to fund.
We would not permit an LEA to apply on behalf of a high school for which it does not have governing authority, such as a high school in a neighboring school district. An LEA, however, may form a consortium with another LEA and submit a joint application for funds. They must follow the procedures for group applications described in 34 CFR 75.127-75.129 in EDGAR.
We further propose limiting an LEA to applying for either a planning or implementation grant on behalf of the same high school. A single high school could be included in either the LEA's planning grant application or its implementation grant application, but not both. An LEA is eligible for only one grant whether the LEA applies independently or as part of a consortium application.
This requirement is designed to ensure that each LEA that receives assistance under this program will manage and coordinate school-level planning and implementation activities as part of a single, coherent, district-wide reform strategy. This will help LEAs make the most effective and efficient use of SLC resources and assist them in aligning SLC activities with other district-level initiatives, including the implementation of activities carried out under other programs funded by the ESEA and the Carl D. Perkins Vocational and Technical Education
We propose limiting an LEA to applying for either a planning or implementation grant on behalf of a single high school because of the different nature and purposes of the two types of grants. A planning grant supports planning, design, and preparatory activities that culminate in the development of a plan for implementing a smaller learning community program. Applicants pursuing planning grant funds must not yet have developed a viable plan. Implementation grants support the implementation of a plan to create or expand a smaller learning community program in a high school. Applicants must be prepared to either implement a new smaller learning community program or to expand an existing SLC program.
For a one-year planning grant, we propose that LEAs applying on behalf of only one school would be eligible for a grant in the range of $25,000 to $50,000. LEAs applying on behalf of a group of eligible schools could receive up to $250,000 per planning grant depending on the number of schools included in the application. To ensure sufficient planning funds at the local level, we propose a limit of 10 schools that an LEA may include in a single application for a planning grant. The following chart provides the ranges for awards that we are proposing for planning grants:
Applicants requesting more funds than the maximum amounts specified for each school and for the total grant would be declared ineligible for funding, and their applications will not be read.
We further propose that schools that received funds through planning grants in a prior year competition will not be eligible to apply for additional planning grants.
For a 36-month implementation grant, we propose that LEAs may receive, on behalf of a single school, $250,000 to $500,000, depending upon the size of the school. LEAs applying on behalf of a group of eligible schools could receive up to $5,000,000 per implementation grant. Implementation grants are designed to support extensive redesign and improvement efforts, professional development, direct student services, and other activities associated with creating or expanding a smaller learning community program. To ensure that sufficient funds are available to support implementation activities, we propose a limit of 10 schools that an LEA may include in a single application for an implementation grant.
The following chart provides the ranges of awards per high school that we are proposing for implementation grants:
Applicants requesting more funds than the maximum amounts specified for each school and for the total grant would be declared ineligible for funding, and their applications will not be read.
We propose that schools that received funds through implementation grants in a prior year competition will not be eligible to apply for additional implementation grants.
In previous SLC competitions, some applicants have requested more funds than the amount that we indicated would be available for a grant. Their applications included any number of activities that could only be made possible if the applicants received a funding amount that exceeded the maximum amount specified in the notice. This strategy put at a competitive disadvantage other applicants who requested funds within the specified funding range and outlined a less extensive set of activities. For this reason, we propose to fund only those applications that request an amount that does not exceed the maximum amounts specified for planning and implementation grants.
The actual size of awards will be based on a number of factors. These factors include the scope, quality, and comprehensiveness of the proposed program, and the range of awards indicated in the application.
By establishing grant award ranges and maximum LEA award amounts, we will be able to fund a larger number of grants, ensure greater geographic distribution, encourage the planning and implementation of a diverse range of SLC strategies, and provide sufficient funding to support comprehensive reform within each participating high school. We determined these amounts after reviewing the experiences of previous recipients of SLC funds and examining the design and outcomes of other similar Federal, State, and privately funded programs.
The proposed grant award ranges and maximum LEA award amounts for SLC planning grants are the same as those that were established for the competition using FY 2000, FY 2001 and FY 2002 SLC funds. We concluded from our review of the experiences of previous recipients of SLC planning grants that these amounts are sufficient to support the activities needed to develop a detailed plan for implementing an SLC program.
For implementation grants, we are proposing to increase the maximum LEA award amount that we established in previous SLC competitions from $2.5 million to $5 million. In competitions using FY 2000, 2001 and 2002 funds, the $2.5 million maximum award discouraged LEAs from working with more than 5 high schools. An LEA serving 6 high schools could receive no more than an LEA serving 5 high schools. Based on our review of the experiences of previous SLC implementation grantees, we do not believe that this $2.5 million cap is warranted. Though some economies of scale may be achieved by serving multiple high schools, the cost savings are not likely to be so significant that an LEA would not be able to serve 6 or more high schools with the same amount of funds that is awarded to an LEA that is serving just 5 high schools. School districts are organized differently in every State. In a number of States, for example, LEAS are organized by county and govern a large number of high schools across a wide geographical area. The $2.5 million maximum award we imposed in previous competitions inadvertently discouraged these LEAs from implementing smaller learning communities on a system-wide basis.
We also have linked implementation grant award amounts to the size of the student population served by each high school. The experiences of previous SLC
Only an estimated 20 percent of eligible American high schools have benefited from a planning or implementation grant awarded under the SLC program since FY 2000. For this reason, we are proposing to limit (a) planning grant assistance to those schools that have not previously benefited from an SLC planning grant and (b) implementation grant assistance to those schools that have not previously benefited from an SLC implementation grant.
Section 5441(b)(13) of the ESEA, as amended by the No Child Left Behind Act of 2001, requires applicants for SLC grants to describe the method of placing students in the smaller learning community or communities, such that students are not placed according to ability or any other measure, but are placed at random or by student/parent choice, and not pursuant to testing or other judgments.” For instance, projects that place students in any smaller learning community on the basis of their prior academic achievement or performance on an academic assessment are not eligible for assistance under this program.
We propose that, to be considered for funding, applicants for planning grants must include in their application an assurance that the applicant will identify, as part of the planning process, methods of selecting or placing students in a smaller learning community that are not according to ability or any other measure but at random or by student/parent choice, and not pursuant to testing or other judgments.
We further propose that applicants for implementation grants must include an assurance/description of how students will be selected or placed in a smaller learning community such that students will not be placed according to ability or any other measure, but will be placed at random or by student/parent choice, and not pursuant to testing or other judgments.
The Department needs this information to ensure that each funded project complies with the requirements of the statute regarding random assignment or student/parent choice for SLC placement of students.
We propose to require applicants for planning grants to develop plans to implement or expand a smaller learning community program that will include every student within the school by no later than the end of the fourth school year of implementation. We propose to require applicants for implementation grants to implement or expand a smaller learning community program that will include every student within the school by no later than the end of the fourth school year of implementation. Elsewhere in this notice, we propose to define a smaller learning community as an environment in which a core group of teachers and other adults within the school know the needs, interests and aspirations of each student well, closely monitor his or her progress, and provide the academic and other support he or she needs to succeed.
The purpose of creating smaller learning communities within large high schools is to provide students with individualized attention, support, and instruction that will help them excel academically and acquire the knowledge and skills they need to succeed after high school. Young people have many different needs and personal resources, but most young people would benefit from participating in a well-implemented smaller learning community. While it may be easier to implement incremental reforms that include only a limited number of students, we do a disservice to young people when we narrow our sights in this way. For this reason, we propose to support only those projects that will include (or, in the case of planning grants, seek to include) every student within a smaller learning community.
We recognize that recipients of implementation grants may need several years to accomplish this goal. Implementing a smaller learning community program within a large high school is a formidable task, and it may take several years to include all students. We also do not believe that we should dictate how grantees accomplish the goal of including all students. The proposed requirement does not mean, for example, that schools must place all students in “houses,” academies, or other smaller organizational units. Smaller learning communities may also be created by implementing a variety of strategies, such as teacher advisories and more intensive academic counseling and career guidance, which do not necessarily require changes in how a school is organized.
We propose to require recipients of planning grants to include as part of their final performance report a copy of the implementation plan they developed during the project period.
Planning grants are awarded to support the development of a plan for implementing or expanding a smaller learning community program. Planning grants are not available to LEAs that wish merely to investigate the merits or feasibility of implementing or expanding a smaller learning community program. This preparatory work should be carried out prior to the submission of an application for a planning grant. Though grantees may wish to refine or expand further the implementation plan they develop during the project period, the plan should be substantially complete at the conclusion of the project period. Requiring grantees to submit these implementation plans as part of their final performance report will help ensure that grantees use planning grant funds effectively and appropriately.
We propose to require applicants for implementation grants to identify in their application specific performance indicators and annual performance objectives for each of these indicators. Specifically, we propose to require applicants to use the following performance indicators to measure the progress of each school:
1. The percentage of students who scored at the proficient and advanced levels on the reading/language arts and mathematics assessments used by the State to measure adequate yearly progress under Part A of Title I of ESEA, disaggregated by subject matter and the following subgroups:
a. All students;
b. Major racial and ethnic groups;
c. Students with disabilities;
d. Students with limited English proficiency; and
e. Economically disadvantaged students.
2. The school's graduation rate, as defined in the State's approved accountability plan for Part A of Title I of ESEA;
3. The percentage of graduates who enroll in postsecondary education, apprenticeships, or advanced training for the semester following graduation;
4. The percentage of graduates who are employed by the end of the first quarter after they graduate (
5. Other appropriate indicators the LEA may choose to identify in its application, such as:
a. Rates of average daily attendance and year-to-year retention;
b. Achievement and gains in English proficiency of limited English proficient students;
c. The incidence of school violence, drug and alcohol use, and disciplinary actions;
d. The percentage of students completing advanced placement courses, and the rate of passing advanced placement tests (such as Advanced Placement, International Baccalaureate, and courses for college credit); and
e. Teacher, student, and parent satisfaction.
Applicants would be required to include in their applications baseline data for each of these indicators and identify performance objectives for each year of the project period. We further propose to require recipients of implementation grants to report annually on the extent to which each school achieved its performance objectives for each indicator during the preceding school year. We propose to require grantees to include in these reports comparable data, if available, for the preceding three school years so that trends in performance will be more apparent.
While creating smaller learning communities appeals to teachers, students, and parents for many reasons, their fundamental purpose is to improve academic achievement and to prepare all young people to participate successfully in postsecondary education or advanced training, the workforce, our democracy, and our communities. As Jacqueline Ancess, Associate Director of the National Center for Restructuring Education, Schools, and Teaching has written, “if the opportunity to develop close relationships with students and know them well is not leveraged on behalf of improving opportunities for their intellectual development, achievement, and success, the promise of these new small schools will be squandered.” (Urban Dreamcatchers: Launching And Leading New Small Schools. 1997. National Center for Restructuring Education, Schools, and Teaching). Assistance provided under the SLC program should also support and enhance the efforts of LEAs and schools to fulfill the ambitious goals of the No Child Left Behind Act of 2001.
For these reasons, it is important that projects measure their progress in improving student academic achievement and related outcomes. Two of the indicators we propose to use, student performance on reading/language arts and mathematics assessments and the graduation rate, are the same indicators used by States to measure the adequate yearly progress of LEAs and schools under Part A of Title I of ESEA. Performance objectives for these indicators should equal or exceed the measurable annual objectives established by the State in its approved accountability plan for Part A of Title I of ESEA.
In today's economy, completing some form of postsecondary education or training beyond high school is becoming a prerequisite to securing employment that pays family-supporting wages and offers opportunities for career advancement. Most parents and students understand this well, and they consider preparing young people for postsecondary education or further learning to be one of the central missions of the American high school. The third indicator we are proposing, entrance into postsecondary education or advanced training, will measure the success of LEAs and schools in fulfilling these expectations. Performance objectives for this indicator should exceed the baseline level of performance and give particular emphasis to narrowing any gaps among all students and between students and economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency.
Our high schools also must prepare young people to succeed in the workforce. All high school graduates should have the necessary skills to obtain gainful employment, whether they decide to work to help pay for postsecondary education and their living expenses or decide to enter the workforce full-time after high school. The extent to which graduates are able to find employment after leaving high school is another important measure of the success of a high school in meeting the needs of its students.
Certainly, LEAs and schools will have other goals they hope to achieve through the implementation or expansion of a smaller learning communities program. For this reason, we propose to give applicants for implementation grants the opportunity to identify and establish performance objectives for other indicators that they consider useful and appropriate, such as, for example, rates of average daily attendance or incidents of violence and drug and alcohol use.
We propose to require recipients of implementation grants to support an evaluation of the project that will provide information to the project director and school personnel that will be useful in gauging their progress and in identifying areas for improvement. We propose that each evaluation include an annual report for each of the three years of the project period and a final report that will be completed at the end of the fourth year of implementation. We would require grantees to submit each of these reports to the Department.
In addition, we propose to require that the evaluation be conducted by an independent third party whose role in the project is limited to conducting the evaluation.
Implementing or expanding a smaller learning community program is difficult and complex work that administrators, teachers, and other school personnel must carry out at the same time that they are carrying out other demanding, day-to-day responsibilities. An evaluation that provides regular feedback on the progress of implementation and its impact can help the project director and school personnel identify their successes and how they may need to revise their strategies to accomplish their goals. To be most useful, the evaluation should be objective and carried out by an independent third party who has no other role in the implementation of the project.
We propose to require applicants for implementation grants to include in their applications a management plan for the 12 months following the end of the 36-month project period, and a budget for these activities that will be supported by other Federal, State, local, or private funds. We also propose to require recipients of implementation
Implementation grants will be awarded for a 36-month project period. Fully implementing a smaller learning communities program, however, may require additional time. Implementation grants are also intended to provide the “seed capital” needed to support the initial implementation or expansion of a smaller learning community program. Other Federal, State, local or private funds must be used to continue and sustain the program. Requiring applicants to develop and submit a management plan, and accompanying budget, for the 12 months following the project period will provide information that is needed to assess the extent to which applicants will fully implement the smaller learning community program, as well as provide the resources needed to continue and sustain it at the end of the project period. The final evaluation report will provide information about the success of the grantee in accomplishing the tasks and objectives it describes in the management plan for the 12 months following the end of the project period.
Applicants should note that the requirements listed in this notice are material requirements. Failure to comply with any requirement or with any elements of the grantee's application may subject the grantee to administrative action, including but not limited to designation as a “high-risk” grantee, the imposition of special conditions, or termination of the grant. Circumstances that might cause the Department to take such action include, but are not limited to: The grantee's failure to show improvement on the required performance indicators by the end of the second year of implementation; the grantee's failure to demonstrate that performance remains above the baseline level; the grantee's failure to make substantial progress in completing the milestones outlined in the management plan as submitted in the application; the grantee's expenditure of funds in a manner that is inconsistent with the budget as submitted in the application. The grantee's failure to carry out its plans for sustaining the program into the fourth year of implementation may be taken into account into a future competition in accordance with 34 CFR 75.217(d)(3).
In addition to the definitions set out in the authorizing statute and 34 CFR 77.1, we propose that the following definitions also apply to this program:
Large High School: A large high school is an entity that includes grades 11 and 12 and has an enrollment of 1,000 or more students in grades 9 and above.
Smaller Learning Community: A smaller learning community is an environment in which a core group of teachers and other adults within the school know the needs, interests, and aspirations of each student well, closely monitor his or her progress, and provide the academic and other support he or she needs to succeed.
BIA School: A BIA school is a school operated or supported by the Bureau of Indian Affairs.
We propose that the following selection criteria be used to evaluate applications for new grants. The maximum score for all of these criteria is 100 points. The maximum score for each criterion or factor under that criterion is indicated in the parentheses.
(a) Need for the project. (10 points) In determining the need for the proposed project, we will consider the extent to which:
(1) (7 points) The applicant will devise a plan or plans to assist school(s) that have the greatest need for assistance relative to other high schools within the State, as indicated by—
(A) Student performance on the academic assessments in reading/language arts and mathematics administered by the State under Part A, Title I of the ESEA;
(B) Gaps in performance between all students and economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency on the academic assessments in reading or language arts and mathematics administered by the State under Part A, Title I of the ESEA
(C) The school's graduation rate, and gaps in the graduation rate between all students and economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency;
(D) Disciplinary actions and reported incidents of violence and of drug and alcohol use;
(E) The percentage of graduates who enroll in postsecondary education, apprenticeships, or advanced training in the semester following graduation, and gaps in the percentage of all students who enroll in postsecondary education, apprenticeships, and advanced training and that of economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency;
(2) (3 points) The applicant's planning activities will address effectively the needs it identified in paragraph (1);
(b) Foundation for planning. (30 points) In determining whether there is an adequate foundation for the development of an effective implementation plan, we will consider the extent to which:
(1) (6 points) Teachers, administrators, and other school staff within each school support the proposed planning project and will be involved actively in the development of an implementation plan, including, particularly, those teachers who will be directly affected by the plan.
(2) (6 points) Teachers, administrators, and other school staff within each school will be provided sufficient and appropriate professional development to enable them to participate effectively in developing the implementation plan.
(3) (6 points) Teachers, administrators, and other school staff within each school will be provided sufficient paid release time during the regular school day or compensated time outside school hours to participate actively in professional development, planning, and preparatory activities.
(4) (6 points) Parents, students, and other community stakeholders (such as institutions of higher education, employers, and community organizations, including local non-profit agencies, faith-based organizations, and other service organizations) support the proposed planning project and will be involved actively in the development of an implementation plan.
(5) (6 points) The implementation or expansion of a smaller learning community program is consistent with, and will advance State and local initiatives to improve student achievement and narrow gaps in achievement between all students and students who are economically disadvantaged, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency.
(c) Quality of project design. (40 points) In evaluating the quality of the project design, we will consider the extent to which the applicant will adequately and effectively investigate
(1) (10 points) Research-based strategies, services, and interventions that are likely to improve overall student achievement and other outcomes (including graduation and enrollment in postsecondary education) and narrow any gaps in achievement between all students and economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency.
(2) (10 points) Research-based strategies, services, and interventions to accelerate learning by students who enter high school with reading/language arts or mathematics skills that are significantly below grade level so that, by no later than the end of the 10th grade, they acquire the reading/language arts and mathematics skills they need to participate successfully in rigorous academic courses that will equip them with the knowledge and skills necessary to transition successfully to postsecondary education, an apprenticeship, or advanced training.
(3) (10 points) A high-quality program of sustained and intensive professional development that will be provided to teachers, administrators, and school staff to assist them in carrying out the implementation plan.
(4) (10 points) Strategies for using funds provided under the ESEA, the Carl D. Perkins Vocational and Technical Education Act, or other Federal programs, as well as local, State, and private funds, to carry out the implementation plan.
(d) Adequacy of resources. (20 points) In determining the adequacy of the financial and personnel resources to support effective planning, we will consider the extent to which:
(1) (8 points) The budget is adequate and funds will be used appropriately and effectively to develop a comprehensive implementation plan.
(2) (6 points) The time commitments of the project director and other key project personnel are appropriate and adequate to achieve the objectives of the proposed project.
(3) (6 points) The qualifications, including relevant training and experience, of the project director and other key project personnel.
(a) Need for the project. (10 points) In determining the need for the proposed project, we will consider the extent to which the applicant will:
(1) (5 points) Assist schools that have the greatest need for assistance, as indicated by, relative to other high schools within the State:
(A) Student performance on the academic assessments in reading/language arts and mathematics administered by the State under Part A, Title I of the ESEA;
(B) Gaps in the performance of all students and that of economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency on the academic assessments in reading or language arts and mathematics administered by the State under Part A, Title I of the ESEA.
(C) The school's graduation rate, and gaps in the graduation rate between all students and economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency.
(D) Disciplinary actions and reported incidents of violence and of drug and alcohol use;
(E) The percentage of graduates who enroll in postsecondary education, apprenticeships, or advanced training in the semester following graduation, and gaps in the percentage of students who enroll in postsecondary education, apprenticeships, and advanced training between all students and economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency.
(2) (5 points) Employ strategies and carry out activities in its implementation of the proposed project that address the needs it has identified in paragraph (1);
(b) Foundation for Implementation. (15 points) In determining the quality of the implementation plan for the proposed project, we will consider the extent to which:
(1) (3 points) Teachers within each school support the proposed project and have been and will continue to be involved in its planning, development, and implementation, including, particularly, those teachers who will be directly affected by the proposed project.
(2) (3 points) Administrators, teachers, and other school staff within each school support the proposed project and have been and will continue to be involved in its planning, development, and implementation.
(3) (3 points) Parents, students, and other community stakeholders (such as institutions of higher education, employers, and community organizations, including local non-profit agencies, faith-based organizations, and other service organizations) support the proposed project and have been and will continue to be involved in its planning, development, and implementation.
(4) (3 points) The proposed project is consistent with, and will advance, State and local initiatives to increase student achievement and narrow gaps in achievement between all students and students who are economically disadvantaged, students from major racial and ethnic groups, students with disabilities, or students with limited English proficiency.
(5) (3 points) The applicant demonstrates that it has reviewed relevant scientifically based and other rigorous research and carried out sufficient planning and preparatory activities, outreach, and consultation with teachers, administrators, and other stakeholders to enable it to implement the proposed project at the beginning of the school year immediately following receipt of an award.
(c) Quality of Project Design. (30 points) In determining the quality of the design of the project we will consider the extent to which, using funds provided by this program in conjunction with other Federal, State, local, or private funds, the proposed project will:
(1) (6 points) Implement strategies, new organizational structures, or other changes in practice that are likely to create an environment in which a core group of teachers and other adults within the school know the needs, interests, and aspirations of each student well, closely monitor his or her progress, and provide the academic and other support he or she needs to succeed.
(2) (6 points) Implement research-based strategies, services, and interventions that are likely to improve overall student achievement and other outcomes (including graduation and enrollment in postsecondary education) and narrow any gaps in achievement between all students and economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, or students with limited English proficiency, such as—
(A) More rigorous academic curriculum for all students, and the provision of academic support to struggling students who need assistance to master more challenging academic content;
(B) More intensive and individualized educational counseling and career and college guidance, provided through mentoring, teacher advisories, adult advocates, or other means;
(C) Strategies designed to increase average daily attendance, increase the
(D) Expanding opportunities for students to participate in Advanced Placement courses and academic and technical courses that offer both high school and postsecondary credit.
(3) (6 points) Implement accelerated learning strategies and interventions that will assist students who enter the school with reading/language or mathematics skills that are significantly below grade level that—
(A) Will serve all students who enter the school with reading/language arts or mathematics skills that are significantly below grade level;
(B) Are designed to equip participating students with grade-level reading/language arts and mathematics skills by no later than the end of 10th grade;
(C) Are grounded in scientifically based research;
(D) Include the use of age-appropriate instructional materials and teaching and learning strategies;
(E) Provide additional instruction and academic support during the regular school day, which may be supplemented by instruction that is provided before or after school, on weekends, and at other times when school is not in session;
(F) Will be delivered with sufficient intensity to improve the reading/language arts or math skills, as appropriate, of participating students; and
(G) Include sustained professional development and ongoing support for teachers and other personnel who are responsible for delivering instruction.
(4) (6 points) Provide high-quality, sustained and intensive professional development throughout the project period that—
(A) Improves the content knowledge of teachers of core academic subjects;
(B) Includes activities designed to enable all teachers of core academic subjects to become “highly qualified” as defined by ESEA by the end of the project period;
(C) Advances the understanding of teachers, administrators, and other school staff of effective, research-based instructional strategies for improving the academic achievement of students, including, particularly, students with academic skills that are significantly below grade level;
(D) Provides teachers, administrators, other school personnel, and parents with the knowledge and skills they need to participate effectively in the development and implementation of a smaller learning community, including professional development that improves the capacity of teachers to deliver instruction and support students within a smaller learning community;
(5) (6 points) Provide the participating schools sufficient flexibility and autonomy to enable school administrators, teachers, other school staff, and parents to participate as full partners in the implementation of the proposed project.
(d) Quality of the Management Plan. (25 points) In determining the quality of the management plan for the proposed project, we consider the following factors:
(1) (10 points) The adequacy of the management plan to achieve the objectives of the proposed project on time and within budget, including clearly defined responsibilities and detailed timelines and milestones for accomplishing project tasks.
(2) (5 points) The extent to which the time commitments of the project director and other key personnel, including the individuals who will have primary responsibility for implementing the project at each school, are appropriate and adequate to achieve the objectives of the proposed project.
(3) (5 points) The qualifications, including relevant training and experience, of the project director and other key personnel, including the individuals who will have primary responsibility for professional development and technical assistance, and the individuals responsible for implementing the project at each school.
(4) Adequacy of resources. (5 points) In determining the adequacy of resources for the proposed project, we consider:
(A) The extent to which the budget is adequate and costs are directly related to the objectives and design of the proposed project.
(B) The extent to which the applicant will use funds provided under the ESEA, the Carl D. Perkins Vocational and Technical Education Act, or other Federal programs, as well as discretionary grants provided by the State or private sources, to support the implementation of the project;
(C) The potential for continued support of the project after Federal funding ends.
(e) Quality of Project Evaluation. (20 points) In determining the quality of the project evaluation conducted by an independent, third party evaluator, we consider the following factors:
(1) (4 points) The extent to which the methods of evaluation are thorough, feasible, and appropriate to the goals, objectives, and outcomes of the proposed project.
(2) (4 points) The extent to which the evaluation will collect and annually report accurate, valid, and reliable data for each of the required performance indicators, including student achievement data that are disaggregated for economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency.
(3) (4 points) The extent to which the evaluation will collect additional qualitative and quantitative data that will be useful in assessing the success and progress of implementation, including, at a minimum:
(A) The results of multiple measures of student academic achievement, including results that are disaggregated for economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, students with limited English proficiency, and other subgroups identified by the applicant.
(B) Rates of average daily attendance, year-to-year retention, and graduation that are disaggregated for economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, students with limited English proficiency, and other subgroups identified by the applicant.
(C) Information on the satisfaction and perspectives of teachers, administrators, parents, and students at each school.
(D) Information on the extent to which the school is providing a safe and orderly environment for learning, such as the number of disciplinary actions, incidents of violence or drug or alcohol use, or other indicators identified by the applicant.
(E) Information on the progress of the school in creating an environment in which a core group of teachers and other adults within the school know the needs, interests and aspirations of each student well, closely monitor his or her progress, and provide the academic and other support he or she needs to succeed.
(4) (4 points) The extent to which the methods of evaluation will provide timely and regular feedback to the LEA and the school on the success and progress of implementation, and identify areas for needed improvement.
(5) (4 points) The qualifications and relevant training and experience of the independent evaluator.
We will announce the final priorities in a notice in the
This notice does not solicit applications. In any year in which we choose to use one or more of these proposed priorities, we invite applications through a notice in the
This proposed priority would support projects that will develop a plan to create or expand a smaller learning community program that will implement a coherent set of strategies and interventions that are designed to ensure that all students who enter high school with reading/language arts and mathematics skills that are significantly below grade level “catch up” quickly so that, by no later than the end of the 10th grade, they acquire the reading/language arts and mathematics skills they need to participate successfully in rigorous academic courses that will equip them with the knowledge and skills necessary to transition successfully to postsecondary education, an apprenticeship, or advanced training.
These accelerated learning strategies and interventions must:
(1) Be grounded in the findings of scientifically based and other rigorous research;
(2) Include the use of age-appropriate instructional materials and teaching and learning strategies;
(3) Provide additional instruction and academic support during the regular school day, which may be supplemented by instruction that is provided before or after school, on weekends, and at other times when school is not in session; and
(4) Provide sustained professional development and ongoing support for teachers and other personnel who are responsible for delivering instruction.
This proposed priority would support projects that will implement a coherent set of strategies and interventions that are designed to ensure that all students who enter high school with reading/language arts or mathematics skills that are significantly below grade level “catch up” quickly so that, by no later than the end of the 10th grade, they acquire the reading/language arts and mathematics skills they need to participate successfully in rigorous academic courses that will equip them with the knowledge and skills necessary to transition successfully to postsecondary education, an apprenticeship, or advanced training.
These accelerated learning strategies and interventions must:
(1) Be grounded in the findings of scientifically based and other rigorous research;
(2) Include the use of age-appropriate instructional materials and teaching and learning strategies;
(3) Provide additional instruction and academic support during the regular school day, which may be supplemented by instruction that is provided before or after school, on weekends, and at other times when school is not in session; and
(4) Provide sustained professional development and ongoing support for teachers and other personnel who are responsible for delivering instruction.
This notice of proposed requirements, priorities, and selection criteria has been reviewed in accordance with Executive Order 12866. Under the terms of the order, we have assessed the potential costs and benefits of this regulatory action.
The potential costs associated with this notice of proposed requirements, priorities, and selection criteria are those resulting from statutory requirements and those we have determined as necessary for administering this program effectively and efficiently.
In assessing the potential costs and benefits—both quantitative and qualitative—of this notice of proposed requirements, priorities, and selection criteria, we have determined that the benefits of the proposed requirements, priorities, and selection criteria justify the costs.
We have also determined that this regulatory action does not unduly interfere with State, local, and tribal governments in the exercise of their governmental functions.
This program is subject to Executive Order 12372 and the regulations in 34 CFR part 79. One of the objectives of the Executive order is to foster an intergovernmental partnership and a strengthened federalism. The Executive order relies on processes developed by State and local governments for coordination and review of proposed Federal financial assistance.
This document provides early notification of our specific plans and actions for this program.
You may view this document, as well as all other Department of Education documents published in the
To use PDF you must have Adobe Acrobat Reader, which is available free at this site. If you have questions about using PDF, call the U.S. Government Printing Office (GPO), toll free, at 1-888-293-6498; or in the Washington, DC, area at (202) 512-1530.
The official version of this document is the document published in the
Coast Guard, DHS.
Notice of withdrawal.
The Coast Guard is withdrawing its proposal to proceed with an interim rule establishing a program through which vessel owners can apply for approval of experimental ballast water treatment (BWT) systems installed and tested on board their operating vessels. Instead of a rulemaking, the Coast Guard will proceed with establishing this voluntary experimental approval program using a Coast Guard Circular. Details of the program are published in Coast Guard Navigation and Vessel Inspection Circular (NVIC) 01-04.
The project “Approval for Experimental Shipboard Installations of Ballast Water Treatment Systems, RIN 1625-AA66, is withdrawn on January 7, 2004.
If you have questions on this Notice of Withdrawal, call Mr. Bivan Patnaik, Environmental Standards Division, Coast Guard, telephone 202-267-1744, E-mail:
On May 22, 2001, we published a request for comments entitled “Approval for Experimental Shipboard Installations of Ballast Water Treatment Systems” in the
The Coast Guard has decided that the most efficient way of establishing this voluntary experimental approval program will be with the publication of a Coast Guard Circular. This will allow the Coast Guard to streamline the initiation process and proceed with the overall development of BWT technologies. Therefore, we are withdrawing this project from the rulemaking process. Additionally, we will use this withdrawal notice to respond to comments received in response to the May 22, 2001, request for comments. All comments and documents received in this docket will be available for use in future rulemakings.
This action is taken under the authority of: 16 U.S.C. 4711; Department of Homeland Security Delegation No. 0170.1.
The Coast Guard received comments from 12 sources on the notice with request for comments. We received comments from ship owners, vendors, industry associations, an environmental group, the United States Maritime Administration, and Transport Canada.
The Coast Guard's notice with request for comments described basic procedures and conditions envisioned for the approval program. Four commenters expressed overall approval for the program's concept, but recommended that several details be strengthened and clarified. One commenter criticized the plan and proposed instead a detailed multi-vessel installation project, claiming it would lower the risk of approving an ineffective technology. The latter suggestion indicates that we may not have been sufficiently clear about the basic purpose of the proposed program. The primary purpose of the experimental approval program is to provide assurance to ship owners involved in projects to test the effectiveness of prototype treatment systems under real-world, operational conditions. The commenter's counter-proposal seems more appropriate for evaluating the operation and maintenance aspects of an approved treatment system.
One commenter suggested we also consider ways to counteract hull fouling, another source of NIS. The Coast Guard agrees that fouling of submerged surfaces of vessels both exterior and interior (
Three commenters noted that a program designed solely for the United States would have international ramifications. One commenter asked us to notify Transport Canada of experimental installations affecting the Great Lakes, and two other commenters urged an international approach to experimental installations, possibly through approval by the International Maritime Organization (IMO), in order to make a United States program more attractive to international shippers.
We agree that close communication with pertinent Canadian agencies will be important and necessary for the shared waters of the Great Lakes. We also agree that a program acceptable to the international shipping community will have the greatest potential to facilitate significant advances in the development of effective technologies. The Coast Guard will keep the relevant Canadian and IMO entities fully informed of this program.
Many commenters wanted to suggest, or wanted the Coast Guard to clarify, the quantitative standards by which a ballast water treatment technology would be evaluated under this program. Given that the intent of this experimental approval program is to facilitate the development of ballast water treatment systems in the absence of a standard, we initially felt it would be inappropriate to create a quantitative “benchmark” that would act as a standard. However, following consideration of the comments on this issue, we agree that a set benchmark for entry into the Program will be useful and appropriate. Consequently, we will incorporate into the review process a minimum quantitative treatment efficacy, expressed as an effluent concentration, that proposed systems will be expected to meet. This will not be a “hard and fast” criterion, because the point of the Program is to facilitate the development of technology, and that goal is best served by a degree of flexibility on conditions for entry. Importantly, the quantitative benchmark we will incorporate will not substitute
Three commenters supported the concept of peer-review, although one commenter recommended that reviews by peer panels other than the one we describe below be accepted as well. We also received comments regarding the qualifications of panel members and problems with matching the review process with real world scheduling of commercial vessels.
We agree that peer-review of the proposed test plans is essential for assuring that systems granted experimental approval are evaluated rigorously and scientifically. It is our intent that peer-review panels be composed of experienced researchers in a range of disciplines, such as environmental engineering, water disinfection, marine ecology, naval architecture, and marine engineering. To the extent possible, panels will include researchers with direct experience in conducting experimental tests of engineering, technologies, and practices on-board operating vessels, including ballast water treatment and ballast water exchange. The Coast Guard or its agent will assemble the panel according to explicit criteria for ensuring an appropriate mix and level of expertise and preventing conflicts of interest. It is important to make the reviews as uniform as possible, and this will be achieved through adherence to an explicit process, including standard review questions addressing specific issues. While it is feasible that independent reviews conducted outside the Coast Guard process could evaluate application materials in a comparable manner, there would be inevitable loss of control over the process and increased potential for conflicts of interest and lack of uniformity.
Industry groups asked how rejected applications would be handled. Our intention is to fully justify and explain rejections, and to allow applicants to resubmit revised proposals without prejudice. Approval of the application will be the responsibility of the Coast Guard. In deciding whether to grant or deny approval, the Coast Guard will consider the findings of the peer-review panel regarding the supporting data and test plan. It must be realized that other criteria, such as those related to safety and conformity with all existing environmental regulations, could outweigh a favorable panel review of the study design. Finally, it is the Coast Guard's intention that this program facilitate the development of ballast water treatment technology, not hinder such efforts through capricious and arbitrary decisions.
Two commenters considered our documentation requirements for the testing process generally too complicated, too expensive, and not reflective of real-world field tests. We disagree that requiring comprehensive and scientifically credible test plans is not reflective of the “real world”. Only when test plans are carefully designed and executed according to accepted practices of science and engineering will the resulting data provide meaningful information about the capabilities of treatment systems operated under shipboard conditions. It is true that carefully designed and implemented shipboard tests are likely to be expensive. However, the documentation required for review and to maintain approved status is not more than would be expected of a credible test and evaluation project.
One commenter suggested that technologies should be approved for shipboard installation only after they pass full-scale prototype testing. Then, they should be installed on several ships (to provide data from different conditions and environments) rather than on a single vessel and that the Coast Guard should monitor results. The Coast Guard disagrees with this comment. The intent of the experimental approval program is to provide incentives to vessel owners to install and test experimental ballast water treatment systems onboard their operating vessels, not to approve ballast water treatment systems for general installation on several ships.
Two commenters requested clarification about the Letter of Commitment and about the ability of the shipping industry to commit to projects within a 90-day review process. Withdrawal by any party of commitments to conduct an experimental evaluation according to the approved plan would be grounds for rescinding the approved status of the treatment system unless the remaining parties provide assurances that the contributions of the withdrawing party can be replaced. We believe that review of application packages will entail a significant commitment of resources by the government. Letters of Commitment from all parties involved in the experimental installations are necessary to minimize the possibility of expending public resources on insufficiently supported projects. With regard to the industry's ability to commit to projects with a 90-day review period, we strongly believe that experimental plans should reflect the attributes and operating circumstances of the vessels on which the experiments will be performed. The uncertainties of certain sectors of the shipping industry may prevent some ship owners from participating. It is our intent to be as flexible as possible, but we also believe that adequate review should not be compromised.
Concerning residual concentrations of treatment chemicals, one commenter said that in multi-jurisdictional waters like the Great Lakes, we should require documentation that shows residual chemicals to be within the limits set by the most demanding jurisdiction. As stated in the notice with request for comments, applicants will have to provide evidence that their proposed systems meet all applicable regulatory requirements for protection of both the environment, and human health and safety.
Our suggested procedure requires applicants to provide documentation from preliminary, small-scale experiments. One commenter criticized our use of the phrase “smaller scale” because it might unduly penalize developers who wish to make incremental improvements on existing or future full-scale experiments. Our intent is that applicants demonstrate that the treatment systems have been carefully evaluated in prior tests. While we have assumed that in many cases, these earlier tests will have used smaller scale versions of treatment systems than those proposed for shipboard installation, we recognize that this will not necessarily be so in all cases. The important consideration will be that the submitted evidence indicates the achievement of a consistently high level of treatment by the experimental system.
Some commenters wanted to modify the “suite of organisms” proposed for demonstrating a prototype system's range of effectiveness, although to different ends. While one commenter suggested broadening the list by adding virus-like particles to the suite, another commenter called the suite too expansive and suggested we instead develop a shorter list of organisms of interest. One commenter said it is unlikely that any one technology would be effective across the entire suite, and we should therefore regard a technology that completely eliminates any one
We strongly believe that shipboard tests should evaluate effectiveness over as wide a range of organisms as possible. Furthermore, at this time there are no agreed-upon surrogates or indicator species for the diverse array of organisms likely to be encountered by a vessel. Organisms of interest will most likely be useful in laboratory or dockside tests and may be an important component in eventual general approval testing. However, shipboard tests should assess effectiveness as broadly as possible to provide the best understanding of various ballast water management approaches.
We proposed that applicants specify any conditions limiting the effectiveness of a treatment method on certain ships or routes. One commenter assumed the effectiveness of a treatment would not be affected by the ship's route. While we too anticipate that treatment systems will be developed for use under the broadest range of conditions, we do not wish to assume that route-specific treatment systems will have no place in the ballast water treatment market.
One commenter said the representative sampling criterion places a great burden on the investigator to predict what test protocol will satisfy the Coast Guard. This commenter said that if the Coast Guard plans to enforce compliance by using a set of sampling protocols, it should develop that set of protocols now and let it be used for testing purposes by vendors and ship owners. This response indicates a misunderstanding of the intended purpose of the experimental approval program. The experimental approval program is intended to foster the shipboard evaluation of treatment systems, not to serve as part of the general regulatory certification process. Our requirement for representative sampling is intended to assure that project protocols in any tests are able to detect true treatment effects, not introduce unintentional confounding variables. Rather than impose a requirement to use a specific approach or design, we instead expect that credible study plans will address this issue.
A group of commenters wanted us to clarify our statement that only a limited number of experimental systems would be approved. The group wanted to be sure we would not arbitrarily limit the number of test installations approved. We intend to limit the number of installations approved for any one experimental system, unless applicants can strongly justify that multiple ship installations are necessary and that sufficient resources are available to evaluate all units. The purpose of the program is not to facilitate the marketing of treatment systems, but to foster their development.
One commenter said that except for some specific line or tanker trades, it is commercially unreasonable to restrict approval to specific routes. We agree, and our experimental approval program will not have such blanket restrictions. However, treatment systems developed for specific trade routes, if they occur, may be so conditioned. Further, study plans for experimental installations on vessels with geographically diverse trading patterns will be expected to reflect, and take advantage of, spatial and temporal variability.
Two commenters agreed that approval for processes or systems shown to have adverse effects on the environment or human health should be revoked. One of the two commenters indicated that the stringent nature of the approval process makes blanket revocation unnecessary. Instead, case-by-case decisions could be made, taking into account vessel and route characteristics. We disagree because in general, blanket revocations are not anticipated for the simple reason that we do not foresee approving multiple installations of any one system. However, if evidence arises that an underlying unit process common to several systems has undesirable effects, then a wider revocation may be considered.
Several commenters expressed concern about our reporting requirements and recommended instead that approved installations be required to incorporate monitoring and recording systems or be subject to random vessel visits (equated with “real marketplace” conditions). A shipper considered the proposed requirement that principal scientists and engineers attend technical workshops at their own expense a negative incentive. Our reporting requirements are intended to ensure that approved shipboard evaluations are conducted according to the agreed-upon study plan, as well as to verify that treatment systems are used and operated as required under the conditions of approval. We expect that performance-monitoring equipment will be integral components of treatment systems, and that system output and performance will be addressed in the reports. Vessel inspections, by the U.S. Coast Guard or its agents, will be part of the monitoring regime to which approved systems will be subject. We agree that requiring attendance at technical workshops may require advance planning and budgeting; however, we feel that such interactions among those testing systems and the resource trustees will be valuable. We will, however, look for ways in which to subsidize or offset the costs of participation.
We received many comments pertaining to the proposed five-year approval period and “grandfather” clause. Several commenters signaled strong support for treating test systems as fully complying with ballast water treatment requirements for a period of years. One commenter called “grandfathering” a critical incentive for technology developers and vessel owners. However, several commenters asked for clarification regarding protection for installers in the event performance standards change during the test period. There was particular concern about making the approval of a ballast water treatment technology expire upon the updating of a standard. These specific comments touch on the primary intent of our experimental approval program, which is to foster research and development work on ballast water treatment systems under shipboard scales and conditions. We agree that uncertainty about the period for which approved systems will be accepted as meeting regulatory requirements will work counter to our intent. Therefore, the rule includes an explicit period of approval. Further, we intend to incorporate in the process for general approval of ballast water treatment systems a provision for considering data and information obtained during an experimental approval period. The installation approval process will be part of a proposed rulemaking on ballast water discharge standards. While the details remain to be resolved, the intent of this provision will be to avoid penalizing treatment system developers that have expended significant effort in meeting the requirements of the experimental approval program.
Several commenters favored periods of approval longer than the five years we proposed and suggested instead that experimental systems be approved for periods of 10-12 years. We consider the five-year period of approval to be sufficient, but seek to clarify that the five-year period will begin at the point in time that a specific vessel would be required to manage its ballast water through the use of mid-ocean exchange or other ballast water management practices including treatment systems. For vessels that install experimental
One commenter further recommended that approval should be conditional on making the experimental technology available for testing by credible agencies. Because our intent is to provide ship owners with assurance that experimental systems will be approved for a specific period of time, we respectfully disagree. For many, if not most of these systems, there may be only one prototype unit, and therefore it would be onerous to require that the developer and/or the ship owner provide additional units for use by others.
It is also our intent that the review process will guarantee credible testing of approved systems. Further, we anticipate that the general approval of ballast water treatment systems will involve objective testing of such systems by independent evaluators. We see no need to require participants to make their experimental systems available to others because this program is intended for treatment systems under development.
Several commenters expressed concern that a test vessel should be protected in the event a shipboard test program fails by giving the vessel some reasonable time to make retrofits without losing its approved status. They argued that letting the approval lapse if, after one year, the system had not been installed or testing had not begun, was unrealistic given the complexities of the shipping industry. Instead, these commenters recommended that an expiration date be set in a manner that accounts for the experiment's proposed timeline.
We agree that there needs to be a high degree of flexibility to accommodate unavoidable scheduling or engineering problems. The review process, therefore, will contain a provision for negotiating schedules for implementation based on specific circumstances and for reacting to unexpected process failures or engineering problems.
Some commenters asked us to consider “grandfathering” for those vessels that have already installed experimental ballast water management technology prior to implementation of a Coast Guard policy on testing. One commenter said that numerous cruise ships have already installed experimental technology and should be included in an incentive program so as not to be penalized for being proactive. The commenter advocated streamlining the application and approval process because the installation can already demonstrate results. We agree that owners who have already installed experimental equipment should not be penalized for their proactive efforts. Vessel owners with experimental systems installed prior to implementation of this program will be able to apply for approval. However, approval will be dependent on an evaluation of the experimental study plan and results to ensure that all approvals are subject to the same degree of rigorous review.
One commenter stressed the importance of increasing financial support for research and development of sampling and evaluation protocols.
Another commenter recommended the Smithsonian Environmental Research Center as an excellent source of testing protocols.
Three commenters discussed specific treatment methods in detail, and one of these also suggested criteria for any system design.
While these are all notable comments with clear relation to the broad issue of experimental evaluation of treatment systems, they are not directly relevant to the issue of conditional Coast Guard approvals for experimental systems.
We appreciate all comments received and will use them as we develop the Shipboard Technology Evaluation Program.
Coast Guard, DHS.
Notice of availability.
The U.S. Coast Guard is announcing an innovative program that will allow vessel owners/operators to apply for acceptance of vessels, permitting them to install and test experimental ballast water treatment systems. This program will facilitate the development of effective ballast water treatment technology, which will create more options for vessels seeking alternatives to ballast water exchange. Details of the program are published in Coast Guard Navigation and Vessel Inspection Circular (NVIC) 01-04.
This program is effective and the NVIC is available on January 7, 2004.
Applicants interested in receiving NVIC 01-04 and/or application documents for the Shipboard Technology Evaluation Program should send requests to the U.S. Coast Guard Headquarters (G-MSO-4), Room 1601, 2100 2nd Street SW., Washington DC 20593. The NVIC is also located at:
If you have questions on this Notice, call Mr. Bivan Patnaik, Environmental Standards Division, Coast Guard, telephone 202-267-1744, e-mail:
Nonindigenous species (NIS) are being unintentionally introduced into U.S. waters via ballast water discharge. These introductions are posing a serious threat to biological diversity, coastal infrastructures, and marine and freshwater resources. As a result, the Coast Guard has established the Shipboard Technology Evaluation Program (STEP). STEP will facilitate the development of experimental ballast water treatment technologies, and allow the Coast Guard to evaluate these technologies.
This will greatly assist the Coast Guard in evaluating ballast water treatment technologies to prevent the introduction and spread of NIS. For more information on this program, contact us as indicated in
Centers for Medicare & Medicaid Services (CMS), HHS.
Interim final rule with comment period.
This interim final rule implements the provisions of the Medicare Prescription Drug, Improvement, and Modernization Act (MPDIMA) of 2003, Pub. L. 108-173, which are applicable in 2004 to Medicare payment for covered drugs and physician fee schedule services. These provisions revise the current payment methodology for Part B covered drugs and biologicals that are not paid on a cost or prospective payment basis; make changes to Medicare payment for furnishing or administering drugs and biologicals; revise the geographic practice cost indices and change the physician fee schedule conversion factor. The 2004 physician fee schedule conversion factor will be $37.3374. The 2004 national anesthesia conversion factor (prior to making adjustment for the geographic practice cost indices) will be $17.4969. The information contained in this final rule related to payment under the physician fee schedule supercedes the information contained in the November 7, 2003, final rule to the extent that the two are inconsistent. All other provisions of the November 7, 2003, final rule are unchanged unless otherwise noted. This rule also extends the “opt-out” provisions of 1802(b)(5)(3) of the Social Security Act to dentists, podiatrists, and optometrists.
In commenting, please refer to file code CMS-1372-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.
Mail written comments (one original and two copies) to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1372-FC, P.O. Box 8013, Baltimore, MD 21244-8013.
Please allow sufficient time for us to receive mailed comments on time in the event of delivery delays.
If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) to one of the following addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-8013.
(Because access to the interior of the HHH Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available if you wish to retain proof of filing by stamping in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and could be considered late.
For information on viewing public comments, see the beginning of the
Jennifer Fan, (410) 786-0548 regarding Medicare payment for Part B covered drugs and biologicals.
Rick Ensor, (410) 786-5617 regarding provisions related to geographic practice cost indices.
Diane Milstead, (410) 786-3355 for provisions related to the physician fee schedule.
Gaysha Brooks, (410) 786-9649 for questions related to obtaining Medicare physician fee schedule information from the CMS Web site.
This
Information on the physician fee schedule and pricing files can be found on our home page. You can access this data at the following Web site:
1. Go to the CMS home page (
2. Place your cursor over the word “Professionals” in the blue area near the top of the page. Select “Physicians” from the drop-down menu.
3. Scroll down and under “Payment/Billing” select “Physician Fee Schedule”.
The Physician Fee Schedule pricing information is contained in two public use files.
(1)
(2)
Another file that may prove useful is the
1. Go to the CMS home page (
2. Place your cursor over the word “Professionals” in the blue area near the top of the page. Select “Physicians” from the drop-down menu.
3. Scroll down and under “Payment/Billing” select “Medicare Payment Systems.”
4. Scroll down and under Coding Files select “Zip Code to Carrier Locality File.”
Medicare Part B covers a limited number of prescription drugs and biologicals. For the purposes of this final rule, the term “drugs” will hereafter refer to both drugs and biologicals. Currently, covered Medicare drugs generally fall into three categories: drugs furnished incident to a physician's service, durable medical equipment (DME) drugs, and drugs specifically covered by statute (for example, oral immunosuppressive drugs). Prior to January 1, 2004, drugs not paid on a cost or prospective payment basis are paid based on the lower of the actual charge or 95 percent of the average wholesale price (AWP) (section 1842(o)(1) of the Social Security Act (the Act), as added by section 4556 of the Balanced Budget Act of 1997 (Pub. L. 105-33)). In December 2000, the Congress passed the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA). Section 429(a) of BIPA required the GAO to conduct a study of the current payment methodology. Section 429(b) of BIPA requires the Secretary, notwithstanding any other provision of law, to revise the Medicare payment methodology for drugs based on the GAO study. In September 2001, the GAO presented its study to the Congress in a report titled, “Medicare: Payments for Covered Outpatient Drugs Exceed Providers’ Costs” (GAO-01-1118). Consistent with the recommendations in the report, we published four options for revising the current drug payment system in a proposed rule published August 20, 2003 (68 FR 50428), in the
Section 1848(e) of the Act requires that payments vary among Medicare physician fee schedule areas according to the extent resource costs vary, as measured by Geographic Practice Cost Indices (GPCIs) for each of the three fee schedule components—work, practice expense and malpractice. As explained later in this document, for services provided on or after January 1, 2004, and prior to January 1, 2007, section 412 of MPDIMA requires that the work GPCI cannot be less than 1.00. Section 602 of MPDIMA requires that work, practice
Sections 1848(d) and (f) of the Act establish a formula for determining the physician fee schedule update and conversion factor (CF). As indicated in the November 7, 2003, final rule (68 FR 63239), the application of the formula in the statute resulted in a 2004 physician fee CF of $35.1339, a reduction of 4.5 percent. However, section 601 of MPDIMA requires that the update to the physician fee schedule CF for 2004 cannot be less than 1.5 percent. We are using this final rule to announce the CF and GPCIs that will be used to determine physician fee schedule rates in 2004.
Subject to the other provisions of MPDIMA, section 303(b) of MPDIMA specifies that drugs not paid on a cost or prospective payment basis will be paid at 85 percent of the average wholesale price (AWP) determined as of April 1, 2003.
Section 303(b)(1) of MPDIMA specifies that for CY 2004 the following drugs will be paid at 95 percent of the AWP:
• Blood clotting factors;
• A drug or biological furnished during 2004 that was not available for Medicare payment as of April 1, 2003;
• Pneumococcal and influenza vaccines as well as hepatitis B vaccine that is furnished to individuals at high or intermediate risk of contracting hepatitis B (as determined by the Secretary); and
• A drug or biological furnished during 2004 in connection with the furnishing of renal dialysis services if separately billed by renal dialysis facilities.
Section 303(b)(1) of MPDIMA also specifies that infusion drugs will be paid at 95 percent of the AWP in effect on October 1, 2003, when furnished through a covered item of durable medical equipment.
Section 303(b)(2) of MPDIMA specifies that the payment for a drug contained in the table entitled “Table 3—Medicare Part B Drugs in the Most Recent GAO and OIG Studies” published in the August 20, 2003, proposed rule (68 FR 50445) will be the percentage of the AWP indicated in the column entitled “Average of the GAO and OIG data (percent)”. This percentage will be applied to the AWP determined as of April 1, 2003. However, in the event that the percentage from Table 3 is less than 80 percent, the percentage applied to the AWP determined as of April 1, 2003, will be 80 percent. Table 1 below is a reprint of Table 3 from the August 20, 2003, proposed rule. Table 2 highlights the relevant column from the August 20, 2003, proposed rule table and applies the 80 percent limit where applicable.
We note that there was a typographical error in Table 3 as published on August 20, 2003, for J1642 “Heparin Sodium Lock Flush”. The percentage in the column specified in MPDIMA is missing for J1642. Given that this column is calculated as the average of the values in the preceding two columns for the drugs in this table, we will treat the missing value as the average of the values in the prior two columns for J1642, namely 66 percent. This is the percentage that would have been in that column in the table in the absence of the typographical error. We believe that this correction is consistent with Congress' intent to revise the percentage based on the average of accurate GAO and OIG data. This percentage will be subject to the 80 percent limitation described above.
We also note that there was another typographical error in Table 3 as published on August 20, 2003, for J9390 “Vinorelbine Tartrate (Navelbine).” The percentage listed under the column titled “GAO Average Widely Available Price as a Percent of AWP (2001)” for J9390 in Table 3 is incorrect and should not have been listed at all since GAO did not include this drug in its study. The percentage under the column titled “OIG Median Catalogue Price as a Percent of AWP (2000)” is correct. Since the column specified in MPDIMA is calculated as the average of the values in the preceding two columns for the drugs in this table, the correct percentage listed for J9390 under this column will be 81 percent based on the data from OIG. We believe that this correction is also consistent with Congress' intent to revise rates based on the average of accurate GAO and OIG data. This is the percentage that would have been in that column in the table in the absence of the typographical error.
Section 303(b)(2) of MPDIMA also provides an opportunity for the manufacturer of a drug to submit data and information requesting a different percentage from the percentage indicated in Table 1A or the 85 percent general rule. The Secretary may adjust the percentage based on this data and information beginning April 1, 2004. Section 303(b) of MPDIMA specifies that this data and information can be submitted after October 15, 2003, and before January 1, 2004. As required by the statute, manufacturers need to submit this data and information before January 1, 2004. Manufacturers may supplement this data and information; however, any additional supplemental information should be received by CMS before 5 p.m. e.s.t. on January 16, 2004. We will use the supplemental information to help us evaluate the initial submission of data and information.
We expect that the data and information submitted by a manufacturer would include the manufacturer's average sales price for the drug for the most recent quarter available. For the purposes of the exceptions process, the manufacturer's average sales price is calculated as the manufacturer's sales to all purchasers in the United States (excluding sales exempted below) for the quarter divided by the total number of units of such drug or biological sold by the manufacturer in that quarter. The submission should also specify the units used in the calculation (for example, micrograms).
In the calculation of the manufacturer's average sales price, a manufacturer should include volume discounts, prompt pay discounts, cash discounts, free goods that are contingent on any purchase requirement, chargebacks, and rebates (other than rebates under the Medicaid program). To the extent that there is a lag in the availability of this information applicable to the quarter, the manufacturer should apply a methodology based on the most recent 12-month period available to estimate costs attributable to these price concessions. The manufacturer should submit a description of the methodology used to estimate these costs.
In the calculation of the manufacturer's average sales price, a manufacturer should exclude the following sales as defined for the Medicaid best price calculation under section 1827(c)(1)(C)(i) of the Act:
1. Sales to the Indian Health Service, the Department of Veterans Affairs, a state home as defined for the purposes of the Medicaid best price calculation, the Department of Defense, the Public Health Service and entities described in section 340(B)(a)(4) of the Public Health Act;
2. Sales under the Federal Supply Schedule of the General Services Administration;
3. Sales under a State pharmaceutical assistance program; and
4. Any depot sales and single award contract sales as defined for the purposes of the Medicaid best price calculation.
A manufacturer should also exclude sales at a nominal charge. Sales at a nominal charge are defined as sales below 10 percent of the average calculated as described above. In other words, after following the methodology described above, sales below 10 percent of the resulting average should be excluded and the average recalculated. The result of this final calculation is the manufacturer's average sales price for the purpose of the exceptions process.
Note that we would base any changes to the percentage indicated in Table 1 or the 85 percent general rule only on data that we could make available to the public.
Section 303(b)(2) of MPDIMA also specifies that we may adjust the percentage effective January 1, 2004, based on data and information that a manufacturer submitted by October 15, 2003. We accepted data from the manufacturer of two biologicals: imiglucerase and alglucerase. The data and information submitted by the manufacturer indicated that the manufacturer's average sales price was 94 percent of the average wholesale price. Based on this data, we will pay for these two biologicals when furnished in 2004 at 94 percent of the average wholesale price determined as of April 1, 2003.
Section 305(a) of MPDIMA specifies that inhalation drugs furnished through durable medical equipment covered under 1861(n) of the Act will be paid in accordance with section 1842(o)(4) of the Act, as added by section 303(b)(2) of MPDIMA. The methodology for determining the payment for a drug under section 303(b)(2) of MPDIMA is described above in section II.A.2 of this rule.
Section 303(e)(2) of MPDIMA provides that the Secretary shall pay a pharmacy supplying fee, less applicable deductible and coinsurance, for immunosuppressive drugs described in section 1861(s)(2)(J) and oral anti-cancer and anti-nausea drugs described in subparagraph (Q) and (T) of the same section as determined appropriate by the Secretary. We believe that the payment of this fee should be bundled into the current payment for these drugs and the 2004 payment amounts specified in section 303(b) of MPDIMA. We do not have data indicating that the 85% figure is insufficient to cover the cost of supplying these drugs. However, for 2005, we will re-examine this issue in light of the average sales price (ASP) data that will be submitted by manufacturers.
As indicated above, sections 303 and 304 of MPDIMA amend section 1848 of the Act for physician fee schedule payments made beginning January 1, 2004. We are describing our implementation of the parts of sections 303 and 304 which have a January 1, 2004, effective date.
Section 303(a)(1) of MPDIMA amends section 1848(c) of the Act to require changes to the practice expense and physician work relative value units (RVUs) used to determine payment for drug administration services. In general, section 1848(c)(2)(B)(ii)(II) provides that the Secretary shall review and may make adjustments to the RVUs if the changes do not cause the amount of expenditures to increase or decrease by more than $20 million. Section 303(a) of MPDIMA amends section 1848(c)(2)(B) of the Act to add a new clause (iv) that exempts from this limitation, any additional expenditures in 2004 attributable to:
(1) The increase in practice expense RVUs for drug administration services resulting from the use of a practice expense survey meeting specific criteria described in the statute;
(2) The increase in practice expense RVUs resulting from using survey data on the compensation of clinical oncology nurses; and
(3) New physician work RVUs that we are adding to the drug administration services consistent with the new statutory provisions.
In addition, section 303(a)(1) of MPDIMA also modifies section 1848(c)(2)(B) of the Act to provide an exemption from the budget neutrality requirements in 2005 or 2006 for further increases in practice expense RVUs for drug administration services that may result from using additional survey data from physician specialties meeting specific criteria that we will discuss in
In general, we have met the budget neutrality requirements in the statute by either applying an adjustment to the physician fee schedule CF or to the RVUs themselves. However, section 303(a) of MPDIMA specifically amends the statute to exempt the additional expenditures that result from changes to the RVUs for drug administration services from the budget neutrality requirements. Therefore, we will make no changes to the physician fee schedule CF or physician work RVUs to account for physician work RVUs being added to drug administration services. We will add the additional expenditures as a result of these provisions to the expenditure base in applying our practice expense methodology.
Section 303(a)(1)(B) of MPDIMA amends section 1848(c)(2) of the Act by adding new subparagraph (H), “Adjustments in Practice Expense Relative Value Units for Certain Drug Administration Services beginning in 2004”. Subparagraph (H)(i) requires the Secretary to determine the practice expense RVUs for 2004 using practice expense surveys submitted to the Secretary as of January 1, 2003, by a physician specialty organization in accordance with section 212 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 if the survey: (1) Covers practice expenses for oncology drug administration services; and (2) meets criteria established by the Secretary for acceptance of such surveys.
Section 212 of the BBRA directed the Secretary to establish a process under which we would accept and use, to the maximum extent practicable and consistent with sound data practices, data collected or developed by entities and organizations. In an interim final rule with comment published in the
The American Society of Clinical Oncology (ASCO) provided us with a supplemental survey prior to January 1, 2003, that includes expenses associated with the administration of chemotherapy drugs. While the survey meets the criteria we established, we initially decided not to use the information because of concerns about the data (for more information, see the December 31, 2003, final rule (67 FR 79973)). In a proposed rule published in the
Consistent with section 1848(c)(2)(H)(i) of the Act, we are using the ASCO survey to determine the practice expense RVUs for physician fee schedule services furnished on or after January 1, 2004, because it: (1) Was submitted prior to January 1, 2003; (2) includes expenses for drug administration services; and (3) meets criteria we have established for use of surveys.
Section 303(j) of MPDIMA applies the amendments made by section 303 for payments for drugs or biologicals and drug administrative services to physicians in the specialties of hematology, hematology/oncology and medical oncology. Section 304 indicates that: “Notwithstanding section 303(j), the amendments made by section 303 shall also apply to payments for drugs or biologicals and drug administration services furnished by physicians in specialties other than the specialties of hematology, hematology/oncology and medical oncology.”
Because the section 303 (a)(1) provisions apply to hematology, hematology/oncology and medical oncology, we will use the supplemental survey submitted by ASCO for CMS specialty codes 82 (hematology), 83 (hematology/oncology) and 90 (medical oncology).
The Conference Report indicates that section 304 requires the Secretary to disregard the (section 303) exemption and apply the adjustments in section 303 to these other specialties. The Conference report further indicates the intent in drafting the provisions in this fashion: “The intent in drafting the two sections in this manner is to segregate the savings achieved from adjustments to payments to oncologists from savings derived from other physician specialties. The specialties to which the provisions apply are the specialties as used by the carriers in administering Medicare.”
The purpose of the separation is only to display the budget scoring effects separately for oncologists from other physician specialties. There is
When we use supplemental survey data, we have generally blended the supplemental survey data with prior survey data from the American Medical Association's Socioeconomic Monitoring Survey (SMS). However, section 1848(c)(2)(H)(i) of the Act indicates that the Secretary should use survey data that meets the specific criteria specified in the statute. We are using the ASCO survey data and are not blending it with the prior SMS data.
Because we are not blending the ASCO survey with the SMS data, we are adopting a consistent policy in 2004 for survey data received in 1999 from the Society for Thoracic Surgery (STS). That is, we will use the STS supplemental survey data without blending it with the SMS data. However, we have not made a final decision and will continue to consider the issue of whether to blend supplemental survey with prior SMS data or to use specialty submitted supplemental surveys without blending. At this time, we are not using the ASCO and STS cases as precedent for our consideration of future survey data. While some may argue that the inclusion of newer, more specific survey data will improve the precision of the data underlying the calculation of the practice expense resource based RVUs, and lead to more stability in the practice expense methodology, it can also be argued that a specialty society would only undertake a survey (arguing that existing SMS data were not sufficiently representative of the specialty's practice expenses) if it believed that higher practice expense payments for that specialty could be achieved by submitting additional data. We do not believe that it would be prudent for the program to commit to the use of supplemental survey data without blending it with the SMS data for any and all future supplementary surveys. We will continue to consider this issue in 2004 when we make proposals for the 2005 physician fee schedule. At this time, we suggest that supplemental
We invite comments on this issue and on appropriate criteria for determining when to employ specialty submitted supplemental surveys without blending.
Table 2 shows the revised practice expense per hour for each cost pool for the specialties of cardiac and thoracic surgery and oncology, hematology/oncology and hematology.
Section 1848(c)(2)(H)(ii) of the Act (as added by section 303(a)(1) of MPDIMA) specifies that if a survey meets the criteria described above (that is, the survey that is submitted prior to January 1, 2003, meets criteria established by the Secretary, etc.) and includes data on wages, salaries and compensation of clinical oncology nurses, the Secretary will use the data in the methodology for determining the practice expense RVUs. The ASCO survey meets the criteria specified in the statute and also includes data on oncology nursing compensation. For this reason, we are using information from the survey to determine the wage rate per minute for oncology certified nurses (OCN). The OCN is included as a practice expense input for the nonchemotherapy infusion codes (90780 through 90781) and the chemotherapy administration codes (96400 through 96549). Using information from the ASCO survey, we determined a wage rate of 0.79 per minute (increase from the 0.56 per minute we are currently using) for the OCN. We used this revised wage rate to determine the practice expense RVUs for the drug administration services shown in Addendum B.
For services furnished on or after January 1, 2004, section 1848(c)(2)(H)(iii) of the Act (as added by section 303(a)(1) of MPDIMA) requires the Secretary to establish work RVUs for drug administration services equal to the work RVUs for a level 1 office medical visit for an established patient (CPT code 99211). Section 1848(c)(2)(H)(iv) of the Act defines drug administration services as those classified as of October 1, 2003, within any of the following groups: therapeutic or diagnostic infusions (excluding chemotherapy); chemotherapy administration services; and therapeutic, prophylactic, or diagnostic injections for which there are no work RVUs assigned and for which national RVUs have been assigned.
CPT code 99211 is a level 1 established patient office visit with physician work RVUs of 0.17. Consistent with the statute we are adding physician work RVUs of 0.17 to the following drug administration services: CPT codes 90780 through 90781, 90782 through 90788, 96400, 96408 through 96425, 96520, and 96530.
Currently, section 15010 of the Medicare Carriers Manual (MCM) does not allow payment for CPT codes 90782, 90783, 90784 and 90788 unless these are the only physician fee schedule services provided on that day. We do pay separately for cancer chemotherapy injections (CPT codes 96400-96549) in addition to an office visit (CPT codes 99211-99215) furnished on the same day by the same physician. CPT code 99211 does not require a face-to-face encounter between the physician and the patient like other office visit services (CPT codes 99212-99215) and can be used be physicians supervising a nurse performing chemotherapy administration. Currently, physicians typically bill for CPT code 99211 approximately 34 percent of the time that they are also providing a drug administration service. We believe that adding physician work to the drug administration services will subsume the supervision that physicians billing for a 99211 on the same day are typically providing. Therefore, we will no longer allow for 99211 to be billed on the same day as a chemotherapy administration service.
Although less common than CPT 99211, physicians also bill for other office visit (CPT codes 99212-99215) provided on the same day as chemotherapy administration. We will continue to allow other office visits to be billed on the same day as a drug administration service with modifier 25 indicating that a separately identifiable evaluation and management service was provided. This policy will make our practice with chemotherapy administration consistent with all other physician fee schedule services where we require use of modifier 25 if a separately identifiable evaluation and management service is provided on the day as a procedure. Section 15400(D) of the Medicare Carrier Manual (MCM) describes Medicare payment policy with respect to chemotherapy administration and “incident to” services provided on the same day. We will be revising section 15400 of the MCM (in addition to section 15010 that describes “bundled services”) to reflect that CPT code 99211 and a chemotherapy administration service cannot be billed for the same patient on a single day.
Section 303(a)(1) of MPDIMA also modifies section 1848(c)(2)(B) of the Act to provide an exemption from the budget neutrality requirements in 2005 or 2006 for further increases in practice expense RVUs for drug administration services that may result from using additional survey data from physician specialties meeting specific criteria. Section 1848(c)(2)(I) of the Act specifies that the exemption from budget neutrality will apply for any survey (other than the ASCO survey that meets the exemption requirement specified by another provision of the statute) submitted by a specialty group where 40 percent or more of its payments for Part B services are attributable to the administration of drugs in 2002 as determined by the Secretary. The statute indicates that the survey must include expenses for the administration of drugs and must be received by the Secretary prior to March 1, 2004, to determine the 2005 practice expense RVUs and prior to March 1, 2005, to determine the 2006 practice expense RVUs.
We have reviewed Medicare allowed charge data for 2002. Based on the 2002 data, we found that the specialties of gynecology/oncology (specialty code 98) rheumatology (specialty code 66) and urology (specialty code 30) received more than 40 percent of total Part B revenues from drugs. We will apply the exemption from budget neutrality specified in section 1848(c)(2)(I) of the Act for additional expenditures that result from the increases in drug administration practice expense RVUs in 2005 or 2006 resulting from use of a survey that is submitted timely by any of these specialties and otherwise meets criteria we have established for use of supplemental surveys. Hematology (specialty 82), hematology/oncology (specialty 83) and medical oncology (specialty 90) also receive more than 40 percent of their Medicare revenues from drugs. However, we are already using the ASCO survey for these specialties and the increase in payment for drug administration is exempt from budget neutrality by another provision of the statute.
Section 1848(c)(2)(J) of the Act requires the Secretary to promptly evaluate existing drug administration codes for physicians' services to ensure accurate reporting and billing for such services, taking into account levels of complexity of the administration and resource consumption. The statute further specifies that the Secretary will use existing processes for the consideration of coding changes and, to the extent changes are made, will use the processes to establish relative values for these services. The Secretary is also required to consult with physician specialties affected by the provisions that change Medicare payments for drugs.
We expect to review this issue in the context of all the payment changes being made by the statute to Medicare payment for drug administration in order to assure accurate reporting and billing for such services taking into account levels of complexity of the administration and resource consumption. The existing processes we plan to use include review by our Physician's Regulatory Issues Team (PRIT) and consultation with the AMA's CPT Editorial Committee and physician specialties affected by changes in payment for drugs and drug administration. The PRIT, an internal CMS group that is working to eliminate unnecessary regulations, is reviewing the issue of coding for drug administration services including section 15400 of the Medicare Carriers Manual (MCM) that currently governs Medicare policy with respect to use of CPT codes in the 96400 through 96549 series for chemotherapy administration.
The nonphysician work pool is a special interim methodology that we use to determine practice expense RVUs for many services that do not have physician work RVUs. The drug administration codes listed above are currently valued using the nonphysician work pool methodology. Because we are now assigning work RVUs to these drug administration codes, they will no longer be included in the nonphysician work pool. Practice expense RVUs for these services will be computed using the standard practice expense methodology that applies to all other physicians' services.
Section 303(a)(2) of MPDIMA requires the Secretary to make adjustments to the nonphysician work pool methodology for the determination of practice expense RVUs under the physician fee schedule so that the practice expense RVUs for services determined under such methodology are not affected relative to the practice expense RVUs of services not determined under such methodology as a result of the amendments made by section 303(a)(2) of MPDIMA. If we made no other changes, removing drug administration codes from the nonphysician work pool would result in a reduction to the practice expense RVUs for services remaining in the nonphysician work pool. Consistent with section 303(a)(1) of MPDIMA, we are making two changes to the nonphysician work pool methodology so that the practice expense RVUs for nonphysician work pool services are not affected relative to other services.
First, we are changing the practice expense per hour assigned to the nonphysician work pool. In place of the “all physician” average, we are using a weighted average practice expense per hour of the specialties that perform the services affected by its calculations. Specifically, we will use the following revised data in the practice expense methodology for services remaining in the nonphysician work pool:
Second, we are adjusting the clinical staff times used in the creation of the pool. By definition, nonphysician work pool services do not involve the physician and have no physician time. To create the nonphysician work pool, we have used clinical staff time per procedure in the computation. We will now use the total staff time rather than the previously utilized maximum staff time for developing the 2004 physician fee schedule. Consistent with section 303(a)(2) of MPDIMA, the change to the practice expense per hour and staff time will result in no reduction to the practice expense RVUs for the services remaining in the nonphysician work pool once drug administration services are removed. By using the maximum staff time, we are assuming that clinical staff are working concurrently. However, it is possible that clinical staff are working sequentially and it would be appropriate to use the total staff time for each service. We are proposing to use the total staff in place of the maximum staff for developing the 2004 physician fee schedule since each are equally likely to address staff time arrangements for non-physician work pool services and the latter approach will assist in meeting the statutory directive that payment for non-physician work pool services not be affected by the changes we are making to drug administration services.
Section 303(a)(3) of MPDIMA requires the Secretary to review the policy as in effect October 1, 2003, for section 1848 of the Act for the administration of more than one drug or biological to an individual on a single day through the push technique. Subsequent to that review, the Secretary will modify the
In the November 25, 1991,
Upon review of this issue and in acknowledgement that there are additional resources involved in administering each subsequent drug which should be considered in a resource-based payment system, we are changing our policy and will allow for CPT code 96408 to be reported once per day for each drug administered. The effective date for this change is for services furnished on or after January 1, 2004. We will modify section 15400 of the manual consistent with this change. In addition, as previously mentioned, the PRIT will be reviewing the issue of use of the chemotherapy administration codes in the 96400 CPT code series and Medicare's manual provisions on their use.
Section 303(a)(4) of MPDIMA provides for a transitional adjustment to Medicare payment for drug administration services to reflect implementation of the amendments made by section 303 of MPDIMA affecting Medicare's payments for drugs. Specifically, section 303(a)(4) of MPDIMA requires Medicare to increase the physician fee schedule amounts otherwise determined by 32 percent for 2004 and 3 percent for 2005. Thus, we will determine the payment for CPT codes 90780 through 90781, 90782 through 90788, 96400, 96408 through 96425, 96520, and 96530 based on the work, practice expense and malpractice RVUs shown in Addendum B and the 2004 CF of $37.3374. Consistent with section 303(a)(4) of MPDIMA, we will increase the physician fee schedule amount by an additional 32 percent for 2004. (The physician fee schedule amounts applicable in 2005 will be increased by 3 percent.)
The Act requires that payments vary among physician fee schedule areas according to the extent that resource costs vary as measured by the Geographic Practice Cost Indices (GPCIs) for each of the three fee schedule components: work, practice expense, and malpractice.
Section 412 of MPDIMA amended section 1848(e)(1) of the Act and establishes a floor of 1.0 for the work geographic index for any locality to be used for purposes of payment for services furnished on or after January 1, 2004, and before January 1, 2007. In addition, section 602 of MPDIMA further amended section 1848(e)(1) of the Act for purposes of payment for services furnished in Alaska under the physician fee schedule on or after January 1, 2004, and before January 1, 2006, and sets the practice expense, malpractice and work indices at 1.67 if the index would otherwise be less than 1.67.
Based on these changes to the Act, we are revising the addenda published in the November 7, 2003, final rule concerning the transitional 2004 and full 2005 GPCIs (Addendum D and Addendum E, respectively). No locality will have a work GPCI of less than 1.00 and the work, practice expense and malpractice GPCIs for Alaska are set at 1.67. Addendum D in the November 7, 2003, final rule listed 58 localities having work GPCIs of less than 1.00. Of these, the range was from 0.881 for Puerto Rico to 0.998 for “Rest of New York” and New Orleans, Louisiana. Addendum D and E that are included in this final rule will replace the addenda previously published November 7, 2003.
In the August 15, 2003, proposed rule (68 FR 49058), we proposed to adjust the work, practice expense and malpractice RVUs to match the rebased MEI weights. In the November 7, 2003, final rule (68 FR 63245), we responded to public comments and applied adjustments of −0.57 percent (0.9943) to the physician work RVUs, −0.77 percent (0.9923) to the practice expense RVUs and 19.86 percent (1.1986) to the malpractice RVUs. These adjustments were intended to make the aggregate work, practice expense and malpractice RVUs used to determine payments in 2004 consistent with their respective weights in the rebased MEI.
However, the changes required by MPDIMA change the 2004 work, practice expense and malpractice RVUs. Provisions that require changes to the work and practice expense RVUs and exempt them from budget neutrality will increase the number of work and practice expense RVUs.
As we indicated in the November 7, 2003, final rule, we believe Medicare payment policy will be improved by adjusting the work, practice expense and malpractice RVUs to match the revised MEI weights. By matching the aggregate pools of RVUs to the rebased MEI weights, Medicare's payments for physician work, practice expense and malpractice will more closely match the proportion of expenses incurred by physicians in these categories. Therefore, we are revising the adjustments applied to the RVUs in the November 7, 2003, final rule consistent with our goal of making the work, practice expense and malpractice RVUs match the rebased MEI weights. The revised adjustments are −0.15 percent (0.9985) for physician work, −1.320 percent (0.9868) for practice expense, and 20.61 percent (1.2061) for malpractice. We have incorporated these adjustments into the RVUs shown in Addenda B and C of this final rule.
The physician fee schedule update is determined under a methodology specified by statute. In the November 7, 2003, final rule (68 FR 63251), we used the formula specified in section 1848(d)(4) of the Act to determine a 4.5 percent reduction to the physician fee schedule CF. However, section 601 of MPDIMA amended section 1848(d) of the Act to specify that the update to the single CF for 2004 and 2005 will not be less than 1.5 percent. Because the statutory formula will yield a 4.5 percent reduction to the physician fee schedule CF and the amendments to the statute indicate that the update for 2004 cannot be less than 1.5 percent, we will increase the physician fee schedule CF by 1.5 percent for 2004.
The specific calculations to determine the physician fee schedule and anesthesia CFs for 2004 are explained below.
Under section 1848(d)(1)(A) of the Act, the physician fee schedule CF is equal to the CF for the previous year multiplied by the update determined under section 1848(d)(4) of the Act.
We illustrate the calculation for the 2004 physician fee schedule CF in table 4:
As described in the November 7, 2003, final rule (68 FR 63252), anesthesia services do not have RVUs like other physician fee schedule services. For this reason, we are accounting for the adjustments to match the revised MEI weights and changes to anesthesia work and practice expenses through a 1.09 percent 1.0109 adjustment to the anesthesia fee schedule CF. The 1.09 percent increase reflects a 0.15 percent reduction on the work portion (79 percent), a 2.0 percent reduction on the practice expense portion (13.7 percent) and a 20.61 percent increase on the malpractice portion (7.2 percent) of the anesthesia conversion factor. (The adjustment to the practice expense portion is comprised of 1.3 percent for the MEI weights and 0.7 percent for the revisions in the practice expense methodology). To determine the anesthesia fee schedule CF for 2004, we used the following figures:
The addenda included in this final rule concerning RVUs and Related Information Used in Determining Medicare Payments for 2004 (Addenda A, B and C) and GPCIs by Medicare Carrier and Locality (Addenda D and E) replace the addenda published November 7, 2003 (68 FR 63261). The revised addenda reflect changes required by MPDIMA as well as corrections to minor errors contained in the addenda published November 7, 2003.
Section 4507 of the Balanced Budget Act of 1997 added section 1802(b) to the Act. This section provides that physicians and certain nonphysician practitioners may opt out of Medicare and enter into private contracts with Medicare beneficiaries. Under these contracts, no limits apply to what physicians or nonphysician practitioners can charge beneficiaries. Physicians opting out of Medicare file an affidavit with the Medicare carrier in which they agree to opt out of Medicare for a period of 2 years and to meet certain other criteria. In general, the statute requires that during that two-year period, physicians and nonphysician practitioners who have filed affidavits opting out of Medicare have private contracts with all Medicare beneficiaries to whom they furnish Medicare covered services. These contracts may not be entered into at a time when a beneficiary needs emergency or urgent care services.
Moreover, the statute requires that the private contract be in writing and be signed by the Medicare beneficiary before any item or service is provided in accordance with the contract and that:
• The beneficiary agrees not to submit a claim (or to request that the physician or practitioner submit a claim) with Medicare for Medicare covered services.
• The beneficiary agrees to be responsible, whether through insurance or otherwise, for services furnished under a private contract.
• The beneficiary acknowledges that no limits (including the limits under section 1848(g) of the Social Security Act) apply to amounts that are charged under the private contract.
• The beneficiary acknowledges that no payment will be made under a Medigap plan, and other insurers may elect not to make payment for services furnished under the private contract.
• The beneficiary acknowledges that Medicare may make payment for covered services if the service was received from a physician or non-physician practitioner with whom the beneficiary has not signed a private contract.
Prior to enactment of MPDIMA, section 1802(b)(5)(B) of the Act limited the types of physicians who could choose to opt out of Medicare to doctors of medicine and doctors of osteopathy. Section 603 of MPDIMA amends section 1802(b)(5)(B) of the Act to include dentists, podiatrists, and optometrists, in certain circumstances, in the definition of physicians who may opt out of Medicare. We are making conforming changes to our regulations to reflect this change in the statute.
We ordinarily publish a notice of proposed rulemaking in the
Section 1871 of the Act provides for publication of a notice of proposed rulemaking and opportunity for public comment before CMS issues a final rule. However, section 1871(b)(2)(B) provides an exception when a law establishes a specific deadline for implementation of a provision and the deadline is less than 150 days after the law's date of enactment. MPDIMA was enacted by Congress on November 25, 2003, and signed into law by the President on December 8, 2003. The provisions of this rule that amend the physician fee schedule and drug payment rate are required to be implemented January 1, 2004. Therefore, these provisions are subject to waiver of proposed rulemaking and public comment in accordance with section 1871(b)(2)(B) of the Act.
Even if section 1871(b)(2)(B) of the Act were not directly applicable here, we would find good cause to waive the requirement for publication of an notice of proposed rulemaking and public comment on the grounds that it is impracticable, unnecessary, and contrary to the public interest. This final rule, with the exception of implementation of billing for a level 1 office visit and pharmacy supplying fee and the technical correction of minor errors in the November rule, merely sets out the non-discretionary provisions of MPDIMA with respect to payment under the physician fee schedule and drug AWP methodology. Because the rule is generally ministerial, we believe that pursuing notice and comment is
For these same reasons, we are waiving the 30-day delay in effective date contained in 5 U.S.C. section 553(d).
With respect to the requirement of a 60-day delay in the effective date of any final rule pursuant to the CRA, see 5 U.S.C. section 801, the CRA provides that the 60-day delayed effective date shall not apply to any rule “which an agency for good cause finds . . . that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest” (5 U.S.C. section 808(2)). For the reasons set forth above, we believe that additional notice-and-comment rulemaking on this subject would be impracticable, unnecessary, or contrary to the public interest. Therefore, we do not believe that the CRA requires a 60-day delay in the effective date of this final rule.
Because of the large number of items of correspondence we normally receive on
Under the Paperwork Reduction Act (PRA) of 1995, we are required to provide 60-day notice in the
The need for the information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
Therefore, we are soliciting public comments on each of these issues for the information collection requirement discussed below.
The following information collection requirement and associated burden are subject to the PRA.
Under paragraph (a)(7) of this section, a manufacturer requesting a drug payment exception to the default 85 percent used in the general rule or the percentage specified in Table 1 will have to submit data and information including the manufacturer's average sales price for the drug. The burden associated with this requirement is the time involved in providing us the information for the submission due before January 1, 2004, and the optional supplemental submission due by January 16, 2004. We believe that it would take an average of one hour to submit the request and the necessary data and information. Given the universe of approximately 450 Medicare drug codes and assuming an average of 10 manufacturers per drug code, the maximum aggregate burden associated with this activity would be 4500 hours.
We are soliciting public comment on this requirement in conjunction with a request for emergency approval of this information collection so that manufacturers may submit their requests during the statutorily prescribed timeframe. These requirements were submitted to OMB for review and are approved by OMB under OMB control number 0938-0913.
If you comment on any of these information collection and record keeping requirements, please mail copies directly to the following: Centers for Medicare & Medicaid Services, Office of Strategic Operations and Regulatory Affairs, Regulations Development and Issuances Group, Attn: Julie Brown, CMS-1372-FC, Room C5-16-03, 7500 Security Boulevard, Baltimore, MD 21244-1850; and Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503, Attn: Brenda Aguilar, CMS Desk Officer.
Comments submitted to OMB may also be emailed to the following address: email:
We have examined the impact of this rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis must be prepared for final rules with economically significant effects (that is, a final rule that would have an annual effect on the economy of $100 million or more in any 1 year, or would adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities). We estimate that the combined effect of the physician fee schedule update and GPCI provisions included in this final rule will increase Medicare spending by $1.0 billion in FY 2004. We have simulated the effect of both the drug payment and physician fee schedule changes that we are adopting in this final rule. We are making several changes to the physician fee schedule RVUs in this final rule. In general, section 1848(c)(2)(B)(ii)(II) of the Act requires that changes to RVUs cannot increase or decrease expenditures more than $20 million from the amount of expenditures that would have resulted with such adjustments. However, section 303(a)(1) of the MPDIMA specifically exempts the changes we are making to the RVUs in this final rule from the budget neutrality requirements of section 1848(c)(2)(B)(ii)(II) of the Act. Thus, the changes that we are making to the physician fee schedule RVUs will increase aggregate spending for Medicare physician fee schedule services. Because the changes in this final rule will increase Medicare spending by more than $1.0 billion in FY 2004, we are considering this final rule to be economically significant. Therefore, this final rule is a major rule and we have prepared a regulatory impact analysis. The table 6 below shows our estimates of the fiscal year 2004 impact of specific MPDIMA provisions we are implementing in this final rule (rounded to the nearest $0.1 billion).
The RFA requires that we analyze regulatory options for small businesses and other entities. We prepare a Regulatory Flexibility Analysis unless we certify that a rule would not have a significant economic impact on a substantial number of small entities. The analysis must include a justification concerning the reason action is being taken, the kinds and number of small entities the rule affects, and an explanation of any meaningful options that achieve the objectives and less significant adverse economic impact on the small entities.
Section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any proposed rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside a Metropolitan Statistical Area and has fewer than 100 beds.
For purposes of the RFA, physicians, non-physician practitioners, and suppliers are considered small businesses if they generate revenues of $6 million or less. Approximately 95 percent of physicians (except mental health specialists) are considered to be small entities. There are about 875,000 physicians, other practitioners and medical suppliers that receive Medicare payment under the physician fee schedule. There are in excess of 20,000 physicians and other practitioners that receive Medicare payment for drugs. These physicians are concentrated in the specialties of oncology, urology and rheumatology. Of the physicians in these specialties, approximately 40 percent are in oncology and 45 percent in urology.
For purposes of the RFA, approximately 98 percent of suppliers of DME and prosthetic devices are considered small businesses according to the Small Business Administration's (SBA) size standards. We estimate that 106,000 entities bill Medicare for DME, prosthetics, orthotics, surgical dressings, and other equipment and supplies each year. Total Medicare expenditures for DME are approximately $7.7 billion per year, of which approximately $1.4 billion are for DME drugs.
The analysis and discussion provided in this section as well as elsewhere in this final rule complies with the RFA requirements. Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule that may result in expenditure in any 1 year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million. This final rule would not impose unfunded mandates on State, local, or tribal governments, or on the private sector of more than $110 million.
We have examined this final rule in accordance with Executive Order 13132 and have determined that this regulation would not have any significant impact on the rights, roles, or responsibilities of State, local, or tribal governments.
We have prepared the following analysis, which together with the rest of this preamble meets all assessment requirements. It explains the rationale for, and purposes of, the rule, details the costs and benefits of the rule, analyzes alternatives, and presents the measures we propose to use to minimize the burden on small entities. This final rule changes Medicare payment rates for drugs and their administration as well as other physician fee schedule services. We are providing information for each of the policy changes in the relevant sections of this final rule. We are unaware of any relevant Federal rules that duplicate, overlap or conflict with this final rule. The relevant sections of this final rule contain a description of significant alternatives if applicable.
As described in more detail earlier in this final rule, effective January 1, 2004, with some exceptions, section 303(b) of MPDIMA specifies that drugs not paid on a cost or prospective payment basis will be paid at 85 percent of the average wholesale price determined as of April 1, 2003. Section 303(a) directs the Secretary to make changes to the physician fee schedule that will increase Medicare spending for physicians' services. Section 303 applies only to oncology payments while section 304 indicates that identical provisions to those in section 303 apply to other physicians. We have estimated that section 303 of MPDIMA would have no cost in FY 2004 and that section 304 would save $0.1 billion in FY 2004.
Section 305(a) of MPDIMA specifies that inhalation drugs furnished through durable medical equipment covered under 1861(n) of the Act will be paid at 80 percent of the average wholesale price determined as of April 1, 2003. We estimated savings associated with implementing section 305(a) of the MPDIMA is $0.1 billion in FY 2004.
Section 303(e)(2) provides for payment of a pharmacy supplying fee, less applicable deductible and coinsurance, for immunosuppressive drugs described in subparagraph (J) of section 1861(s)(2) and oral anti-cancer and anti-nausea drugs described in subparagraphs (Q) and (T) of such section. The payment of this fee is bundled into the current payment for these drugs and the 2004 payment amounts specified in section 303(b). This provision has no impact on Medicare expenditures in 2004.
As indicated above, we are making changes to the work and practice expense RVUs under the provisions of section 1848(c)(2) of the Act as amended by section 303 of MPDIMA. In general, under section 1848(c)(2) of the Act, adjustments to RVUs may not cause the amount of expenditures to differ by more than $20 million from the amount of expenditures that would have
Table 6A shows the specialty level impact on payment of changes being made for CY 2004. The payment impacts reflect averages for each specialty based on Medicare utilization. The payment impact for an individual physician would be different from the average, based on the mix of services the physician provides. The average change in total revenues would be less than the impact displayed here since physicians furnish services to both Medicare and non-Medicare patients and specialties may receive substantial Medicare revenues for services that are not paid under the physician fee schedule. For instance, oncologists receive approximately 20 percent of their Medicare revenues from physician fee schedule services and approximately 77 percent of their Medicare revenues from drugs. Table 6A shows only the payment impact on physician fee schedule services. Table 11 below shows the combined impact of the physician fee schedule and drug payment changes for selected specialties and suppliers that receive a high percentage of their Medicare revenues from drugs.
We modeled the impact of all changes to the relative value units and illustrated their effect in table 6A. The column labeled “Impact 11/7/2003 Final Rule Pre-MEI Weight Adjustments” shows the combined effect of all of the relative value unit changes contained in the August 15, 2003, proposed rule and the November 7, 2003, final rule other than the adjustments to make the aggregate work, practice expense and malpractice RVUs match the MEI weights. (For a description of the impact of the provisions of the August 15, 2003, proposed rule
The column labeled “Section 303 and 304 Changes without Transition Payments” shows the impact of changes made in this final rule implementing section 303 and 304 of MPDIMA other than section 303(a)(4) that requires a “transitional adjustment” that increases payments for specific drug administration services by an additional 32 percent in 2004. This column shows the effect of increases in payments for drug administration services resulting from the higher work and practice expense RVUs required by section 303 and 304 of MPDIMA as well allowing oncologists to bill for multiple drug administrations by the “push” technique on a single day. In addition, because there will be no same day billing of a level 1 office visit and a drug administration service, the impacts shown include the effect of fewer office visit billings by the minority of oncologists who billed for such services. Taken together, these provisions will increase payments to oncologists by an estimated 27 percent. We estimate that payments to other physicians that provide drug administration services (rheumatology, infectious disease, obstetrics/gynecology) will increase by 1 to 2 percent. The revision to the practice expense per hour for cardiac and thoracic surgeons will increase their payments by an estimated 1 percent. All of the other increases shown in the table are a result of changes that we are making to the non-physician work pool. These changes will increase payments to physicians, practitioners and suppliers (Allergy/Immunology, Radiation Oncology, Radiology, Audiology, Diagnostic Testing Facility and Portable X-Ray suppliers) that provide services affected by the non-physician work pool calculations by approximately 1 percent. There will be little or no change in payments for all other specialties from the changes we are making in this interim final rule because the changes to the RVUs resulting from MPDIMA are exempt from the budget neutrality requirements of section 1848(c)(2)(ii)(II) of the Act.
The column labeled “Transition Payments” shows the impact on payment from the 32 percent increase in payment for drug administration services required by section 303(a)(4) of MPDIMA. This provision will have an effect on only those specialties that provide drug administration services and is estimated to increase payments to oncologists by an additional 14 percent. We estimate that payments to other physicians that provide drug administration services (infectious disease, obstetrics/gynecology rheumatology and urology) will increase by 1 to 2 percent.
We also modeled the effect of adjusting the RVUs to match the new MEI weights. Because we are increasing the malpractice RVUs by more than 20 percent, adjusting the RVUs to match the new MEI weights will result in an increase in payment for those specialties that perform services with high malpractice RVUs. Payments to anesthesiology, cardiac surgery, emergency medicine, neurosurgery, orthopedic surgery, thoracic surgery and vascular surgery will increase by approximately 1 percent. There will be a small impact on payment to all other physicians, practitioners and suppliers from the adjustments that reduce physician work and practice expense RVUs to match the new MEI weights. The total change in payment from provisions of the November 7, 2003, final rule and this final rule are shown in the total column.
In general, the statutory methodology for updating the physician fee schedule conversion factor is specified in section 1848(d)(4) of the Act. However, section 1848(d)(5) specifies that the update to the conversion factor for 2004 and 2005 shall not be less than 1.5 percent. Application of the statutory methodology of section 1848(d)(4) of the Act would reduce the physician fee schedule conversion factor by 4.5 percent. However, because section 1848(d)(5) of the Act indicates that the update can be no less than 1.5 percent, we are increasing the 2004 physician fee schedule conversion factor by 1.5 percent. In table 7, we are showing the estimated change in average payments by specialty based on provisions of this final rule and the estimated physician fee schedule update.
In the November 7, 2003, final rule, we showed the impact of all RVUs changes and a 4.5 percent reduction in the physician fee schedule conversion factor. In the table below, we are showing the effect of MPDIMA on payment for physician fee schedule services relative to the changes that would have occurred in 2004 under current law had MPDIMA not been enacted. That is, because the physician fee schedule conversion factor would have been reduced by 4.5 percent to $35.1339 and MPDIMA requires that it be increased by 1.5 percent to $37.3374, MPDIMA provisions affecting the update increased average physician fee schedule rates by 6.3 percent ($37.3374/$35.339 − 1 = 1.063 or 6.3 percent). Furthermore, MPDIMA required changes to relative value units that also resulted in further average increases in Medicare payment for physician fee schedule services. The following table also includes the impact of the GPCI provision that does not allow a work GPCI to be less than 1.0 and another one that increases the Alaska GPCI to 1.67. However, the impact on any specific physician, practitioner or supplier will be different than the average depending upon on whether the individual is located in Alaska or an area that would have had a GPCI that is less than 1.0.
The column labeled “Impact 11/7/2003” final rule shows the impacts from table 27 of the November 7, 2003, final rule (68 FR 63256). The next column shows the impacts from table 7 and an estimate of the increase in payments due to the GPCI provisions. The percentage difference between these columns isolates the impact of the MPDIMA provisions we are adopting in this final rule and are shown in the last column.
Table 9 shows the impact on payments for selected high volume procedures of all of the changes previously discussed. This table shows the combined impact of the change in the work, practice expense and malpractice RVUs and the estimated physician fee schedule update on total payment for the procedure. There are separate columns that show the change in the facility rates and the non-facility rates. For an explanation of facility and non-facility practice expense refer to § 414.22(b)(5)(i). The figures in tables 9 and 10 show the impact of the RVU changes and the physician fee schedule update but do not include the impact of the GPCI changes.
The next table shows the change in payments from 2003 to 2004 for selected high volume drug administration services. This table shows the impact of the increases in the physician work and practice expense RVUs, the 1.5 percent increase in the physician fee schedule conversion factor and the additional 32 percent “transition adjustment” required by section 303(a)(4) of MPDIMA in 2004.
Table 11 shows the combined impact of changes we are making to Medicare drug and physician fee schedule payments on selected specialties/medical suppliers that receive a significant portion of their total Medicare revenues from drugs. These figures do not include the impact of the legislated increases in the GPCI. The table shows the amount and proportion of total Medicare revenues received from drugs and physician fee schedule services (DME fee schedule services for DME/Other Medical Suppliers). We note that these impacts and percentages represent averages for each specialty or supplier. The percentages and impacts for any individual physician or DME supplier are dependent on the mix of drugs and physician fee schedule services they provide to Medicare beneficiaries. These tables are intended to illustrate the combined payment impact in a single year across all of the services that these specialties or suppliers perform using the most recent data available to us. The first two columns of table 11 list the specialty and its combined Medicare revenues from all sources. The next three columns show estimated total Medicare drug revenues, the proportion of total revenues represented by drugs and the percent change in Medicare drug payments estimated in the first year. The revenue reduction shown includes the effect of limiting decreases in drug payments to 15 percent, the maximum reduction allowed in 2004 consistent with section 1842(o)(4)(D) of the Act (as added by section 303(b) of MPDIMA). The following three columns show analogous information for physician fee schedule services. The last column shows the combined percentage change across all Medicare revenues. For example, as indicated in the table, approximately 77 percent of total Medicare revenues for oncologists are attributed to drugs. As indicated in the next column, we estimate that Medicare revenues from drugs will decline by approximately 12 percent for oncologists as a result of policies adopted in this interim final rule or about $510 million. We are increasing oncology physician fee schedule payments by 47 percent in this interim final rule or about $510 million. We estimated that the one-year decrease in drug payments and increase in physician fee schedule payments resulting from this final rule will produce virtually no net change in total Medicare payments for oncologists.
For DME/Other Medical Suppliers, 42 and 58 percent of Medicare revenues respectively are received from drugs and DME fee schedule services. These suppliers will receive an approximate reduction of 13 percent in their Medicare drug revenues the first year. The total reduction in payment in one year across all of the services they provide will be approximately 6 percent.
In general, the other physician specialties receive a smaller share of their total Medicare revenues from drugs than oncologists. However, they are also less affected by the payment increases for drug administration services. Taken together, we estimate a net change in revenues from the drug and drug administration payment changes for urology (−4 percent), rheumatology (−2 percent), obstetrics/gynecology (+1 percent) and infectious disease (+4 percent).
Section 412 of MPDIMA amended section 1848(e)(1) of the Act and establishes a floor of 1.0 for the work geographic index for any locality to be used for purposes of payment for services furnished on or after January 1, 2004, and before January 1, 2007. In addition, section 602 of MPDIMA further amended 1848 (e)(1) of the Act for purposes of payment for services furnished in Alaska under the physician fee schedule on or after January 1, 2004, and before January 1, 2006, and sets the practice expense, malpractice and work indices at 1.67 if such index would otherwise be less than 1.67. The impact of the MPDIMA provisions on the work GPCI is illustrated in Table 12.
An impact of these legislative changes to the GPCI can also be demonstrated by a comparison of area geographic adjustment factors (GAFs). The GAFs are a weighted composite of each area's work, practice expense, and malpractice expense GPCIs using the national GPCI cost share weights. While we do not actually use the GAFs in computing the fee schedule payment for a specific service, they are useful in comparing overall area costs and payments. The actual effect on payment for any specific service will deviate from the GAF to the extent that the service's proportions of work, practice expenses, and malpractice expense RVUs differ from those of the GAF. Table 13 shows the effects of the legislative revisions to the GPCIs on area GAFs for 2004. As directed by the legislation no locality will have a work GPCI of less than 1.00 and the work, practice expense and malpractice GPCIs for Alaska are set at 1.67. Tables 12 and 13 are sorted by decreasing percent change in work GPCI and GAF respectively.
We estimate the cost of the provisions affecting the GPCI will increase Medicare spending by 0.2 billion in FY 2004.
For the most part, this interim final implements prescriptive provisions of MPDIMA and the statute does not permit us to exercise our discretion. Nevertheless, the preamble identifies ancillary policies and rationale for our decisions.
For instance, the statutory provisions requiring changes to Medicare's payments for drugs were prescriptive. We did not consider any alternatives because of the clear direction in the statute to determine Medicare prices for drugs in 2004. Similarly, the provisions of the statute with respect to the GPCI were also prescriptive and did not allow for us to consider any alternatives. While we considered using the formula contained in section 1848(d)(4) of the Act to update the physician fee schedule conversion factor, its application would result in a reduction of 4.5 percent and would be inconsistent with the MPDIMA provision requiring an update to the physician fee schedule conversion factor for 2004 of not less than 1.5 percent. With respect to the provisions of this final rule that require changes to Medicare payments for the administration of drugs, we generally did not find that the statute permitted discretion. Nevertheless, earlier in the preamble of this final rule, we provided detailed descriptions of the statutory provisions and its requirements and, where possible, of the alternatives we considered.
Although changes in physicians' payments were large when the physician fee schedule was implemented in 1992, we detected no problems with beneficiary access to care. We do not believe that there would be any problem with access to care as a result of the changes in this rule. For the most part, we are increasing payments for physicians fee schedule services that otherwise would be reduced. We don't believe the drug payment changes will have an impact on beneficiary access to services but we will continue to monitor this issue.
We estimate that beneficiary liability will increase in CY 2004 by $1.0 billion for the physician fee schedule provisions relative to current law. Payment changes we are making in this final rule for drug administration will increase beneficiary liability. However, we estimate that the provisions that change Medicare's drug payments to oncologists (section 303 of MPDIMA), other physicians (section 304 of MPDIMA) and inhalation drugs (section 305 of MPDIMA) will offset the additional beneficiary liability for drug administration. We estimate that the net effect of changes to payment for drugs and drug administration will result in savings to beneficiaries of approximately $100 million in CY 2004.
In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.
Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, Medical devices, Medicare, Reporting and recordkeeping requirements, Rural areas, X-rays.
Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, Medicare, Reporting and recordkeeping requirements, Rural areas, X-rays.
For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services amends 42 CFR chapter IV as follows:
Secs. 1102, 1802, and 1871 of the Social Security Act (42 U.S.C. 1302, 1395a, and 1395hh).
(a)
(2)
Secs. 1102, 1871, and 1881(b)(1) of the Social Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(1)).
1842(o)—Rules for payment of certain drugs and biologicals.
This subpart implements section 1842(o) of the Social Security Act by specifying the methodology for determining the payment allowance limit for drugs and biologicals covered under Part B of Title XVIII of the Act (hereafter in this subpart referred to as the “program”) that are not paid on a cost or prospective payment system basis. Examples of drugs that are subject to the rules contained in this subpart are: drugs furnished incident to a physician's service; durable medical equipment (DME) drugs; separately billable drugs at independent dialysis facilities not under the ESRD composite rate; statutorily covered drugs, for example, influenza, pneumococcal and hepatitis vaccines, antigens, hemophilia blood clotting factor, immunosuppressive drugs and certain oral anti-cancer drugs.
As used in this subpart, the following definition applies.
(a)
(i) The actual charge on the claim for program benefits; or
(ii) 85 percent of the average wholesale price determined as of April 1, 2003, subject to the exceptions as specified in paragraphs (a)(2) through (a)(8) of this section.
(2) The payment limits for the following drugs are calculated using 95 percent of the average wholesale price:
(i) Blood clotting factors.
(ii) A drug or biological furnished during 2004 that was not available for Medicare payment as of April 1, 2003.
(iii) Pneumococcal and influenza vaccines as well as hepatitis B vaccine that is furnished to individuals at high or intermediate risk of contracting hepatitis B (as determined by the Secretary).
(iv) A drug or biological furnished during 2004 in connection with the furnishing of renal dialysis services if separately billed by renal dialysis facilities.
(3) The payment limits for infusion drugs furnished through a covered item of durable medical equipment are calculated using 95 percent of the average wholesale price in effect on October 1, 2003.
(4) The payments limits for drugs contained in the following table are calculated based on the percentages of the average wholesale price determined as of April 1, 2003 that are specified in the table.
(5) The payment limits for imiglucerase and alglucerase are calculated using 94 percent of the average wholesale price determined as of April 1, 2003.
(6) Exception. The payment limit for a drug otherwise subject to paragraph (a)(1)(ii) or paragraph (a)(4) of this section may be calculated using the percentage of the average wholesale price as the Secretary deems appropriate based on data and information submitted by the drug manufacturer.
(i) The manufacturer must submit data after October 15, 2003 and before January 1, 2004.
(ii) The percentage only applies for drugs furnished on or after April 1, 2004.
(7) In the case of blood and blood products (other than blood clotting factors), the payment limits shall be determined in the same manner as such payment limit was determined on October 1, 2003.
(b)
These addenda will not appear in the Code of Federal Regulations.
The addenda on the following pages provide various data pertaining to the Medicare fee schedule for physicians' services furnished in 2004. Addendum B contains the RVUs for work, non-facility practice expense, facility practice expense, and malpractice expense, and other information for all services included in the physician fee schedule.
In previous years, we have listed many services in Addendum B that are not paid under the physician fee schedule. To avoid publishing as many pages of codes for these services, we are not including clinical laboratory codes and most alpha-numeric codes (Healthcare Common Procedure Coding System (HCPCS) codes not included in CPT) in Addendum B.
This addendum contains the following information for each CPT code and alphanumeric HCPCS code, except for alphanumeric codes beginning with B (enteral and parenteral therapy), E (durable medical equipment), K (temporary codes for nonphysicians' services or items), or L (orthotics), and codes for anesthesiology.
1.
2.
Modifier −53 is shown for a discontinued procedure. There will be RVUs for the code (CPT code 45378) with this modifier.
3.
A = Active code. These codes are separately payable under the fee schedule if covered. There will be RVUs for codes with this status. The presence of an “A” indicator does not mean that Medicare has made a national decision regarding the coverage of the service. Carriers remain responsible for coverage decisions in the absence of a national Medicare policy.
B = Bundled code. Payment for covered services is always bundled into payment for other services not specified. If RVUs are shown, they are not used for Medicare payment. If these services are covered, payment for them is subsumed by the payment for the services to which they are incident. (An example is a telephone call from a hospital nurse regarding care of a patient.)
C = Carrier-priced code. Carriers will establish RVUs and payment amounts for these services, generally on a case-by-case basis following review of documentation, such as an operative report.
D = Deleted code. These codes are deleted effective with the beginning of the calendar year.
E = Excluded from physician fee schedule by regulation. These codes are for items or services that we chose to exclude from the physician fee schedule payment by regulation. No RVUs are shown, and no payment may be made under the physician fee schedule for these codes. Payment for them, if they are covered, continues under reasonable charge or other payment procedures.
F = Deleted/discontinued codes. Code not subject to a 90-day grace period.
G = Code not valid for Medicare purposes. Medicare does not recognize codes assigned this status. Medicare uses another code for reporting of, and payment for, these services.
H = Deleted modifier. Either the TC or PC component shown for the code has been deleted, and the deleted component is shown in the data base with the H status indicator. (Code subject to a 90-day grace period.)
I = Not valid for Medicare purposes. Medicare uses another code for the reporting of, and the payment for these services. (Code NOT subject to a 90-day grace period.)
N = Noncovered service. These codes are noncovered services. Medicare payment may not be made for these codes. If RVUs are shown, they are not used for Medicare payment.
P = Bundled or excluded code. There are no RVUs for these services. No separate payment should be made for them under the physician fee schedule.
• If the item or service is covered as incident to a physician's service and is furnished on the same day as a physician's service, payment for it is bundled into the payment for the physician's service to which it is incident (an example is an elastic bandage furnished by a physician incident to a physician's service).
• If the item or service is covered as other than incident to a physician's service, it is excluded from the physician fee schedule (for example, colostomy supplies) and is paid under the other payment provisions of the Act.
R = Restricted coverage. Special coverage instructions apply. If the service is covered and no RVUs are shown, it is carrier-priced.
T = Injections. There are RVUs for these services, but they are only paid if there are no other services payable under the physician fee schedule billed on the same date by the same provider. If any other services payable under the physician fee schedule are billed on the same date by the same provider, these services are bundled into the service(s) for which payment is made.
X = Exclusion by law. These codes represent an item or service that is not within the definition of “physicians' services” for physician fee schedule payment purposes. No RVUs are shown for these codes, and no payment may be made under the physician fee schedule. (Examples are ambulance services and clinical diagnostic laboratory services.)
4.
5.
6.
7.
8.
9.
10.
11.
MMM = The code describes a service furnished in uncomplicated maternity cases including antepartum care, delivery, and postpartum care. The usual global surgical concept does not apply. See the 1999 Physicians' Current Procedural Terminology for specific definitions.
XXX = The global concept does not apply.
YYY = The global period is to be set by the carrier (for example, unlisted surgery codes).
ZZZ = Code related to another service that is always included in the global period of the other service. (Note: Physician work and practice expense are associated with intra service time and in some instances the post service time.)
Department of the Air Force, DoD.
Final rule.
The Department of the Air Force is revising its Privacy Act Program Instruction. The revision moves responsibility for the Air Force Privacy Program to Air Force Chief Information Officer; prescribes Air Force Visual Aid 33-276, Privacy Act Label as optional; adds the E-Government Act of 2002 requirement for a Privacy Impact Assessment for all information technology systems that collect, maintain, or disseminate information in identifiable form from or about members of the public; changes appeal processing from Air Force Communications and Information Center to Air Force Legal Services Agency; adds Privacy Act warning language to use on information systems subject to the Privacy Act, includes guidance on sending personal information via e-mail; adds procedures on complaints; and provides guidance on recall rosters; social rosters; consent statements, systems of records operated by a contractor, and placing information on shared drives.
November 28 2003.
Mrs. Anne Rollins at (703) 601-4043.
The proposed rule was published on September 25, 2003, at 68 FR 55337. One public comment was received regarding administrative clarifications needed for § 806b.15, Fees, and § 806b.17, Special Provisions for Certain Medical Records. We added a paragraph on fee waivers to address concerns for those cases where the total copies are slightly over the 100 free copy threshold. We moved the last sentence in § 806b.15(b) which states, “The Privacy Act requires that we ultimately insure that the subject receives the records.” to a separate paragraph under § 806b.17 to clearly show that the individual is entitled to their medical records under the Privacy Act.
It has been determined that Privacy Act rules for the Department of Defense are not significant rules. The rules do not (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy; a sector of the economy; productivity; competition; jobs; the environment; public health or safety; or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another Agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive order.
It has been determined that Privacy Act rules for the Department of Defense do not have significant economic impact on a substantial number of small entities because they are concerned only with the administration of Privacy Act systems of records within the Department of Defense.
It has been determined that Privacy Act rules for the Department of Defense impose no information requirements beyond the Department of Defense and that the information collected within the Department of Defense is necessary and consistent with 5 U.S.C. 552a, known as the Privacy Act of 1974.
It has been determined that the Privacy Act rulemaking for the Department of Defense does not involve a Federal mandate that may result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100 million or more and that such rulemaking will not significantly or uniquely affect small governments.
It has been determined that the Privacy Act rules for the Department of Defense do not have federalism implications. The rules do 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.
Privacy.
Pub. L. 93-579, 88 Stat. 1896 (5 U.S.C. 552a).
This part moves responsibility for the Air Force Privacy Program from Air Force Communications and Information Center to the Air Force Chief Information Officer; prescribes Air Force Visual Aid 33-276, Privacy Act Label as optional; adds the
This part implements the
(a) Records that are retrieved by name or personal identifier are subject to Privacy Act requirements and are referred to as Privacy Act systems of records. The Air Force must publish notices in the
(b) An official system of records is:
(1) Authorized by law or Executive Order.
(2) Needed to carry out an Air Force mission or function.
(3) Published in the
(c) The Air Force will not:
(1) Keep records on how a person exercises First Amendment rights. Exceptions are when: The Air Force has the permission of that individual or is authorized by Federal statute; or the information pertains to, and is within the scope of, an authorized law enforcement activity. First Amendment rights include, but are not limited to, freedom of religion, freedom of political beliefs, freedom of speech, freedom of the press, the right to assemble, and the right to petition.
(2) Penalize or harass an individual for exercising rights guaranteed under the Privacy Act. We must reasonably help individuals exercise their rights under the Privacy Act.
(d) Air Force members will:
(1) Keep paper and electronic records that are retrieved by name or personal identifier only in approved Privacy Act systems published in the
(2) Collect, maintain, and use information in such systems, for purposes described in the published notice, to support programs authorized by law or Executive Order.
(3) Safeguard the records in the system and keep them the minimum time required.
(4) Ensure records are timely, accurate, complete, and relevant.
(5) Amend and correct records on request.
(6) Allow individuals to review and receive copies of their own records unless the Secretary of the Air Force approved an exemption for the system; or the Air Force created the records in anticipation of a civil action or proceeding (5 U.S.C. 552a(d)(5)).
(7) Provide a review of decisions that deny individuals access to or amendment of their records through appellate procedures.
An individual may file a civil law suit against the Air Force for failing to comply with the Privacy Act. The courts may find an individual offender guilty of a misdemeanor and fine that individual offender not more than $5,000 for:
(a) Willfully maintaining a system of records that doesn't meet the public notice requirements.
(b) Disclosing information from a system of records to someone not entitled to the information.
(c) Obtaining someone else's records under false pretenses.
(a) Process Privacy Act complaints or allegations of Privacy Act violations through the appropriate base or Major Command Privacy Act office, to the local systems manager. The base or Major Command Privacy Act officer directs the process and provides guidance to the system manager. The local systems manager will investigate complaints, or allegations of Privacy Act violations; will establish and review the facts when possible; interview individuals as needed; determine validity of the complaint; take appropriate corrective action; and ensure a response is sent to the complainant through the Privacy Act Officer. In cases where no system manager can be identified, the local Privacy Act officer will assume these duties. Issues that cannot be resolved at the local level will be elevated to the Major Command Privacy Office. When appropriate, local system managers will also: refer cases for more formal investigation, refer cases for command disciplinary action, and consult the servicing Staff Judge Advocate. In combatant commands, process component unique system complaints through the respective component chain of command.
(b) For Privacy Act complaints filed in a U.S. District Court against the Air Force, an Air Force activity, or any Air Force employee, Air Force Legal Services Agency, General Litigation Division (JACL) will provide Air Force Chief Information Officer/P a litigation
The Privacy Act does not apply to personal notes on individuals used as memory aids. Personal notes may become Privacy Act records if they are retrieved by name or other personal identifier and at least one of the following three conditions apply: Keeping or destroying the records is not at the sole discretion of the author; the notes are required by oral or written directive, regulation, or command policy; or they are shown to other agency personnel.
Contractors who are required to operate or maintain a Privacy Act system of records by contract must follow this part for collecting, safeguarding, maintaining, using, accessing, amending and disseminating personal information. The record system affected is considered to be maintained by the Air Force and is subject to this part. Systems managers for offices who have contractors operating or maintaining such record systems must ensure the contract contains the proper Privacy Act clauses, and identify the record system number, as required by the Defense Acquisition Regulation and this part.
(a) Contracts for systems of records operated or maintained by a contractor will be reviewed annually by the appropriate Major Command Privacy Officer to ensure compliance with this part.
(b) Disclosure of personal records to a contractor for use in the performance of an Air Force contract is considered a disclosure within the agency under exception (b)(1) of the Privacy Act (
(a) The Air Force Chief Information Officer is the senior Air Force Privacy Official with overall responsibility for the Air Force Privacy Act Program.
(b) The Office of the General Counsel to the Secretary of the Air Force, Fiscal and Administrative Law Division (GCA) makes final decisions on appeals.
(c) The General Litigation Division, Air Force Legal Services Agency (JACL), receives Privacy Act appeals and provides recommendations to the appellate authority. Service unique appeals, from combatant commands, should go through the respective chain of command.
(d) The Plans and Policy Directorate, Office of the Chief Information Officer manages the program through the Air Force Privacy Act Officer who:
(1) Administers procedures outlined in this part.
(2) Reviews publications and forms for compliance with this part.
(3) Reviews and approves proposed new, altered, and amended systems of records; and submits system notices and required reports to the Defense Privacy Office.
(4) Serves as the Air Force member on the Defense Privacy Board and the Defense Data Integrity Board.
(5) Provides guidance and assistance to Major Commands, field operating agencies, direct reporting units and combatant commands for which AF is executive agent in their implementation and execution of the Air Force Privacy Program. Ensures availability of training and training tools for a variety of audiences.
(6) Provides advice and support to those commands to ensure that information requirements developed to collect or maintain personal data conform to Privacy Act standards; and that appropriate procedures and safeguards are developed, implemented, and maintained to protect the information.
(e) Major Command commanders, and Deputy Chiefs of Staff and comparable officials at Secretary of the Air Force and Headquarters United States Air Force offices implement this part.
(f) 11th Communications Squadron will provide Privacy Act training and submit Privacy Act reports for Headquarters United States Air Force and Secretary of the Air Force offices.
(g) Major Command Commanders: Appoint a command Privacy Act officer, and send the name, office symbol, phone number, and e-mail address to Air Force Chief Information Officer/P.
(h) Major Command and Headquarters Air Force Functional Chief Information Officers:
(1) Review and provide final approval on Privacy Impact Assessments (
(2) Send a copy of approved Privacy Impact Assessments to Air Force Chief Information Officer/P.
(i) Major Command Privacy Act Officers:
(1) Train base Privacy Act officers. May authorize appointment of unit Privacy Act monitors to assist with implementation of the program.
(2) Promote Privacy Act awareness throughout the organization.
(3) Review publications and forms for compliance with this part (do forms require a Privacy Act Statement; is Privacy Act Statement correct?).
(4) Submit reports as required.
(5) Review system notices to validate currency.
(6) Evaluate the health of the program at regular intervals using this part as guidance.
(7) Review and provide recommendations on completed Privacy Impact Assessments for information systems.
(8) Resolve complaints or allegations of Privacy Act violations.
(9) Review and process denial recommendations.
(10) Provide guidance as needed to functionals on implementing the Privacy Act.
(j) Base Privacy Act Officers:
(1) Provide guidance and training to base personnel.
(2) Submit reports as required.
(3) Review publications and forms for compliance with this part.
(4) Review system notices to validate currency.
(5) Direct investigations of complaints/violations.
(6) Evaluate the health of the program at regular intervals using this part as guidance.
(k) System Managers:
(1) Manage and safeguard the system.
(2) Train users on Privacy Act requirements.
(3) Protect records from unauthorized disclosure, alteration, or destruction.
(4) Prepare system notices and reports.
(5) Answer Privacy Act requests.
(6) Records of disclosures.
(7) Validate system notices annually.
(8) Investigate Privacy Act complaints.
(l) System owners and developers:
(1) Decide the need for, and content of systems.
(2) Evaluate Privacy Act requirements of information systems in early stages of development.
(3) Complete a Privacy Impact Assessment and submit to the Privacy Act Officer.
The Commander, Air Force Office of Special Investigation; the Commander, Air Force Security Forces Center; Major Command, Field Operating Agency, and base chiefs of security forces; Air Force Office of Special Investigations detachment commanders; and designees of those offices may ask another agency for records for law enforcement under 5 U.S.C. 552a(b)(7). The requesting office must indicate in writing the specific part of the record desired and identify the law enforcement activity asking for the record.
Promises of confidentiality must be prominently annotated in the record to protect from disclosure any “confidential” information under 5 United States Code 552a(k)(2), (k)(5), or (k)(7) of the Privacy Act.
Collect personal information directly from the subject of the record whenever possible. Only ask third parties when:
(a) You must verify information.
(b) You want opinions or evaluations.
(c) You can't contact the subject.
(d) You are doing so at the request of the subject individual.
(a) Give a PAS orally or in writing to the subject of the record when you are collecting information from them that will go in a system of records. Note: Do this regardless of how you collect or record the answers. You may display a sign in areas where people routinely furnish this kind of information. Give a copy of the Privacy Act Statement if asked. Do not ask the person to sign the Privacy Act Statement.
(b) A Privacy Act Statement must include four items:
(1)
(2)
(3)
(4)
When asking an individual for his or her Social Security Number, always give a Privacy Act Statement that tells the person: The legal authority for requesting it; the uses that will be made of the Social Security Number; and whether providing the Social Security Number is voluntary or mandatory. Do not deny anyone a legal right, benefit, or privilege for refusing to give their Social Security Number unless the law requires disclosure, or a law or regulation adopted before January 1, 1975 required the Social Security Number and the Air Force uses it to verify a person's identity in a system of records established before that date.
(a) The Air Force requests an individual's Social Security Number and provides the individual information required by law when anyone enters military service or becomes an Air Force civilian employee. The Air Force uses the Social Security Number as a service or employment number to reference the individual's official records. When you ask someone for a Social Security Number as identification to retrieve an existing record, you do not have to restate this information.
(b) Executive Order 9397,
Within DoD, do not disclose them to anyone without an official need to know. Outside DoD, they are not releasable without the person's consent, or unless authorized under one of the 12 exceptions to the Privacy Act (see § 806b.47).
Persons or their designated representatives may ask for a copy of their records in a system of records. Requesters need not state why they want access to their records. Verify the identity of the requester to avoid unauthorized disclosures. How you verify identity will depend on the sensitivity of the requested records. Persons may use a notary or an unsworn declaration in the following format: “I declare under penalty of perjury (if outside the United States, add “under the laws of the United States of America”) that the foregoing is true and correct. Executed on (date). (Signature).”
Consider a request from an individual for his or her own records in a system of records under both the Freedom of Information Act and the Privacy Act regardless of the Act cited. The requester does not need to cite either Act if the records they want are contained in a system of records. Process the request under whichever Act gives the most information. When necessary, tell the requester which Act you used and why.
(a) Requesters should describe the records they want. They do not have to name a system of records number, but they should at least name a type of record or functional area. For requests that ask for “all records about me,” ask for more information and tell the person how to review the Air Force systems of records published in the
(b) Requesters should not use government equipment, supplies, stationery, postage, telephones, or official mail channels for making Privacy Act requests. System managers will process such requests and tell requesters that using government resources to make Privacy Act requests is not authorized.
(c) Tell the requester if a record exists and how to review the record. If possible, respond to requests within 10 workdays of receipt. If you cannot answer the request in 10 workdays, send a letter explaining why and give an approximate completion date no more than 20 workdays after the first office received the request.
(d) Show or give a copy of the record to the requester within 30 workdays of receiving the request unless the system
(e) If the requester wants another person present during the record review, the system manager may ask for written consent to authorize discussing the record with another person present.
Give the first 100 pages free, and charge only reproduction costs for the remainder. Copies cost $.15 per page; microfiche costs $.25 per fiche. Charge fees for all pages for subsequent requests for the same records. Do not charge fees:
(a) When the requester can get the record without charge under another publication (for example, medical records).
(b) For search.
(c) For reproducing a document for the convenience of the Air Force.
(d) For reproducing a record so the requester can review it.
Fee waivers. Waive fees automatically if the direct cost of reproduction is less than $15, unless the individual is seeking an obvious extension or duplication of a previous request for which he or she was granted a waiver. Decisions to waive or reduce fees that exceed $15 are made on a case-by-case basis.
System managers process access denials within 5 workdays after you receive a request for access. When you may not release a record, send a copy of the request, the record, and why you recommend denying access (include the applicable exemption) to the denial authority through the legal office and the Privacy Act office. Judge Advocate offices will include a written legal opinion. The Privacy Act officer reviews the file, and makes a recommendation to the denial authority. The denial authority sends the requester a letter with the decision. If the denial authority grants access, release the record. If the denial authority refuses access, tell the requester why and explain pertinent appeal rights (
(a) The system has an exemption rule published in the
(b) The exemption covers each document. (All parts of a system are not automatically exempt.)
(c) Nonexempt parts are segregated.
If a physician believes that disclosing requested medical records could harm the person's mental or physical health, you should:
(a) Ask the requester to get a letter from a physician to whom you can send the records. Include a letter explaining to the physician that giving the records directly to the individual could be harmful.
(b) Offer the services of a military physician other than one who provided treatment if naming the physician poses a hardship on the individual.
(c) The Privacy Act requires that we ultimately insure that the subject receives the records.
Ordinarily a person is entitled to their entire record under the Privacy Act. However, the law is not uniform regarding whether a subject is entitled to information that is not “about” him or her (for example, the home address of a third party contained in the subject's records). Consult your servicing Staff Judge Advocate before disclosing third party information. Generally, if the requester will be denied a right, privilege or benefit, the requester must be given access to relevant portions of the file.
Withhold records compiled in connection with a civil action or other proceeding including any action where the Air Force expects judicial or administrative adjudicatory proceedings. This exemption does not cover criminal actions. Do not release attorney work products prepared before, during, or after the action or proceeding.
These officials or a designee may deny access or amendment of records as authorized by the Privacy Act. Send a letter to Air Force Chief Information Officer/P with the position titles of designees. Authorities are:
(a) Deputy Chief of Staffs and chiefs of comparable offices or higher level at Secretary of the Air Force or Headquarters United States Air Force or designees.
(b) Major Command, Field Operating Agency, or direct reporting unit commanders or designees.
(c) Director, Personnel Force Management, 1040 Air Force Pentagon, Washington, DC 20330-1040 (for civilian personnel records).
(d) Commander, Air Force Office of Special Investigations, Washington, DC 20332-6001 (for Air Force Office of Special Investigations records).
(e) Unified Commanders or designees.
Individuals may ask to have their records amended to make them accurate, timely, relevant, or complete. System managers will routinely correct a record if the requester can show that it is factually wrong (
(a) Anyone may request minor corrections orally. Requests for more serious modifications should be in writing.
(b) After verifying the identity of the requester, make the change, notify all known recipients of the record, and inform the individual.
(c) Acknowledge requests within 10 workdays of receipt. Give an expected completion date unless you complete the change within that time. Final decisions must take no longer than 30 workdays.
The Air Force does not usually amend a record when the change is based on opinion, interpretation, or subjective official judgment. Determinations not to amend such records constitutes a denial, and requesters may appeal (
(a) If the system manager decides not to amend the record, send a copy of the request, the record, and the recommended denial reasons to the denial authority through the legal office and the Privacy Act office. Legal offices will include a written legal opinion. The Privacy Act officer reviews the proposed denial and legal opinion and makes a recommendation to the denial authority.
(b) The denial authority sends the requester a letter with the decision. If the denial authority approves the request, amend the record and notify all previous recipients that it has been changed. If the authority denies the request, give the requester the statutory authority, reason, and pertinent appeal rights (see subpart F of this part).
Requesters should pursue record corrections of subjective matters and opinions through proper channels to the Civilian Personnel Office using grievance procedures or the Air Force Board for Correction of Military Records. Record correction requests denied by the Air Force Board for Correction of Military Records are not subject to further consideration under this part. Military personnel, other than U.S. Air Force personnel, should pursue service-unique record corrections through their component chain of command.
Do not keep copies of disputed records in this file. File disputed records in their appropriate series. Use the file solely for statistics and to process requests. Do not use the case files to make any kind of determination about an individual. Document reasons for untimely responses. These files include:
(a) Requests from and replies to individuals on whether a system has records about them.
(b) Requests for access or amendment.
(c) Approvals, denials, appeals, and final review actions.
(d) Coordination actions and related papers.
Individuals who receive a denial to their access or amendment request may request a denial review by writing to the Secretary of the Air Force, through the denial authority, within 60 calendar days after receiving a denial letter. The denial authority promptly sends a complete appeal package to Air Force Legal Services Agency, General Litigation Division (JACL). The package must include:
(1) The original appeal letter;
(2) The initial request;
(3) The initial denial;
(4) A copy of the record;
(5) Any internal records or coordination actions relating to the denial;
(6) The denial authority's comments on the appellant's arguments; and
(7) The legal reviews.
(a) If the denial authority reverses an earlier denial and grants access or amendment, notify the requester immediately.
(b) Air Force Legal Services Agency, General Litigation Division (JACL) reviews the denial and provides a final recommendation to Secretary of the Air Force, Fiscal and Administrative Law Division (GCA). Secretary of the Air Force, Fiscal and Administrative Law Division (GCA) tells the requester the final Air Force decision and explains judicial review rights.
(c) The requester may file a concise statement of disagreement with the system manager if Secretary of the Air Force, Fiscal and Administrative Law Division (GCA) denies the request to amend the record. Secretary of the Air Force, Fiscal and Administrative Law Division (GCA) explains the requester's rights when they issue the final appeal decision.
(d) The records should clearly show that a statement of disagreement is filed with the record or separately.
(e) The disputed part of the record must show that the requester filed a statement of disagreement.
(f) Give copies of the statement of disagreement to the record's previous recipients. Inform subsequent record users about the dispute and give them a copy of the statement with the record.
(g) The system manager may include a brief summary of the reasons for not amending the record. Limit the summary to the reasons Secretary of the Air Force, Fiscal and Administrative Law Division (GCA) gave to the individual. The summary is part of the individual's record, but it is not subject to amendment procedures.
Include a Privacy Act Warning Statement in each Air Force publication that requires collecting or keeping information in a system of records. Also include the Warning Statement when publications direct collection of the Social Security Number, or any part of the Social Security Number, from the individual. The warning statement will cite legal authority and when part of a record system, the Privacy Act system of records number and title. You can use the following warning statement: “This instruction requires collecting and maintaining information protected by the Privacy Act of 1974 authorized by (U.S.C. citation and or Executive Order number). System of records notice (number and title) applies.”
Information systems that contain information on individuals that is retrieved by name or personal identifier are subject to the Privacy Act. The Privacy Act requires these systems to have a Privacy Act system notice published in the
(a) Exercise caution before transmitting personal information over e-mail to ensure it is adequately safeguarded. Some information may be so sensitive and personal that e-mail may not be the proper way to transmit it. When sending personal information over e-mail within DoD, ensure: There is an official need; all addressee(s) (including “cc” addressees) are authorized to receive it under the Privacy Act; and it is protected from unauthorized disclosure, loss, or alteration. Protection methods may include encryption or password protecting the information in a separate Word document. When transmitting personal information over e-mail, add “FOUO” to the beginning of the subject line, followed by the subject, and apply the following statement at the beginning of the e-mail:
“This e-mail contains For Official Use Only (FOUO) information which must be protected under the Privacy Act and Air Force Instruction 33-332.”
(b) Do not indiscriminately apply this statement to e-mails. Use it only in situations when you are actually transmitting personal information. DoD Regulation 5400.7/Air Force Supp, Chapter 4
(c) Do not disclose personal information to anyone outside DoD unless specifically authorized by the Privacy Act (see § 806b.47).
(d) Do not send Privacy Act information to distribution lists or group e-mail addresses unless each member has an official need to know the personal information. When in doubt, send only to individual accounts.
(e) Before forwarding e-mails you have received that contain personal information, verify that your intended recipients are authorized to receive the
Information system owners and developers must address Privacy Act requirements in the development stage of the system and integrate privacy protections into the development life cycle of the information system. This is accomplished with a Privacy Impact Assessment.
(a) The Privacy Impact Assessment addresses what information is to be collected; why the information is being collected; the intended use of the information; with whom the information will be shared; what notice or opportunities for the individual to decline or consent to providing the information collected, and how that information is shared; secured; and whether a system of records is being created, or an existing system is being amended. The E-Government Act of 2002
(1) Developing or procuring information technology systems or projects that collect, maintain, or disseminate information in identifiable form from or about members of the public.
(2) Initiating a new electronic collection of information in identifiable form for 10 or more persons excluding agencies, instrumentalities, or employees of the Federal Government.
(b) In general, Privacy Impact Assessments are required to be performed and updated as necessary where a system change creates new privacy risks.
(c) No Privacy Impact Assessment is required where information relates to internal government operations, has been previously assessed under an evaluation similar to a Privacy Impact Assessment, or where privacy issues are unchanged.
(d) The depth and content of the Privacy Impact Assessment should be appropriate for the nature of the information to be collected and the size and complexity of the information technology system.
(e) The system owner will conduct a Privacy Impact Assessment as outlined in appendix E to this part and send it to their Major Command Privacy Act office for review and final approval by the Major Command or Headquarters Air Force Functional Chief Information Officer. The Major Command or Headquarters Air Force Functional Chief Information Officer will send a copy of approved Privacy Impact Assessments to Air Force Chief Information Officer/P, 1155 Air Force Pentagon, Washington DC 20330-1155; or e-mail
(f) Whenever practicable, approved Privacy Impact Assessments will be posted to the Freedom of Information Act/Privacy Act Web site for public access at
The Air Force must publish notices in the
(a) Starting a new system.
(b) Instituting significant changes to an existing system.
(c) Sending out data collection forms or instructions.
(d) Issuing a request for proposal or invitation for bid to support a new system.
At least 120 days before implementing a new system, or a major change to an existing system, subject to this part, system managers must send a proposed notice, through the Major Command Privacy Office, to Air Force Chief Information Officer/P. Send notices electronically to
System managers will review and validate their Privacy Act system notices annually and submit changes to Air Force Chief Information Officer/P through the Major Command Privacy Office.
Maintaining information privacy is the responsibility of every federal employee, military member, and contractor who comes into contact with information in identifiable form. Protect information according to its sensitivity level. Consider the personal sensitivity of the information and the risk of disclosure, loss or alteration. Most information in systems of records is FOUO. Refer to DoD 5400.7-R/Air Force Supp, DoD Freedom of Information Act Program, for protection methods.
Balance additional protection against sensitivity, risk and cost. In some situations, a password may be enough protection for an automated system with a log-on protocol. Others may require more sophisticated security protection based on the sensitivity of the information. Classified computer systems or those with established audit and password systems are obviously less vulnerable than unprotected files. Follow Air Force Instruction 33-202,
(a) AF Form 3227, Privacy Act Cover Sheet,
(b) Privacy Act Labels. Use of Air Force Visual Aid 33-276, Privacy Act Label, is optional to assist in protecting Privacy Act information on compact disks, diskettes, and tapes.
You may use the following methods to dispose of records protected by the Privacy Act and authorized for destruction according to records retention schedules:
(a) Destroy by any method that prevents compromise, such as tearing, burning, or shredding, so long as the personal data is not recognizable and beyond reconstruction.
(b) Degauss or overwrite magnetic tapes or other magnetic medium.
(c) Dispose of paper products through the Defense Reutilization and Marketing Office or through activities that manage a base-wide recycling program. The recycling sales contract must contain a clause requiring the contractor to safeguard privacy material until its destruction and to pulp, macerate, shred, or otherwise completely destroy the records. Originators must safeguard Privacy Act material until it is transferred to the recycling contractor. A Federal employee or, if authorized, a contractor employee must witness the destruction. This transfer does not require a disclosure accounting.
There are two types of exemptions permitted by 5 U.S.C. 552a:
(a) A
(b) A
Denial authorities may withhold records using Privacy Act exemptions only when an exemption for the system of records has been published in the
A system manager who believes that a system needs an exemption from some or all of the requirements of the Privacy Act will send a request to Air Force Chief Information Officer/P through the Major Command or Field Operating Agency Privacy Act Officer. The request will detail the reasons for the exemption, the section of the Act that allows the exemption, and the specific subsections of the Privacy Act from which the system is to be exempted, with justification for each subsection.
Exemptions permissible under 5 U.S.C. 552a (subject to § 806b.38 of this part):
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
The Privacy Act requires the written consent of the subject before releasing personal information to third parties, unless one of the 12 exceptions of the Privacy Act applies (see § 806b.47). Use this checklist before releasing personal information to third parties: Make sure it is authorized under the Privacy Act; consider the consequences; and check the accuracy of the information. You can release personal information to third parties when the subject agrees in writing. Air Force members consent to releasing their home telephone number and address when they sign and check the “Do Consent” block on the AF Form 624, Base/Unit Locator and Postal Service Center Directory
Before including personal information such as spouses names, home addresses, home phones, and similar information on social rosters or directories that are shared with groups of individuals, ask for signed consent statements. Otherwise, do not include the information. Consent statements must give the individual a choice to consent or not consent, and clearly tell the individual what information is being solicited, the purpose, to whom you plan to disclose the information, and that consent is voluntary. Maintain the signed statements until no longer needed.
Personal information should never be placed on shared drives for access by groups of individuals unless each person has an official need to know the information to perform their job. Add appropriate access controls to ensure access by only authorized individuals. Recall rosters are FOUO because they contain personal information and should be shared with small groups at the lowest levels for official purposes to reduce the number of people with access to such personal information. Commanders and supervisors should give consideration to those individuals with unlisted phone numbers, who do not want their number included on the office recall roster. In those instances, disclosure to the Commander or immediate supervisor, or deputy, should normally be sufficient.
Following are some examples of information that is not releasable without the written consent of the subject. This list is not all-inclusive.
(a) Marital status (single, divorced, widowed, separated).
(b) Number, name, and sex of dependents.
(c) Civilian educational degrees and major areas of study (unless the request for the information relates to the professional qualifications for Federal employment).
(d) School and year of graduation.
(e) Home of record.
(f) Home address and phone.
(g) Age and date of birth (year).
(h) Present or future assignments for overseas or for routinely deployable or sensitive units.
(i) Office and unit address and duty phone for overseas or for routinely deployable or sensitive units.
(j) Race/ethnic origin.
(k) Educational level (unless the request for the information relates to the professional qualifications for Federal employment).
(l) Social Security Number.
Following are examples of information normally releasable to the public without the written consent of the subject. This list is not all-inclusive.
(a) Name.
(b) Rank.
(c) Grade.
(d) Air Force specialty code.
(e) Pay (including base pay, special pay, all allowances except Basic Allowance for Quarters and Variable Housing Allowance).
(f) Gross salary for civilians.
(g) Past duty assignments, unless sensitive or classified.
(h) Present and future approved and announced stateside assignments.
(i) Position title.
(j) Office, unit address, and duty phone number (Continental United States (CONUS) only).
(k) Date of rank.
(l) Entered on active duty date.
(m) Pay date.
(n) Source of commission.
(o) Professional military education.
(p) Promotion sequence number.
(q) Military awards and decorations.
(r) Duty status of active, retired, or reserve.
(s) Active duty official attendance at technical, scientific, or professional meetings.
(t) Biographies and photos of key personnel.
(u) Date of retirement, separation.
Use these guidelines to decide whether to release information:
(a) Would the subject have a reasonable expectation of privacy in the information requested?
(b) Would disclosing the information benefit the general public? The Air Force considers information as meeting the public interest standard if it reveals anything regarding the operations or activities of the agency, or performance of its statutory duties.
(c) Balance the public interest against the individual's probable loss of privacy. Do
The Privacy Act prohibits disclosing personal information to anyone other than the subject of the record without his or her written consent. There are twelve exceptions to the “no disclosure without consent” rule. Those exceptions permit release of personal information without the individual's consent only in the following instances:
(a)
(b)
(c)
In addition to the Routine Uses established by the Department of the Air Force within each system of records, the DoD has established “Blanket Routine Uses” that apply to all record systems maintained by the Department of the Air Force. These “Blanket Routine Uses” have been published only once at the beginning of the Department of the Air Force's
(d)
(e)
(f)
(g)
(h)
(i)
(1) Requests from a Congressional member acting on behalf of the record subject are evaluated under the routine use of the applicable system notice. If the material for release is sensitive, get a release statement.
(2) Requests from a Congressional member not on behalf of a committee or the record subject are properly analyzed under the Freedom of Information Act, and not under the Privacy Act.
(j)
(k)
(l)
Air Force personnel may disclose the medical records of minors to their parents or legal guardians in conjunction with applicable Federal laws and guidelines. The laws of each state define the age of majority.
(a) The Air Force must obey state laws protecting medical records of drug or alcohol abuse treatment, abortion, and birth control. If you manage medical
(b) Outside the United States (overseas), the age of majority is 18. Unless parents or guardians have a court order granting access or the minor’s written consent, they will not have access to minor's medical records overseas when the minor sought or consented to treatment between the ages of 15 and 17 in a program where regulation or statute provides confidentiality of records and he or she asked for confidentiality.
System managers must keep an accurate record of all disclosures made from any system of records except disclosures to DoD personnel for official use or disclosures under the Freedom of Information Act. System managers may use Air Force Form 771
(a) System managers may file the accounting record any way they want as long as they give it to the subject on request, send corrected or disputed information to previous record recipients, explain any disclosures, and provide an audit trail for reviews. Include in each accounting:
(1) Release date.
(2) Description of information.
(3) Reason for release.
(4) Name and address of recipient.
(5) Some exempt systems let you withhold the accounting record from the subject.
(b) You may withhold information about disclosure accountings for law enforcement purposes at the law enforcement agency's request.
Computer matching programs electronically compare records from two or more automated systems that may include DoD, another Federal agency, or a state or other local government. A system manager proposing a match that could result in an adverse action against a Federal employee must meet these requirements of the Privacy Act:
(1) Prepare a written agreement between participants;
(2) Secure approval of the Defense Data Integrity Board;
(3) Publish a matching notice in the
(4) Ensure full investigation and due process; and
(5) Act on the information, as necessary.
(a) The Privacy Act applies to matching programs that use records from: Federal personnel or payroll systems and Federal benefit programs where matching:
(1) Determines Federal benefit eligibility;
(2) Checks on compliance with benefit program requirements;
(3) Recovers improper payments or delinquent debts from current or former beneficiaries.
(b) Matches used for statistics, pilot programs, law enforcement, tax administration, routine administration, background checks and foreign counterintelligence, and internal matching that won't cause any adverse action are exempt from Privacy Act matching requirements.
(c) Any activity that expects to participate in a matching program must contact Air Force Chief Information Officer/P immediately. System managers must prepare a notice for publication in the
(d) Record subjects must receive prior notice of a match. The best way to do this is to include notice in the Privacy Act Statement on forms used in applying for benefits. Coordinate computer matching statements on forms with Air Force Chief Information Officer/P through the Major Command Privacy Act Officer.
Do not post personal information on publicly accessible DoD web sites unless clearly authorized by law and implementing regulation and policy. Additionally, do not post personal information on .mil private web sites unless authorized by the local commander, for official purposes, and an appropriate risk assessment is performed.
(a) Ensure public Web sites comply with privacy policies regarding restrictions on persistent and third party cookies, and add appropriate privacy and security notices at major web site entry points and Privacy Act statements or Privacy Advisories when collecting personal information. Notices must clearly explain where the collection or sharing of certain information is voluntary, and notify users how to provide consent.
(b) Include a Privacy Act Statement on the web page if it collects information directly from an individual that we maintain and retrieve by his or her name or personal identifier (
(c) Anytime a web site solicits personally-identifying information, even when not maintained in a Privacy Act system of records, it requires a Privacy Advisory. The Privacy Advisory informs the individual why the information is solicited and how it will be used. Post the Privacy Advisory to the web page where the information is being solicited, or through a well-marked hyperlink “Privacy Advisory—Please refer to the Privacy and Security Notice that describes why this information is collected and how it will be used.”
The Privacy Act requires training for all persons involved in the design, development, operation and maintenance of any system of records. More specialized training is needed for personnel who may be expected to deal with the news media or the public, personnel specialists, finance officers, information managers, supervisors, and individuals working with medical and security records. Commanders will ensure that above personnel are trained annually in the principles and requirements of the Privacy Act.
Helpful resources include:
(a) The Air Force Freedom of Information Act Web page which includes a Privacy Overview, Privacy Act training slides, the Air Force systems of records notices, and links to the Defense Privacy Board Advisory Opinions, the DoD and Department of Justice Privacy web pages. Go to
(b) “The Privacy Act of 1974,” a 32-minute film developed by the Defense
(c) A Manager's Overview, What You Need to Know About the Privacy Act. This overview gives you Privacy Act 101 and is available on-line at
(d) Training slides for use by the Major Command and base Privacy Act officers, available from the Freedom of Information Act web page at
Formal school training groups that develop or modify blocks of instruction must send the material to Air Force Chief Information Officer/P for coordination.
(a) Information Collections. No information collections are required by this publication.
(b) Records. Retain and dispose of Privacy Act records according to Air Force Manual 37-139, Records Disposition Schedule.
(c) Forms or Information Management Tools (Adopted and Prescribed).
(1) Adopted Forms or Information Management Tools. Air Force Form 624, Base/Unit Locator and PSC Directory, and AF Form 847, Recommendation for Change of Publication.
(2) Prescribed Forms or Information Management Tools. AF Form 3227, Privacy Act Cover Sheet, Air Force Form 771, Accounting of Disclosures, and Air Force Visual Aid 33-276.
The following elements comprise a system of records notice for publication in the
Executive Order 9397 authorizes using the Social Security Number as a personal identifier. Include this authority whenever the Social Security Number is used to retrieve records.
The DoD ‘Blanket Routine Uses’ published in the Air Force Directory of System Notices apply to all system notices unless you indicate otherwise.
Certain DoD “blanket routine uses” have been established that are applicable to every record system maintained by the Department of the Air Force, unless specifically stated otherwise within the particular record system notice. These additional routine uses of the records are published only once in the Air Force's Preamble to its compilation of records systems in the interest of simplicity, economy and to avoid redundancy.
If a system of records maintained by a DoD Component to carry out its functions indicates a violation or potential violation of law, whether civil, criminal, or regulatory in nature, and whether arising by general statute or by regulation, rule, or order issued pursuant thereto, the relevant records in the system of records may be referred, as a routine use, to the agency concerned, whether federal, state, local, or foreign, charged with the responsibility of investigating or prosecuting such violation or charged with enforcing or implementing the statute, rule, regulation, or order issued pursuant thereto.
A record from a system of records maintained by a Component may be disclosed as a routine use to a federal, state, or local agency maintaining civil, criminal, or other relevant enforcement information or other pertinent information, such as current licenses, if necessary to obtain information relevant to a Component decision concerning the hiring or retention of an employee, the issuance of a security clearance, the letting of a contract, or the issuance of a license, grant, or other benefit.
A record from a system of records maintained by a Component may be disclosed to a federal agency, in response to its request, in connection with the hiring or retention of an employee, the issuance of a security clearance, the reporting of an investigation of an employee, the letting of a contract, or the issuance of a license, grant, or other benefit by the requesting agency, to the extent that the information is relevant and necessary to the requesting agency's decision on the matter.
Disclosure from a system of records maintained by a Component may be made to a congressional office from the record of an individual in response to an inquiry from the congressional office made at the request of that individual.
Relevant information contained in all systems of records of the Department of Defense published on or before August 22, 1975, will be disclosed to the Office of Management and Budget in connection with the review of private relief legislation as set forth in Office of Management and Budget Circular A-19 (reference (u)) at any stage of the legislative coordination and clearance process as set forth in that Circular.
A record from a system of records maintained by a Component may be disclosed to foreign law enforcement, security, investigatory, or administrative authorities to comply with requirements imposed by, or to claim rights conferred in, international agreements and arrangements including those regulating the stationing and status in foreign countries of DoD military and civilian personnel.
Any information normally contained in Internal Revenue Service (IRS) Form W-2 which is maintained in a record from a system of records maintained by a Component may be disclosed to state and local taxing authorities with which the Secretary of the Treasury has entered into agreements under 5 U.S.C., sections 5516, 5517, and 5520 (reference (v)) and only to those state and local taxing authorities for which an employee or military member is or was subject to tax regardless of whether tax is or was withheld. This routine use is in accordance with Treasury Fiscal Requirements Manual Bulletin No. 76-07.
A record from a system of records subject to the Privacy Act and maintained by a Component may be disclosed to the Office of Personnel Management (OPM) concerning information on pay and leave, benefits, retirement deduction, and any other information necessary for the OPM to carry out its legally authorized government-wide personnel management functions and studies.
A record from a system of records maintained by this component may be disclosed as a routine use to any component of the Department of Justice for the purpose of representing the Department of Defense, or any officer, employee or member of the Department in pending or potential litigation to which the record is pertinent.
Information as to current military addresses and assignments may be provided to military banking facilities who provide banking services overseas and who are reimbursed by the Government for certain checking and loan losses. For personnel separated, discharged, or retired from the Armed Forces, information as to last known residential or home of record address may be provided to the military banking facility upon certification by a banking facility officer that the facility has a returned or dishonored check negotiated by the individual or the individual has defaulted on a loan and that if restitution is not made by the individual, the U.S. Government will be liable for the losses the facility may incur.
A record from a system of records maintained by this component may be disclosed as a routine use to the General Services Administration (GSA) for the purpose of records management inspections conducted under authority of 44 U.S.C. 2904 and 2906.
A record from a system of records maintained by this component may be disclosed as a routine use to the National Archives and Records Administration (NARA) for the purpose of records
A record from a system of records maintained by this component may be disclosed as a routine use to the Merit Systems Protection Board, including the Office of the Special Counsel for the purpose of litigation, including administrative proceedings, appeals, special studies of the civil service and other merit systems, review of OPM or component rules and regulations, investigation of alleged or possible prohibited personnel practices; including administrative proceedings involving any individual subject of a DoD investigation, and such other functions, promulgated in 5 U.S.C. 1205 and 1206, or as may be authorized by law.
A record from a system of records maintained by this component may be disclosed as a routine use outside the DoD or the U.S. Government for the purpose of counterintelligence activities authorized by U.S. Law or Executive Order or for the purpose of enforcing laws, which protect the national security of the United States.
(a) All systems of records maintained by the Department of the Air Force shall be exempt from the requirements of 5 U.S.C. 552a(d) pursuant to 5 U.S.C. 552a(k)(1) to the extent that the system contains any information properly classified under Executive Order 12958 and that is required by Executive Order to be kept classified in the interest of national defense or foreign policy. This exemption is applicable to parts of all systems of records including those not otherwise specifically designated for exemptions herein, which contain isolated items of properly classified information.
(b) An individual is not entitled to have access to any information compiled in reasonable anticipation of a civil action or proceeding (5 U.S.C. 552a(d)(5)).
(c) No system of records within Department of the Air Force shall be considered exempt under subsection (j) or (k) of the Privacy Act until the exemption rule for the system of records has been published as a final rule in the
(d) Consistent with the legislative purpose of the Privacy Act of 1974, the Department of the Air Force will grant access to non-exempt material in the records being maintained. Disclosure will be governed by the Department of the Air Force's Privacy Instruction, but will be limited to the extent that identity of confidential sources will not be compromised; subjects of an investigation of an actual or potential violation will not be alerted to the investigation; the physical safety of witnesses, informants and law enforcement personnel will not be endangered, the privacy of third parties will not be violated; and that the disclosure would not otherwise impede effective law enforcement. Whenever possible, information of the above nature will be deleted from the requested documents and the balance made available. The controlling principle behind this limited access is to allow disclosures except those indicated above. The decisions to release information from these systems will be made on a case-by-case basis.
(e) General Exemptions. The following systems of records claim an exemption under 5 U.S.C. 552a(j)(2), with the exception of F090 AF IG B, Inspector General Records and F051 AF JA F, Courts-Martial and Article 15 Records. They claim both the (j)(2) and (k)(2) exemption, and are listed under this part:
(1) System identifier and name: F071 AF OSI A, Counter Intelligence Operations and Collection Records.
(2) System identifier and name: F071 AF OSI C, Criminal Records.
(3) System identifier and name: F071 AF OSI D, Investigative Support Records.
(4) System identifier and name: F031 AF SP E, Security Forces Management Information System (SFMIS).
(i) Exemption: Parts of this system may be exempt pursuant to 5 U.S.C. 552a(j)(2) if information is compiled and maintained by a component of the agency which performs as its principle function any activity pertaining to the enforcement of criminal laws. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(j)(2) from the following subsections of 5 U.S.C. 552a(c)(3), (c)(4), (d), (e)(1), (e)(2), (e)(3), (e)(4)(G), and (I), (e)(5), (e)(8), (f), and (g).
(ii) Authority: 5 U.S.C. 552a(j)(2).
(iii) Reasons: (A) To protect ongoing investigations and to protect from access criminal investigation information contained in this record system, so as not to jeopardize any subsequent judicial or administrative process taken as a result of information contained in the file.
(B) From subsection (c)(3) because the release of the disclosure accounting, for disclosures pursuant to the routine uses published for this system, would permit the subject criminal investigation or matter under investigation to obtain valuable information concerning the nature of that investigation which will present a serious impediment to law enforcement.
(C) From subsection (c)(4) because an exemption is being claimed for subsection this subsection will not be applicable.
(D) From subsection (d) because access the records contained in this system would inform the subject of an investigation of existence of that investigation, provide subject of the investigation with information that might enable him to avoid detection, and would present a serious impediment to law enforcement.
(E) From subsection (e)(4)(H) because system of records is exempt from individual access pursuant to subsection (j) of the Privacy Act of 1974.
(F) From subsection (f) because this system of records has been exempted from access provisions of subsection (d).
(5) System identifier and name: F031 AF SF A, Correction and Rehabilitation Records.
(i) Exemption: Parts of this system may be exempt pursuant to 5 U.S.C. 552a(j)(2) if information is compiled and maintained by a component of the agency which performs as its principle function any activity pertaining to the enforcement of criminal laws. Portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(j)(2) from the following subsections of 5 U.S.C. 552a(c)(3), (c)(4), (d), (e)(3), (e)(4)(G), (H) and (I), (e)(5), (e)(8), (f), and (g).
(ii) Authority: 5 U.S.C. 552a(j)(2).
(iii) Reasons: (A) From subsection (c)(3) because the release of the disclosure accounting, for disclosures pursuant to the routine uses published for this system, would permit the subject of a criminal investigation or matter under investigation to obtain valuable information concerning the nature of that investigation which will present a serious impediment to law enforcement.
(B) From subsection (c)(4) because an exemption is being claimed for subsection (d), this subsection will not be applicable.
(C) From subsection (d) because access to the records contained in this system would inform the subject of a criminal investigation of the existence of that investigation, provide the subject of the investigation with information that might enable him to avoid detection or apprehension, and would present a serious impediment to law enforcement.
(D) From subsection (e)(3) would constitute a serious impediment to law enforcement in that it could compromise the existence of a confidential investigation, reveal the identity of confidential sources of information and endanger the life and physical safety of confidential informants.
(E) From subsections (e)(4)(G) and (H) because this system of records is exempt from individual access pursuant to subsections (j)(2) of the Privacy Act of 1974.
(F) From subsection (e)(4)(I) because the identity of specific sources must be withheld in order to protect the confidentiality of the sources of criminal and other law enforcement information. This exemption is further necessary to protect the privacy and physical safety of witnesses and informants.
(G) From subsection (e)(5) because in the collection of information for law enforcement purposes it is impossible to determine in advance what information is accurate, relevant, timely, and complete. With the passage of time, seemingly irrelevant or untimely information may acquire new significance as further investigation brings new details to light and the accuracy of such information can only be determined in a court of law. The restrictions of subsection (e)(5) would restrict the ability of trained investigators and intelligence analysts to exercise their judgment reporting on investigations and impede the development of intelligence necessary for effective law enforcement.
(H) From subsection (e)(8) because the individual notice requirements of subsection (e)(8) could present a serious impediment to law enforcement as this could interfere with the ability to issue search authorizations and could reveal investigative techniques and procedures.
(I) From subsection (f) because this system of records has been exempted from the access provisions of subsection (d).
(J) From subsection (g) because this system of records compiled for law enforcement
(6) System identifier and name: F090 AF IG B, Inspector General Records.
(i) Exemption: (A) Parts of this system of records may be exempt pursuant to 5 U.S.C. 552a(j)(2) if the information is compiled and maintained by a component of the agency which performs as its principle function any activity pertaining to the enforcement of criminal laws. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(j)(2) from the following subsections of 5 U.S.C. 552a(c)(3), (c)(4), (d), (e)(1), (e)(2), (e)(3), (e)(4)(G), (H), and (I), (e)(5), (e)(8), (f), and (g).
(B) Investigative material compiled for law enforcement purposes, other than material within the scope of subsection 5 U.S.C. 552a(j)(2), may be exempt pursuant to 5 U.S.C. 552a(k)(2). However, if an individual is denied any right, privilege, or benefit for which he would otherwise be entitled by Federal law or for which he would otherwise be eligible, as a result of the maintenance of the information, the individual will be provided access to the information exempt to the extent that disclosure would reveal the identity of a confidential source. Note: When claimed, this exemption allows limited protection of investigative reports maintained in a system of records used in personnel or administrative actions. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(2) from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(1), (e)(4)(G), (H) and (I), and (f).
(ii) Authority: 5 U.S.C. 552a(j)(2) and (k)(2).
(iii) Reasons: (A) From subsection (c)(3) because the release of accounting of disclosure would inform a subject that he or she is under investigation. This information would provide considerable advantage to the subject in providing him or her with knowledge concerning the nature of the investigation and the coordinated investigative efforts and techniques employed by the cooperating agencies. This would greatly impede the Air Force IG's criminal law enforcement.
(B) From subsection (c)(4) and (d), because notification would alert a subject to the fact that an open investigation on that individual is taking place, and might weaken the ongoing investigation, reveal investigative techniques, and place confidential informants in jeopardy.
(C) From subsection (e)(1) because the nature of the criminal and/or civil investigative function creates unique problems in prescribing a specific parameter in a particular case with respect to what information is relevant or necessary. Also, information may be received which may relate to a case under the investigative jurisdiction of another agency. The maintenance of this information may be necessary to provide leads for appropriate law enforcement purposes and to establish patterns of activity that may relate to the jurisdiction of other cooperating agencies.
(D) From subsection (e)(2) because collecting information to the fullest extent possible directly from the subject individual may or may not be practical in a criminal and/or civil investigation.
(E) From subsection (e)(3) because supplying an individual with a form containing a Privacy Act Statement would tend to inhibit cooperation by many individuals involved in a criminal and/or civil investigation. The effect would be somewhat adverse to established investigative methods and techniques.
(F) From subsections (e)(4)(G), (H), and (I) because this system of records is exempt from the access provisions of subsection (d) and (f).
(G) From subsection (e)(5) because the requirement that records be maintained with attention to accuracy, relevance, timeliness, and completeness would unfairly hamper the investigative process. It is the nature of law enforcement for investigations to uncover the commission of illegal acts at diverse stages. It is frequently impossible to determine initially what information is accurate, relevant, timely, and least of all complete. With the passage of time, seemingly irrelevant or untimely information may acquire new significance as further investigation brings new details to light.
(H) From subsection (e)(8) because the notice requirements of this provision could present a serious impediment to law enforcement by revealing investigative techniques, procedures, and existence of confidential investigations.
(I) From subsection (f) because the agency's rules are inapplicable to those portions of the system that are exempt and would place the burden on the agency of either confirming or denying the existence of a record pertaining to a requesting individual might in itself provide an answer to that individual relating to an ongoing investigation. The conduct of a successful investigation leading to the indictment of a criminal offender precludes the applicability of established agency rules relating to verification of record, disclosure of the record to that individual, and record amendment procedures for this record system.
(J) From subsection (g) because this system of records should be exempt to the extent that the civil remedies relate to provisions of 5 U.S.C. 552a from which this rule exempts the system.
(7) System identifier and name: F051 AF JA F, Courts-Martial and Article 15 Records.
(i) Exemptions: (A) Parts of this system may be exempt pursuant to 5 U.S.C. 552a(j)(2) if the information is compiled and maintained by a component of the agency which performs as its principle function any activity pertaining to the enforcement of criminal laws. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(j)(2) from the following subsection of 5 U.S.C. 552a(c)(3), (c)(4), (d), (e)(1), (e)(2), (e)(3), (e)(4)(G), (H) and (I), (e)(5), (e)(8), (f), and (g).
(B) Investigatory material compiled for law enforcement purposes, other than material within the scope of subsection 5 U.S.C. 552a(j)(2), may be exempt pursuant to 5 U.S.C. 552a(k)(2). However, if an individual is denied any right, privilege, or benefit for which he would otherwise be entitled by Federal law or for which he would otherwise be eligible, as a result of the maintenance of the information, the individual will be provided access to the information exempt to the extent that disclosure would reveal the identity of a confidential source. NOTE: When claimed, this exemption allows limited protection of investigative reports maintained in a system of records used in personnel or administrative actions. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(2) from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(1), (e)(4)(G), (H) and (I), and (f).
(ii) Authority: 5 U.S.C. 552a(j)(2) and (k)(2).
(iii) Reason: (A) From subsection (c)(3) because the release of the disclosure accounting, for disclosures pursuant to the routine uses published for this system, would permit the subject of a criminal investigation or matter under investigation to obtain valuable information concerning the nature of that investigation which will present a serious impediment to law enforcement.
(B) From subsection (c)(4) because an exemption is being claimed for subsection (d), his subsection will not be applicable.
(C) From subsection (d) because access to the records contained in this system would inform the subject of a criminal investigation of the existence of that investigation, provide the subject of the investigation with information that might enable him to avoid detection or apprehension, and would present a serious impediment to law enforcement.
(D) From subsection (e)(1) because in the course of criminal investigations information is often obtained concerning the violation of laws or civil obligations of others not relating to an active case or matter. In the interests of effective law enforcement, it is necessary that this information be retained since it can aid in establishing patterns of activity and provide valuable leads for other agencies and future cases that may be brought.
(E) From subsection (e)(2) because in a criminal investigation the requirement that information be collected to the greatest extent possible from the subject individual would present a serious impediment to law enforcement in that the subject of the investigation would be placed on notice of the existence of the investigation and would therefore be able to avoid detection.
(F) From subsection (e)(3) because the requirement that individuals supplying information be provided with a form stating the requirements of subsection (e)(3) would constitute a serious impediment to law enforcement in that it could compromise the existence of a confidential investigation, reveal the identity of confidential sources of information and endanger the life and physical safety of confidential informants.
(G) From subsections (e)(4)(G) and (H) because this system of records is exempt from individual access pursuant to subsections (j) and (k) of the Privacy Act of 1974.
(H) From subsection (e)(4)(I) because the identity of specific sources must be withheld in order to protect the confidentiality of the sources of criminal and other law enforcement information. This exemption is further necessary to protect the privacy and physical safety of witnesses and informants.
(I) From subsection (e)(5) because in the collection of information for law enforcement
(J) From subsection (e)(8) because the individual notice requirements of subsection (e)(8) could present a serious impediment to law enforcement as this could interfere with the ability to issue search authorizations and could reveal investigative techniques and procedures.
(K) From subsection (f) because this system of records has been exempted from the access provisions of subsection (d).
(L) From subsection (g) because this system of records is compiled for law enforcement purposes and has been exempted from the access provisions of subsections (d) and (f).
(f) Specific Exemptions. The following systems of records are subject to the specific exemptions shown:
(1) System identifier and name: F036 USAFA K, Admissions Records.
(i) Exemption: Evaluation material used to determine potential for promotion in the Military Services may be exempt pursuant to 5 U.S.C. 552a(k)(7), but only to the extent that the disclosure of such material would reveal the identify of a confidential source. Therefore, portions of this system of records (Liaison Officer Evaluation and Selection Panel Candidate Evaluation) may be exempt pursuant to 5 U.S.C. 552a(k)(7) from the following subsections of 5 U.S.C. 552a(d), (e)(4)(H), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(7).
(iii) Reasons: To ensure the frankness of information used to determine whether cadets are qualified for graduation and commissioning as officers in the Air Force.
(2) System identifier and name: F036 AFPC N, Air Force Personnel Test 851, Test Answer Sheets.
(i) Exemption: Testing or examination material used solely to determine individual qualifications for appointment or promotion in the federal or military service may be exempt pursuant to 5 U.S.C. 552a(k)(6), if the disclosure would compromise the objectivity or fairness of the test or examination process. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(6) from the following subsections of 5 U.S.C. 552a(c)(3); (d); (e)(4)(G), (H), and (I); and (f).
(ii) Authority: 5 U.S.C. 552a(k)(6).
(iii) Reasons: To protect the objectivity of the promotion testing system by keeping the test questions and answers in confidence.
(3) System identifier and name: F036 USAFA A, Cadet Personnel Management System.
(i) Exemption: Evaluation material used to determine potential for promotion in the Military Services may be exempt pursuant to 5 U.S.C. 552a(k)(7), but only to the extent that the disclosure of such material would reveal the identify of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(7) from the following subsections of 5 U.S.C. 552a(d), (e)(4)(H), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(7).
(iii) Reasons: To maintain the candor and integrity of comments needed to evaluate an Air Force Academy cadet for commissioning in the Air Force.
(4) System identifier and name: F036 AETC I, Cadet Records.
(i) Exemption: Investigatory material compiled solely for the purpose of determining suitability, eligibility, or qualifications for federal civilian employment, military service, federal contracts, or access to classified information may be exempt pursuant to 5 U.S.C. 552a(k)(5), but only to the extent that such material would reveal the identity of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(5) (Detachment Professional Officer Course Selection Rating Sheets; Air Force Reserve Officer Training Corps Form 0-24—Disenrollment Review; Memoranda for Record and Staff Papers with Staff Advice, Opinions, or Suggestions) may be exempt from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(4)(G) and (H), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(5).
(iii) Reasons: To protect the identity of a confidential source who furnishes information necessary to make determinations about the qualifications, eligibility, and suitability of cadets for graduation and commissioning in the Air Force.
(5) System identifier and name: F044 AF SG Q, Family Advocacy Program Records.
(i) Exemption: (A) Investigative material compiled for law enforcement purposes, other than material within the scope of subsection 5 U.S.C. 552a(j)(2), may be exempt pursuant to 5 U.S.C. 552a(k)(2). However, if an individual is denied any right, privilege, or benefit for which he would otherwise be entitled by Federal law or for which he would otherwise be eligible, as a result of the maintenance of the information, the individual will be provided access to the information exempt to the extent that disclosure would reveal the identity of a confidential source.
(B) Investigative material compiled solely for the purpose of determining suitability, eligibility, or qualifications for federal civilian employment, military service, federal contracts, or access to classified information may be exempt pursuant to 5 U.S.C. 552a(k)(5), but only to the extent that such material would reveal the identity of a confidential source.
(C) Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(2) and (k)(5) from the following subsections of 5 U.S.C. 552a(c)(3) and (d).
(ii) Authority: 5 U.S.C. 552a(k)(2) and (k)(5).
(iii) Reasons: From subsections (c)(3) and (d) because the exemption is needed to encourage those who know of exceptional medical or educational conditions or family maltreatments to come forward by protecting their identities and to protect such sources from embarrassment or recriminations, as well as to protect their right to privacy. It is essential that the identities of all individuals who furnish information under an express promise of confidentiality be protected. Granting individuals access to information relating to criminal and civil law enforcement, as well as the release of certain disclosure accounting, could interfere with ongoing investigations and the orderly administration of justice, in that it could result in the concealment, alteration, destruction, or fabrication of information; could hamper the identification of offenders or alleged offenders and the disposition of charges; and could jeopardize the safety and well being of parents and their children. Exempted portions of this system also contain information considered relevant and necessary to make a determination as to qualifications, eligibility, or suitability for Federal employment and Federal contracts, and that was obtained by providing an express or implied promise to the source that his or her identity would not be revealed to the subject of the record.
(6) System identifier and name: F036 AF PC A, Effectiveness/Performance Reporting System.
(i) Exemption: Evaluation material used to determine potential for promotion in the Military Services (Brigadier General Selectee Effectiveness Reports and Colonel and Lieutenant Colonel Promotion Recommendations with close out dates on or before January 31, 1991) may be exempt pursuant to 5 U.S.C. 552a(k)(7), but only to the extent that the disclosure of such material would reveal the identity of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(7) from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(4)(H), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(7).
(iii) Reasons: (A) From subsection (c)(3) because making the disclosure accounting available to the individual may compromise express promises of confidentiality by revealing details about the report and identify other record sources, which may result in circumvention of the access exemption.
(B) From subsection (d) because individual disclosure compromises express promises of confidentiality conferred to protect the integrity of the promotion rating system.
(C) From subsection (e)(4)(H) because of and to the extent that portions of this record system are exempt from the individual access provisions of subsection (d).
(D) From subsection (f) because of and to the extent that portions of this record system are exempt from the individual access provisions of subsection (d).
(7) System identifier and name: F036 AFDP A, Files on General Officers and Colonels Assigned to General Officer Positions.
(i) Exemption: Evaluation material used to determine potential for promotion in the Military Services may be exempt pursuant to
(ii) Authority: 5 U.S.C. 552a(k)(7).
(iii) Reasons: To protect the integrity of information used in the Reserve Initial Brigadier General Screening Board, the release of which would compromise the selection process.
(8) System identification and name: F036 AF PC O, General Officer Personnel Data System.
(i) Exemption: Evaluation material used to determine potential for promotion in the Military Services may be exempt pursuant to 5 U.S.C. 552a(k)(7), but only to the extent that the disclosure of such material would reveal the identity of a confidential source. Therefore, portions of this system of records (Air Force General Officer Promotion and Effectiveness Reports with close out dates on or before January 31, 1991) may be exempt pursuant to 5 U.S.C. 552a(k)(7) may be exempt from following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(4)(H), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(7).
(iii) Reason: (A) From subsection (c)(3) because making the disclosure accounting available to the individual may compromise express promises of confidentiality by revealing details about the report and identify other record sources, which may result in circumvention of the access exemption.
(B) From subsection (d) because individual disclosure compromises express promises of confidentiality conferred to protect the integrity of the promotion rating system.
(C) From subsection (e)(4)(H) because of and to the extent that portions of this record system are exempt from the individual access provisions of subsection (d).
(D) From subsection (f) because of and to the extent that portions of this record system are exempt from the individual access provisions of subsection (d).
(9) System identifier and name: F036 AFPC K, Historical Airman Promotion Master Test File.
(i) Exemption: Testing or examination material used solely to determine individual qualifications for appointment or promotion in the federal or military service, if the disclosure would compromise the objectivity or fairness of the test or examination process may be exempt pursuant to 5 U.S.C. 552a(k)(6), if the disclosure would compromise the objectivity or fairness of the test or examination process. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(6) from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(4)(G), (H), and (I), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(6).
(iii) Reasons: To protect the integrity, objectivity, and equity of the promotion testing system by keeping test questions and answers in confidence. Reserved.
(10) System identifier and name: F071 AF OSI F, Investigative Applicant Processing Records.
(i) Exemption: Investigatory material compiled solely for the purpose of determining suitability, eligibility, or qualifications for federal civilian employment, military service, federal contracts, or access to classified information may be exempt pursuant to 5 U.S.C. 552a(k)(5), but only to the extent that such material would reveal the identity of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(5) from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(4)(G), (H), and (I), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(5).
(iii) Reasons: To protect those who gave information in confidence during Air Force Office of Special Investigations applicant inquiries. Fear of harassment could cause sources not to make frank and open responses about applicant qualifications. This could compromise the integrity of the Air Force Office of Special Investigations personnel program that relies on selecting only qualified people.
(11) System identifier and name: F036 USAFA B, Master Cadet Personnel Record (Active/Historical).
(i) Exemptions: Evaluation material used to determine potential for promotion in the Military Services may be exempt pursuant to 5 U.S.C. 552a(k)(7), but only to the extent that the disclosure of such material would reveal the identify of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(7) from the following subsections of 5 U.S.C. 552a(d), (e)(4)(H), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(7).
(iii) Reasons: To maintain the candor and integrity of comments needed to evaluate a cadet for commissioning in the Air Force.
(12) System identifier and name: F031 497IG A, Sensitive Compartmented Information Personnel Records.
(i) Exemption: (A) Investigatory material compiled for law enforcement purposes, other than material within the scope of subsection 5 U.S.C. 552a(j)(2), may be exempt pursuant to 5 U.S.C. 552a(k)(2). However, if an individual is denied any right, privilege, or benefit for which he would otherwise be entitled by Federal law or for which he would otherwise be eligible, as a result of the maintenance of the information, the individual will be provided access to the information exempt to the extent that disclosure would reveal the identify of a confidential source.
(B) Investigatory material compiled solely for the purpose of determining suitability, eligibility, or qualifications for federal civilian employment, military service, federal contracts, or access to classified information may be exempt pursuant to 5 U.S.C. 552a(k)(5), but only to the extent that such material would reveal the identity of a confidential source.
(C) Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(2) and (k)(5) from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(4)(G), (H), and (I), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(2) and (k)(5).
(iii) Reasons: To protect the identity of sources to which proper promises of confidentiality have been made during investigations. Without these promises, sources will often be unwilling to provide information essential in adjudicating access in a fair and impartial manner.
(13) System identifier and name: F071 AF OSI B, Security and Related Investigative Records.
(i) Exemption: Investigatory material compiled solely for the purpose of determining suitability, eligibility, or qualifications for federal civilian employment, military service, federal contracts, or access to classified information may be exempt pursuant to 5 U.S.C. 552a(k)(5), but only to the extent that such material would reveal the identity of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(5) from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(4)(G), (H), and (I), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(5).
(iii) Reasons: To protect the identity of those who give information in confidence for personnel security and related investigations. Fear of harassment could cause sources to refuse to give this information in the frank and open way needed to pinpoint those areas in an investigation that should be expanded to resolve charges of questionable conduct.
(14) System identifier and name: F031 497IG B, Special Security Case Files.
(i) Exemption: Investigatory material compiled solely for the purpose of determining suitability, eligibility, or qualifications for federal civilian employment, military service, federal contracts, or access to classified information may be exempt pursuant to 5 U.S.C. 552a(k)(5), but only to the extent that such material would reveal the identity of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(5) from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(4)(G), (H), and (I), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(5).
(iii) Reasons: To protect the identity of those who give information in confidence for personnel security and related investigations. Fear of harassment could cause sources to refuse to give this information in the frank and open way needed to pinpoint those areas in an investigation that should be expanded to resolve charges of questionable conduct.
(15) System identifier and name: F031 AF SP N, Special Security Files.
(i) Exemption: Investigatory material compiled solely for the purpose of determining suitability, eligibility, or qualifications for federal civilian employment, military service, federal contracts, or access to classified information may be exempt pursuant to 5 U.S.C. 552a(k)(5), but only to the extent that such material would reveal the identity of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(5) from the following subsections of 5 U.S.C. 552a(c)(3), (d), (e)(4)(G), (H), and (I), and (f).
(ii) Authority: 5 U.S.C. 552a(k)(5).
(iii) Reasons: To protect the identity of those who give information in confidence for personnel security and related investigations. Fear of harassment could cause them to refuse to give this information in the frank and open way needed to pinpoint areas in an investigation that should be expanded to resolve charges of questionable conduct.
(16) System identifier and name: F036 AF PC P, Applications for Appointment and Extended Active Duty Files.
(i) Exemption: Investigatory material compiled solely for the purpose of determining suitability, eligibility, or qualifications for federal civilian employment, military service, federal contracts, or access to classified information may be exempt pursuant to 5 U.S.C. 552a(k)(5), but only to the extent that such material would reveal the identity of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(5) from the following subsection of 5 U.S.C. 552a(d).
(ii) Authority: 5 U.S.C. 552a(k)(5).
(iii) Reasons: To protect the identity of confidential sources who furnish information necessary to make determinations about the qualifications, eligibility, and suitability of health care professionals who apply for Reserve of the Air Force appointment or interservice transfer to the Air Force.
(17) System identifier and name: F036 AF DPG, Military Equal Opportunity and Treatment.
(i) Exemption: Investigative material compiled for law enforcement purposes, other than material within the scope of subsection 5 U.S.C. 552a(j)(2), may be exempt pursuant to 5 U.S.C. 552a(k)(2). However, if an individual is denied any right, privilege, or benefit for which he would otherwise be entitled by Federal law or for which he would otherwise be eligible, as a result of the maintenance of the information, the individual will be provided access to the information exempt to the extent that disclosure would reveal the identity of a confidential source.
(ii) Authority: 5 U.S.C. 552a(k)(2).
(iii) Reasons: (A) From subsection (d) because access to the records contained in this system would inform the subject of an investigation of the existence of that investigation, provide the subject of the investigation with information that might enable him to avoid detection, and would present a serious impediment to law enforcement. In addition, granting individuals access to information collected while an Equal Opportunity and Treatment clarification/investigation is in progress conflicts with the just, thorough, and timely completion of the complaint, and could possibly enable individuals to interfere, obstruct, or mislead those clarifying/investigating the complaint.
(B) From subsection (e)(4)(H) because this system of records is exempt from individual access pursuant to subsection (k) of the Privacy Act of 1974.
(C) From subsection (f) because this system of records has been exempted from the access provisions of subsection (d).
(18) System identifier and name: F051 AF JA I, Commander Directed Inquiries.
(i) Exemption: Investigatory material compiled for law enforcement purposes, other than material within the scope of subsection 5 U.S.C. 552a(j)(2), may be exempt pursuant to 5 U.S.C. 552a(k)(2). However, if an individual is denied any right, privilege, or benefit for which he would otherwise be entitled by Federal law or for which he would otherwise be eligible, as a result of the maintenance of the information, the individual will be provided access to the information except to the extent that disclosure would reveal the identity of a confidential source.
(ii) Authority: 5 U.S.C. 552a(k)(2).
(iii) Reasons: (A) From subsection (c)(3) because to grant access to the accounting for each disclosure as required by the Privacy Act, including the date, nature, and purpose of each disclosure and the identity of the recipient, could alert the subject to the existence of the investigation. This could seriously compromise case preparation by prematurely revealing its existence and nature; compromise or interfere with witnesses or make witnesses reluctant to cooperate; and lead to suppression, alteration, or destruction of evidence.
(B) From subsections (d) and (f) because providing access to investigative records and the right to contest the contents of those records and force changes to be made to the information contained therein would seriously interfere with and thwart the orderly and unbiased conduct of the investigation and impede case preparation. Providing access rights normally afforded under the Privacy Act would provide the subject with valuable information that would allow interference with or compromise of witnesses or render witnesses reluctant to cooperate; lead to suppression, alteration, or destruction of evidence; enable individuals to conceal their wrongdoing or mislead the course of the investigation; and result in the secreting of or other disposition of assets that would make them difficult or impossible to reach in order to satisfy any Government claim growing out of the investigation or proceeding.
(C) From subsection (e)(1) because it is not always possible to detect the relevance or necessity of each piece of information in the early stages of an investigation. In some cases, it is only after the information is evaluated in light of other evidence that its relevance and necessity will be clear.
(D) From subsections (e)(4)(G) and (H) because this system of records is compiled for investigative purposes and is exempt from the access provisions of subsections (d) and (f).
(E) From subsection (e)(4)(I) because to the extent that this provision is construed to require more detailed disclosure than the broad, generic information currently published in the system notice, an exemption from this provision is necessary to protect the confidentiality of sources of information and to protect privacy and physical safety of witnesses and informants.
(19) System identifier and name: F031 DoD A, Joint Personnel Adjudication System.
(i) Exemption: Investigatory material compiled solely for the purpose of determining suitability, eligibility, or qualifications for federal civilian employment, military service, federal contracts, or access to classified information may be exempt pursuant to 5 U.S.C. 552a(k)(5), but only to the extent that such material would reveal the identity of a confidential source. Therefore, portions of this system of records may be exempt pursuant to 5 U.S.C. 552a(k)(5) from the following subsections of 5 U.S.C. 552a(c)(3), (d), and (e)(1).
(ii) Authority: 5 U.S.C. 552a(k)(5).
(iii) Reasons: (A) From subsection (c)(3) and (d) when access to accounting disclosures and access to or amendment of records would cause the identity of a confidential source to be revealed. Disclosure of the source's identity not only will result in the Department breaching the promise of confidentiality made to the source but it will impair the Department's future ability to compile investigatory material for the purpose of determining suitability, eligibility, or qualifications for Federal civilian employment, Federal contracts, or access to classified information. Unless sources can be assured that a promise of confidentiality will be honored, they will be less likely to provide information considered essential to the Department in making the required determinations.
(B) From subsection (e)(1) because in the collection of information for investigatory purposes, it is not always possible to determine the relevance and necessity of particular information in the early stages of the investigation. In some cases, it is only after the information is evaluated in light of other information that its relevance and necessity becomes clear. Such information permits more informed decision-making by the Department when making required suitability, eligibility, and qualification determinations.
(20) System identifier and name: F033 AF A, Information Requests-Freedom of Information Act.
(i) Exemption: During the processing of a Freedom of Information Act request, exempt materials from ‘other’ systems of records may in turn become part of the case record in this system. To the extent that copies of exempt records from those other systems of records are entered into this system, the Department of the Air Force hereby claims the same exemptions for the records from those ‘other’ systems that are entered into this system, as claimed for the original primary system of which they are a part.
(ii) Authority: 5 U.S.C. 552a(j)(2), (k)(1), (k)(2), (k)(3), (k)(4), (k)(5), (k)(6), and (k)(7).
(iii) Reasons: Records are only exempt from pertinent provisions of 5 U.S.C. 552a to the extent such provisions have been identified and an exemption claimed for the original record, and the purposes underlying the exemption for the original record still pertain to the record which is now contained in this system of records. In general, the exemptions were claimed in order to protect properly classified information relating to national defense and foreign policy, to avoid interference during the conduct of criminal, civil, or administrative actions or investigations, to ensure protective services provided the President and others are not compromised, to protect the identity of confidential sources incident to Federal employment, military service, contract, and security clearance determinations, and to preserve the confidentiality and integrity of Federal evaluation materials. The exemption rule for the original records will identify the specific reasons why the records are exempt from specific provisions of 5 U.S.C. 552a.
(21) System identifier and name: F033 AF B, Privacy Act Request Files.
(i) Exemption: During the processing of a Privacy Act request, exempt materials from other systems of records may in turn become part of the case record in this system. To the extent that copies of exempt records from those ‘other’ systems of records are entered into this system, the Department of the Air Force hereby claims the same exemptions for the records from those ‘other’ systems that are entered into this system, as claimed for the original primary system of which they are a part.
(ii) Authority: 5 U.S.C. 552a(j)(2), (k)(1), (k)(2), (k)(3), (k)(4), (k)(5), (k)(6), and (k)(7).
(iii) Reason: Records are only exempt from pertinent provisions of 5 U.S.C. 552a to the extent such provisions have been identified and an exemption claimed for the original record, and the purposes underlying the exemption for the original record still pertain to the record which is now contained in this system of records. In general, the exemptions were claimed in order to protect properly classified information relating to national defense and foreign policy, to avoid interference during the conduct of criminal, civil, or administrative actions or investigations, to ensure protective services provided the President and others are not compromised, to protect the identity of confidential sources incident to Federal employment, military service, contract, and security clearance determinations, and to preserve the confidentiality and integrity of Federal evaluation materials. The exemption rule for the original records will identify the specific reasons why the records are exempt from specific provisions of 5 U.S.C. 552a.
The Privacy Act Assessment. The Air Force recognizes the importance of protecting the privacy of individuals, to ensure sufficient protections for the privacy of personal information as we implement citizen-centered e-Government. Privacy issues must be addressed when systems are being developed, and privacy protections must be integrated into the development life cycle of these automated systems. The vehicle for addressing privacy issues in a system under development is the Privacy Impact Assessment. The Privacy Impact Assessment process also provides a means to assure compliance with applicable laws and regulations governing individual privacy.
(a) Purpose. The purpose of this document is to:
(1) Establish the requirements for addressing privacy during the systems development process.
(2) Describe the steps required to complete a Privacy Impact Assessment.
(3) Define the privacy issues you will address in the Privacy Impact Assessment.
(b) Background. The Air Force is responsible for ensuring the privacy, confidentiality, integrity, and availability of personal information. The Air Force recognizes that privacy protection is both a personal and fundamental right. Among the most basic of individuals' rights is an expectation that the Air Force will protect the confidentiality of personal, financial, and employment information. Individuals also have the right to expect that the Air Force will collect, maintain, use, and disseminate identifiable personal information and data only as authorized by law and as necessary to carry out agency responsibilities. Personal information is protected by the following:
(1) Title 5, U.S.C. 552a, The Privacy Act of 1974, as amended, which affords individuals the right to privacy in records maintained and used by Federal agencies.
(2) Public Law 100-235, The Computer Security Act of 1987,
(3) OMB Circular A-130, Management of Federal Information Resources,
(4) Public Law 107-347, Section 208, E-Gov Act of 2002, which aims to ensure privacy in the conduct of federal information activities.
(5) Title 5, U.S.C. 552, The Freedom of Information Act, as amended, which provides for the disclosure of information maintained by Federal agencies to the public while allowing limited protections for privacy.
(6) DoD Directive 5400.11, Department of Defense Privacy Program,
(7) DoD 5400.11-R, Department of Defense Privacy Program,
(8) Air Force Instruction 33-332, Air Force Privacy Act Program.
(c) The Air Force Privacy Office is in the Office of the Air Force Chief Information Officer, Directorate of Plans and Policy, and is responsible for overseeing Air Force implementation of the Privacy Act.
System Privacy. Rapid advancements in computer technology make it possible to store and retrieve vast amounts of data of all kinds quickly and efficiently. These advancements have raised concerns about the impact of large computerized information systems on the privacy of data subjects. Public concerns about highly integrated information systems operated by the government make it imperative to commit to a positive and aggressive approach to protecting individual privacy. Air Force Chief Information Officer is requiring the use of this Privacy Impact Assessment in order to ensure that the systems the Air Force develops protect individuals' privacy. The Privacy Impact Assessment incorporates privacy into the development life cycle so that all system development initiatives can appropriately consider privacy issues from the earliest stages of design.
(a) What is a Privacy Impact Assessment? The Privacy Impact Assessment is a process used to evaluate privacy in information systems. The process is designed to guide system owners and developers in assessing privacy through the early stages of development. The process consists of privacy training, gathering data from a project on privacy issues, and identifying and resolving the privacy risks. The Privacy Impact Assessment process is described in detail in Section C, Completing a Privacy Impact Assessment.
(b) When is a Privacy Impact Assessment Done? The Privacy Impact Assessment is initiated in the early stages of the development of a system and completed as part of the required system life cycle reviews. Privacy must be considered when requirements are being analyzed and decisions are being made about data usage and system design. This applies to all of the development methodologies and system life cycles used in the Air Force.
(c) Who completes the Privacy Impact Assessment? Both the system owner and system developers must work together to complete the Privacy Impact Assessment. System owners must address what data is to be used, how the data is to be used, and who will use the data. The system developers must address whether the implementation of the owner's requirements presents any threats to privacy.
(d) What systems have to complete a Privacy Impact Assessment? Accomplish Privacy Impact Assessments when:
(1) Developing or procuring information technology that collects, maintains, or disseminates information in identifiable form from or about members of the public.
(2) Initiating a new collection of information, using information technology, that collects, maintains, or disseminates information in identifiable form for 10 or
(3) Systems as described above that are undergoing major modifications.
(e) The Air Force or Major Command Privacy Act Officer reserves the right to request that a Privacy Impact Assessment be completed on any system that may have privacy risks.
The Privacy Impact Assessment. This section describes the steps required to complete a Privacy Impact Assessment. These steps are summarized in Table A4.1, Outline of Steps for Completing a Privacy Impact Assessment.
Training. Training on the Privacy Impact Assessment will be available, on request, from the Major Command Privacy Act Officer. The training consists of describing the Privacy Impact Assessment process and provides detail about the privacy issues and privacy questions to be answered to complete the Privacy Impact Assessment. Major Command Privacy Act Officers may use Appendix E, Sections A, B, D, and E for this purpose. The intended audience is the personnel responsible for writing the Privacy Impact Assessment document.
The Privacy Impact Assessment Document. Preparing the Privacy Impact Assessment document requires the system owner and developer to answer the privacy questions in Section E. A brief explanation should be written for each question. Issues that do not apply to a system should be noted as “Not Applicable.” During the development of the Privacy Impact Assessment document, the Major Command Privacy Act Officer will be available to answer questions related to the Privacy Impact Assessment process and other concerns that may arise with respect to privacy.
Review of the Privacy Impact Assessment Document. Submit the completed Privacy Impact Assessment document to the Major Command Privacy Act Office for review. The purpose of the review is to identify privacy risks in the system.
Approval of the Privacy Impact Assessment. The system life cycle review process (Command, Control, Communications, Computers, and Intelligence Support Plan) will be used to validate the incorporation of the design requirements to resolve the privacy risks. Major Command and Headquarters Air Force Functional CIOs will issue final approval of the Privacy Impact Assessment.
Title 5, U.S.C., 552a, The Privacy Act of 1974, as amended, requires Federal Agencies to protect personally identifiable information. It states specifically:
Each agency that maintains a system of records shall:
Maintain in its records only such information about an individual as is relevant and necessary to accomplish a purpose of the agency required to be accomplished by statute or by executive order of the President;
Collect information to the greatest extent practicable directly from the subject individual when the information may result in adverse determinations about an individual's rights, benefits, and privileges under Federal programs;
Maintain all records used by the agency in making any determination about any individual with such accuracy, relevance, timeliness, and completeness as is reasonably necessary to assure fairness to the individual in the determination;
Establish appropriate administrative, technical and physical safeguards to ensure the security and confidentiality of records and to protect against any anticipated threats or hazards to their security or integrity which could result in substantial harm, embarrassment, inconvenience, or unfairness to any individual on whom information is maintained.
Accuracy—within sufficient tolerance for error to assure the quality of the record in terms of its use in making a determination.
Completeness—all elements necessary for making a determination are present before such determination is made.
Determination—any decision affecting an individual which, in whole or in part, is based on information contained in the record and which is made by any person or agency.
Necessary—a threshold of need for an element of information greater than mere relevance and utility.
Record—any item, collection or grouping of information about an individual and identifiable to that individual that is maintained by an agency.
Relevance—limitation to only those elements of information that clearly bear on the determination(s) for which the records are intended.
Routine Use—with respect to the disclosure of a record, the use of such record outside DoD for a purpose that is compatible with the purpose for which it was collected.
System of Records—a group of any records under the control of any agency from which information is retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual.
Timeliness—sufficiently current to ensure that any determination based on the record will be accurate and fair.
To fulfill the commitment of the Air Force to protect personal information, several issues must be addressed with respect to privacy.
The use of information must be controlled.
Information may be used only for a necessary and lawful purpose.
Individuals must be informed in writing of the principal purpose and routine uses of the information being collected from them.
Information collected for a particular purpose should not be used for another purpose without the data subject's consent unless such other uses are specifically authorized or mandated by law.
Any information used must be sufficiently accurate, relevant, timely and complete to assure fair treatment of the individual.
Given the availability of vast amounts of stored information and the expanded capabilities of information systems to process the information, it is foreseeable that there will be increased requests to share that information. With the potential expanded uses of data in automated systems it is important to remember that information can only be used for the purpose for which it was collected unless other uses are specifically authorized or mandated by law. If the data is to be used for other purposes, then the public must be provided notice of those other uses. These procedures do not in themselves create any legal rights, but are intended to express the full and sincere commitment of the Air Force to protect individual privacy rights and which provide redress for violations of those rights.
The sources of the information in the system are an important privacy consideration if the data is gathered from other than Air Force records. Information collected from non-Air Force sources should be verified, to the extent practicable, for accuracy, that the information is current, and complete. This is especially important if the information will be used to make determinations about individuals.
Who has access to the data in a system must be defined and documented. Users of the data can be individuals, other systems, and other agencies. Individuals who have access to the data can be system users, system administrators, system owners, managers, and developers. When individuals are granted access to a system, their access should be limited, where possible, to only that data needed to perform their assigned duties. If individuals are granted access to all of the data in a system, procedures need to be in place to deter and detect browsing and unauthorized access. Other systems are any programs or projects that interface with the system and have access to the data. Other agencies can be International, Federal, state, or local entities that have access to Air Force data.
When requirements for the data to be used in the system are being determined, those requirements must include the privacy attributes of the data. The privacy attributes are derived from the legal requirements imposed by The Privacy Act of 1974. First, the data must be relevant and necessary to accomplish the purpose of the system. Second, the data must be complete, accurate, and timely. It is important to ensure the data has these privacy attributes in order to assure fairness to the individual in making decisions based on the data.
Automation of systems can lead to the consolidation of processes, data, and the controls in place to protect the data. When administrative controls are consolidated, they should be evaluated so that all necessary controls remain in place to the degree necessary to continue to control access to and use of the data. Document record retention and disposal procedures and coordinate them with the Major Command Records Manager.
1. Generally describe the information to be used in System the system.
2. What are the sources of the information in the system?
a. What Air Force files and databases are used?
b. What Federal Agencies are providing data for use in the system?
c. What State and local agencies are providing data for use in the system?
d. What other third party sources will data be collected from?
e. What information will be collected from the employee?
3. Is data accurate and complete?
a. How will data collected from sources other than Air Force records and the subject be verified for accuracy?
b. How will data be checked for completeness?
c. Is the data current? How do you know?
4. Are the data elements described in detail and documented? If yes, what is the name of the document?
1. Who will have access to the data in the system Data (Users, Managers, System Administrators, Developers, Other)?
2. How is access to the data by a user determined? Are criteria, procedures, controls, and responsibilities regarding access documented?
3. Will users have access to all data on the system or will the user's access be restricted? Explain.
4. What controls are in place to prevent the misuse (
5. Does the system share data with another system?
a. Do other systems share data or have access to data in this system? If yes, explain.
b. Who will be responsible for protecting the privacy rights of the employees affected by the interface?
6. Will other agencies have access to the data in the system?
a. Will other agencies share data or have access to data in this system (International, Federal, State, Local, Other)?
b. How will the data be used by the agency?
c. Who is responsible for assuring proper use of the data?
d. How will the system ensure that agencies only get the information they are entitled to under applicable laws?
1. Is the use of the data both relevant and necessary Data to the purpose for which the system is being designed?
2. Will the system create new data about an individual?
a. Will the system derive new data or create previously unavailable data about an individual through aggregation from the information collected?
b. Will the new data be placed in the individual's record?
c. Can the system make determinations about the record subject that would not be possible without the new data?
d. How will the new data be verified for relevance and accuracy?
3. Is data being consolidated?
a. If data is being consolidated, what controls are in place to protect the data from unauthorized access or use?
b. If processes are being consolidated, are the proper controls remaining in place to protect the data and prevent unauthorized access? Explain.
4. How will the data be retrieved? Is it retrieved by a personal identifier? If yes, explain.
(1) a. Explain how the system and its use will ensure Administrative equitable treatment of record subjects.
b. If the system is operated at more than one location, how will consistent use of the system and data be maintained?
c. Explain any possibility of disparate treatment of individuals or groups.
(2) a. Coordinate proposed maintenance and disposition of the records with the Major Command Records Manager.
b. While the data is retained in the system, what are the requirements for determining if the data is still sufficiently accurate, relevant, timely, and complete to ensure fairness in making determinations?
(3) a. Is the system using technologies in ways that the Air Force has not previously employed?
b. How does the use of this technology affect personal privacy?
(4) a. Will this system provide the capability to identify, locate, and monitor individuals? If yes, explain.
b. Will this system provide the capability to identify, locate, and monitor groups of people? If yes, explain.
c. What controls will be used to prevent unauthorized monitoring?
(5) a. Under which Systems of Record notice does the system operate? Provide number and name.
b. If the system is being modified, will the system of record require amendment or revision? Explain.
Office of the Secretary, Department of Transportation.
Final rule.
The Department is amending its rules governing airline computer reservations systems (“CRSs” or “systems”) to eliminate most of the rules now and to terminate additional rules as of July 31, 2004. The Department is readopting the rules prohibiting display bias and adopting rules that prohibit systems from imposing certain types of contract clauses on participating airlines that would unreasonably restrict their ability to choose how to distribute their services. These rules will be effective during a six-month transition period.
This rule is effective on January 31, 2004.
Thomas Ray, Office of the General Counsel, 400 Seventh St. SW., Washington, DC 20590, (202) 366-4731.
You can view and download this document by going to the website of the Department's Docket Management System (
ASTA—American Society of Travel Agents.
Board—The Civil Aeronautics Board.
Booking fees—Fees paid by airlines and other travel suppliers when a travel agent makes or changes a booking in a system.
CRS—Computer reservations system.
Mandatory participation rule—The rule requiring each airline that has a significant ownership interest in a system to participate in competing systems at as high a level of functionality as it does in its own system, if the terms are commercially reasonable.
Network airlines—The airlines that operate hub-and-spoke route systems, especially the five largest airlines (American, Continental, Delta, Northwest, and United).
Non-airline system—A system that is neither owned nor controlled by any airline or airline affiliate.
OMB—Office of Management and Budget.
Participate—To make the services of an airline or other travel supplier available for sale through a system under a contract with that system.
Parity clauses—Clauses in participating airline contracts that require a participating airline to buy at least as high a level of service from the system as it does from any other system.
Productivity pricing—Pricing formula used in subscriber contracts that enables the travel agency to obtain lower CRS fees from a system if the travel agency meets minimum booking quotas established by the contract.
Section 411—49 U.S.C. 41712, recodifying section 411 of the Federal Aviation Act.
Subscriber—A travel agency that obtains CRS services under a contract with the system.
System—Computer reservations system.
Webfares—Discount fares offered by an airline through its own website and often through selected distribution channels.
In this proceeding we have reexamined whether our existing rules on computer reservations systems (“CRSs” or “systems”), 14 CFR Part 255, remain necessary and, if so, whether we should readopt them, with or without modifications. If we do not readopt the rules, they will expire on their sunset date, currently January 31, 2004. Our notice of proposed rulemaking asked for comment on these issues and proposed that most of the rules should be readopted. 67 FR 69366 (November 15, 2002). After reviewing the comments and the on-going changes in the airline distribution and CRS businesses reflected in those comments, we have concluded that most of the rules should be allowed to sunset on January 31, 2004. We believe, however, that we should adopt the rules prohibiting display bias and certain rules barring unreasonably restrictive requirements in the contracts between systems and their airline customers for a six-month transition period to provide an opportunity for the affected parties to prepare for complete deregulation of computer reservation systems. We intend to monitor developments in the industry during this period and beyond. We, of course, retain our authority to pursue future regulatory or enforcement actions against airlines or systems that engage in anti-competitive practices.
The systems' operations have been subject to rules for twenty years. Although the systems now are commonly called global distribution systems, or GDSs, we will continue to refer to them here as CRSs. The Civil Aeronautics Board (“the Board”), the agency that had been responsible for the economic regulation of the airline industry, originally adopted those rules in 1984. 49 FR 32540 (August 15, 1984),
When these rulemakings were held, one or more airlines or airline affiliates owned or controlled each system, airlines depended heavily on travel agencies for distribution, travel agents used a system to research airline service options and to make bookings, and each travel agency predominantly relied on one system to perform these tasks. Systems therefore did not need to compete for airline participants (a “participant” is an airline that agrees to make its services saleable through a system). The airlines that controlled the systems had the incentive and ability to use them to prejudice the competitive position of non-owner airlines and to provide information on airline services through the systems to travel agents that gave an undue preference to the services operated by the owner airlines. Competitive market forces did not discipline the prices and terms for services offered by systems to participating airlines.
Our goal in CRS rulemakings has been to prevent practices that were likely to harm consumers by substantially reducing airline competition or by giving travel agents and their customers inaccurate or misleading information on airline services. The rules block system practices that would cause consumers and their travel agents to receive misleading information and would distort airline competition. We adopted most of the rules under our authority to prevent unfair methods of competition in the sale of airline transportation, an authority that empowers us to prohibit practices that violate the antitrust laws or antitrust principles, but, in adopting the rules prohibiting display bias, we additionally relied on our authority to prevent unfair and deceptive practices in the marketing of air transportation.
We should adopt rules regulating industry practices only if they are reasonably necessary to prevent anti-competitive or deceptive practices that are likely to occur, and would cause significant consumer harm if they did occur, and that market forces are unlikely to remedy. Any rule must be effective and enforceable. Rules intended to address a serious competitive concern may have unintended consequences that may reduce efficiency and consumer choice. As we explained in our notice of proposed rulemaking, we will not adopt rules that address all potential problems, for such detailed regulations would necessarily impose significant burdens on the systems and interfere with legitimate business practices. 67 FR 69389. Our approach for determining whether rules are necessary is essentially the same as that recommended by the Justice Department. The Department of Justice states that regulation is appropriate “only when (1) market participants have substantial and durable market power that will likely harm consumers directly, or will be exercised in ways that exclude or limit competition in contiguous markets, and (2) the regulation will likely be effective and enforceable without imposing significant costs of its own.” Justice Department Reply Comments at 18.
Our rules included a sunset date, currently January 31, 2004, to ensure that we would review whether the rules remained necessary in light of on-going developments in the CRS and airline distribution businesses. 57 FR 43829-43830; 68 FR 15350 (March 31, 2003). This proceeding carries out that reassessment. The major changes that have occurred since our last major rulemaking underscore the need for such a reassessment.
All of the U.S. airlines that had controlled a system have divested their CRS ownership interests. As a result, none of the four systems now operating in the United States is owned or controlled by any U.S. airline or airline affiliate. Furthermore, airlines are selling an increasingly large share of their tickets through their Internet websites and a diminishing share through travel agencies using a system. The airlines' control over access to their webfares, the discounted fares originally offered only through individual airline websites, has enabled them to obtain lower fees from two of the systems. And travel agencies are increasingly demanding—and winning—contracts from the systems that give them more freedom to use alternative booking channels and to switch systems periodically.
Our examination of these developments has persuaded us that we should allow most of the existing rules to sunset upon their expiration. The major predicate for the rules has always been the systems' control by airlines. The U.S. airlines' divestiture of their ownership interests has eliminated that basis for the rules. While each system still has market power over most airlines, that power is diminishing. Moreover, the record does not show a likelihood that the systems would use that power to distort airline competition except potentially through the sale of bias.
On the other hand, we have determined that we should readopt, for a six-month transition period, the rules prohibiting display bias and rules prohibiting certain types of contract clauses in the systems' contracts with airlines. We are readopting the rules against display bias because we believe that, were the rules terminated immediately, systems might well be expected to bias their displays in ways that could mislead travel agents and their customers and prejudice airline competition. For that reason, we believe it is important to provide a measure of notice to the industry prior to the rules' termination and a concomitant opportunity to prepare for the absence of regulation.
Similarly, we are adopting for the same short transition period two rules governing the contracts between the systems and airlines: rules prohibiting parity clauses (a parity clause would require an airline to participate in that system at at least as high a level as it participates in any other system) and clauses requiring airlines to provide access to all webfares as a condition to any participation in a system. However, an airline is free to agree to such clauses. We believe that, were these prohibitions terminated immediately, the systems would have sufficient market power to impose contract terms on airlines that would unreasonably restrict the airlines' ability to bargain for better terms for participation. The transition period during which these prohibitions will be maintained will furnish the industry with reasonable notice of the forthcoming change with an opportunity to prepare for it. Our final decision is consistent with the recommendations made by the Justice Department.
The two rules on contract clauses and the rule prohibiting display bias therefore will sunset on July 31, 2004. We will actively monitor developments during the transition period and beyond and take appropriate investigative, enforcement, or regulatory action if we see evidence that systems or airlines are engaging in anti-competitive conduct in connection with airline distribution through the systems and other channels.
We will not readopt the other rules now in force, and we reaffirm our tentative decision not to adopt rules governing the use of the Internet in airline distribution. The rules that we are not readopting will automatically expire on January 31, 2004, their sunset date.
The elimination of most of the rules will ensure that government regulation does not interfere with market forces and innovation in the CRS and airline distribution businesses. The record indicates that market forces are beginning to discipline business practices in the CRS industry. Ending the broad regulation of CRS practices will enable each system and each airline to bargain over the terms on which CRS services should be provided, just as airlines obtain products and services from other suppliers under agreements negotiated by the parties. The systems will have the same ability to bargain with their other customers, the travel agencies. The resulting terms under which airlines and travel agencies obtain system services will likely reflect the interests of both sides better than if we maintained broad regulations restricting the parties' behavior. While we cannot predict exactly what will happen, we believe that ending most of the rules will produce the best results for consumers over time. We base this judgment on our experience with airline deregulation. Airline deregulation has provided lower fares and better service for consumers, in part by enabling new firms to enter the airline business. Several of the new airlines have followed new business plans that have provided great benefits for airline travelers. Airline deregulation has produced these benefits even though the deregulated airline industry has not operated in the manner expected by industry experts on the eve of deregulation. The deregulation of the CRS business should also benefit consumers, even though we cannot forecast how it will play out.
Our final rule also conforms to the limits imposed by Congress on our authority to regulate the airline and airline distribution businesses. Congress has given us the authority to prevent practices that violate the antitrust laws or antitrust principles and practices that are deceptive, but no comprehensive oversight authority over airline distribution. We are adopting only those rules that are necessary to prevent practices in the CRS business that would constitute unfair or deceptive practices, or unfair methods of competition.
We are aware that some participants in the airline distribution and CRS businesses may seek to engage in anti-competitive conduct that would reduce competition in the airline and airline distribution businesses and thereby harm consumers. A system, for example, might develop vertical ties with an airline that would cause the system to operate in a way that could prejudice airline competition. Some systems may seek to pursue practices that would reduce competition in the CRS business and preserve their market power over airlines. Even without specific regulations, any such practices could be unfair methods of competition and thus unlawful. We retain the authority to bring enforcement cases against firms that violate the statutory prohibition against unfair methods of competition, and we will take appropriate action if we have evidence of unlawful conduct. As Congress stated when it deregulated the airline industry, S. Rep. No. 95-631, 95th Cong., 2d Sess. (1978) at 52:
Vigorous enforcement of antitrust policy is the discipline by which competition can remain free and markets can operate in a healthy fashion. Predatory behavior, market concentration, and other economic evils should be avoided and remedied by the Board when they exist.
We will also actively monitor the systems' reactions to the substantial deregulation of their business, and we, of course, retain the power to reexamine our decision that all rules should terminate by July 31, 2004, if the systems' conduct or other developments makes such a reexamination necessary.
Our final rule departs from the proposals made by our notice of proposed rulemaking. Our notice proposed to eliminate two of the major rules, the rule barring discriminatory booking fees and the rule requiring airlines with a significant ownership interest in one system to participate in competing systems at an equivalent level if the terms for doing so were commercially reasonable, but to readopt most of the remaining rules. Our review of the rulemaking record up to that point suggested that rules were still necessary, notwithstanding the changes in the systems' ownership and the growing role of the Internet. 67 FR 69375-69384. The notice, however, did request comment on whether we should sunset more of the rules now, and we predicted that the rules would become unnecessary in a few years. 67 FR 69368, 69376, 69388-69389.
The comments and the continuing developments in airline distribution and the CRS business have convinced us that most of the rules are no longer appropriate. In particular, one of the systems, Worldspan, was owned by three U.S. airlines when we issued our notice of proposed rulemaking but was sold several months ago to two private venture capital firms. The airline distribution business has continued to evolve since we issued the notice. Airlines are selling more tickets through the Internet. Moreover, as we predicted, the airlines' control over access to their webfares has led some of the systems to offer airlines discounted booking fees in return for the ability to sell those fares. 67 FR 69381; Galileo Supp. Comments at 5-8. And the comments have shown that the systems' contracts with travel agencies are significantly less restrictive than they were even a few years ago.
That our final rule does not duplicate our proposal is consistent with the purpose of rulemaking procedures. The notice of proposed rulemaking was designed to obtain comments from interested persons on our tentative findings and our economic and policy analysis and to enable them to submit current information. We held a public hearing to give interested persons an additional opportunity to present their views and respond to our questions. The comments submitted in this proceeding, together with the on-going developments in the airline distribution and CRS businesses, have persuaded us that our proposals should not be made final. Those proposals, while reasonable in light of industry conditions two or three years ago, to a large extent no longer reflect current conditions.
We will begin our explanation of our final rule by updating our description of the CRS and travel agency businesses, and we address several procedural issues. We then discuss our conclusions on the need for adopting some CRS rules, including our findings that the systems continue to have market power over airlines, and discuss the question of our legal authority to readopt the rules and to apply them to systems that are not owned by airlines. We thereafter present the rationale for our decisions on each of the rule proposals.
Our notice of proposed rulemaking included a request for comments on whether we should clarify our policy on fare disclosures as regards the disclosure of travel agency service fees. We have decided to address that question in a separate rule.
We will refer to commenters by their common names (for example, “Alaska,” not “Alaska Airlines”). References to comments and reply comments are to the pleadings filed in response to the notice of proposed rulemaking, not the pleadings filed in response to the advance notices of proposed rulemaking, which were discussed in the notice of proposed rulemaking. We will refer to the statutory provision that is the principal basis for our adoption of CRS rules, 49 U.S.C. 41712, by its traditional name, section 411, as we did in the notice of proposed rulemaking. The glossary at the beginning of this document gives the meaning of the abbreviations and technical terms used in this rule.
Our notice of proposed rulemaking described in some detail the nature of the airline distribution and CRS businesses, including the travel agency business. 67 FR 69369-69375. Here we will update our factual description on the basis of the information provided by the comments and set forth the factual findings underlying our final decision.
Airlines use several distribution methods: direct sales through their reservations agents, sales through “brick-and-mortar” travel agencies, sales through individual airline websites, and sales through on-line travel agencies. In the past, the “brick-and-mortar” travel agency channel produced the great majority of airline revenues for almost all airlines. In 1999 travel agencies sold almost three-quarters of airline tickets, almost all through off-line travel agencies. 67 FR 69369, citing Bear, Stearns & Co., “Point, Click, Trip: An Introduction to the On-Line Travel Agency” (April 2000) at 17. Since then the Internet has become an increasingly important distribution channel. Galileo states that the different channels' shares of total airline tickets in 2002 were as follows, Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 24:
Until recently the great majority of all travel agency airline ticket sales, whether off-line or on-line, have been made through one of the systems.
Four systems operate in the United States: Sabre, Galileo, Worldspan, and Amadeus. Each of them was originally developed by one or more U.S. airlines (Amadeus entered the U.S. market by acquiring a U.S. system). Two of the systems—Sabre and Galileo—were no longer owned or controlled by any U.S. airlines when we issued the notice of proposed rulemaking. At that time, three U.S. airlines—American, Delta, and Northwest—owned Worldspan. Amadeus was then owned by three European airlines—Air France, Iberia, and Lufthansa—as well as by public shareholders (and has the same ownership today). Worldspan's airline owners sold that system to two private venture capital firms on June 30, 2003, after the issuance of our notice of proposed rulemaking. As part of that sale, the airline owners agreed to certain parity clauses and marketing commitments. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 20; Amadeus Comments at 32-33; August 1, 2003, Letter from Charles Simpson, Jr.; Sabre Supp. Reply at 4. Amadeus is now the only system with any airline ownership.
The systems that have no airline owners have marketing ties with their former owners. United markets Galileo, American markets Sabre, and Delta and Northwest have agreed to market Worldspan for several years following the closing of the system's sale. Amadeus Comments at 25, n. 24; Galileo Supp. Comments at 1-4. Southwest also markets Sabre, although Southwest never had an ownership interest in the system.
Each system's share of CRS airline bookings in the United States in 2002 was as follows, Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 18:
Since 1999 the shares of Galileo and Amadeus have been declining, while Worldspan's share has risen sharply, from 19.3 percent to 26.5 percent. The growth in Worldspan's share in large part reflects its status as the booking engine for two of the three largest on-line travel agencies, Expedia and Orbitz.
Each system provides information and booking capabilities on the airlines that “participate” in it, that is, agree to make their services saleable through the system. The system obtains its availability information from the airlines' internal reservations systems, and it makes bookings in those systems, which are used by the airlines' own reservations agents and other staff members. The systems also provide information and booking capabilities for rental cars, hotels, and other travel services. Airline transportation is the most important travel service sold through the systems, and airlines obtain a larger share of their revenues from CRS bookings (sales made through the systems) than do other travel suppliers. 67 FR 69370.
An airline (or other travel supplier) participating in a system must pay fees for each booking transaction (the fees paid by participating airlines are usually called “booking fees”). Airlines can participate at different levels. At higher levels the information provided travel agencies will be more timely and so more reliable, and travel agents can carry out tasks like reserving specific seats for their customers. An airline that chooses a higher level of participation must pay a higher booking fee. 67 FR 69370. Booking fees paid by airlines provide well over half of the systems' total revenues. 67 FR 69380.
The average airline booking fee per segment is $4.25. Because the average ticket includes more than one segment, the average booking fee per ticket is $11. United Reply Comments at 28; “Upheaval in Travel Distribution: Impact on Consumers and Travel Agents,” National Commission to Ensure Consumer Information and Choice in the Airline Industry” (November 13, 2002), at 16. United alleges that its average booking fee per segment equals 3.3 percent of its average revenue per segment. United Reply Comments at 29. Sabre has stated that the effective booking fee per segment for its highest level of participation was $4.38 in 2002, about 2.4 percent of the average airline ticket price for tickets sold through Sabre. Sabre charges $2.12 per segment for airlines participating at its low level, Basic Booking Service. Sabre Comments at 14; Sabre Comments, Wilson Declaration at 6.
Sabre and Galileo have created programs that give participating airlines lower booking fees in return for a commitment to provide the system with all of their webfares. Under Sabre's Direct Connect Availability program (“DCA program”), an airline can obtain a 10 percent reduction in its booking fees, guaranteed for three years, in exchange for a commitment to provide the system with all of the airline's published fares, including its webfares. American, Continental, Delta, Northwest, United, U.S. Airways, and a number of smaller airlines now participate in this program. Sabre Supplemental Reply at 1.
Galileo first established its Momentum program, which gave airlines a 20 percent reduction in booking fees for tickets sold through participating travel agencies, if the airlines agreed to give Galileo access to all of their publicly-available fares. Travel agencies could participate in the program if they agreed to a reduction in their incentive payments from Galileo. United and U.S. Airways were the first airlines that joined this program. One of the travel agencies that joined the program was Rosenbluth International, the fourth largest U.S. corporate travel agency. Due to complaints from America West and other airlines, Galileo dropped the initial requirement that any airline participating in the Momentum program must upgrade its participation level to the highest level. More recently Galileo introduced Preferred Fares Select, which will enable airlines to obtain lower booking fees on all of their bookings if they agree to make all of their publicly-available fares saleable through Galileo. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 52-56; Galileo Reply Comments at 33-34; Galileo Supplemental Comments at 5-8; Sabre Comments, Fahy Declaration at 10-11.
The record does not indicate that Amadeus or Worldspan has introduced comparable programs.
Travel agencies often obtain CRS services at no cost or receive bonus payments in exchange for agreeing to use a system. ASTA states that in 2002 fewer than half of all travel agencies paid monthly fees for system services and that 60 percent of them received a signing bonus of some kind from the system that they were using. ASTA Comments at 17. The systems pay on average $1 to $1.50 per booking to travel agencies for using a system. Sabre Comments at 7.
As we stated in the notice of proposed rulemaking, travel agents have depended heavily on the systems to determine what airline services are available and to make bookings. There we cited statistics showing that travel agencies in 1999 sold almost three-quarters of all airline tickets and made 93 percent of their domestic airline bookings and 81 percent of their international airline bookings through a system. 67 FR 69369-69370. The record shows that since then the share of airline revenues produced by travel agents using a system has been declining. The Justice Department states that the share of revenues produced by “brick-and-mortar” travel agencies for the five airlines that own Orbitz has fallen from 76 percent in May 2000 to 67 percent in March 2002, primarily due to the growth in Internet sales. Justice Department Reply Comments at 14-15.
In the past, almost all U.S. airlines participated in every system. Southwest, which has participated only in Sabre and at a low level, was the major exception. JetBlue, which began operations in 2000, also participates only in Sabre and at the same level as Southwest. Sabre Comments at 38. Airlines that can avoid participation in every system focus their marketing efforts instead on direct sales to consumers, made through either the airline's website or its reservations agents. Airlines that have been participating in all of the systems, such as Alaska, have been shifting many of their bookings away from the travel agency channel, which required them to pay the systems' booking fees.
The systems have played a major role in airline distribution because travel agents—the airlines' primary distribution channel—have relied so much on the systems for investigating airline service options and booking tickets, because the systems are so efficient. They electronically provide comprehensive information and booking capabilities on airlines and other travel suppliers. Each system presents displays that integrate almost all services offered in a market. Each system shows the schedules and fares offered by airlines in each market that are available for sale through travel agents using that system and whether seats are available on specific flights at specific fares (some fares are often not available through the systems, notably corporate discount fares and webfares). The system thus allows the travel agent to compare the schedules and fares offered by different airlines and determine which would best meet a customer's needs. The agent using a system can reserve a seat and issue a paper ticket or print an E-ticket.
On-line agencies also use systems—Travelocity uses Sabre, while Expedia and Orbitz use Worldspan, for example. 67 FR 69370. Orbitz and Expedia have been developing direct connection technologies which enable bookings to be made directly with an airline's internal reservations system, bypassing Worldspan. Sabre Comments, Fahy Declaration at 8-9.
Since the Board first adopted CRS rules, no firm has entered the CRS business. Until recently, entry into the CRS business would have been prohibitively costly and time-consuming. 67 FR 69381. This may no longer be true. Sabre Comments, Fahy Declaration at 8. New direct-connection technologies can enable firms to provide airline information and booking services that replicate at least some of the services provided by the systems. Galileo Comments at 42, n. 38. Orbitz, which now operates as an on-line travel agency, plans to make its services available to travel agencies through software being developed by Aqua. Orbitz continues to rely on Worldspan for some functions involved in the search and booking process. 67 FR 69373, 69374. Another commenter in this proceeding, AgentWare, is also offering travel agencies fare and schedule information and links to booking sites. Galileo Comments at 66-67.
The development of sources of airline information and booking capabilities on the Internet has created additional resources that travel agents can use. Travel agents are increasingly checking the fares and services offered on websites because some airline discount fares have not been sold through the systems. Travel agents, however, continue to make most of their airline bookings through a system. Using alternative booking channels is less efficient for travel agents, as discussed below. Nevertheless, the development of alternative sources of information and booking capabilities on the Internet, and the airlines' control over access to their webfares, have begun to make the systems responsive to market force discipline.
Corporate travel departments as well as travel agencies use the systems. A corporate travel department can book travel for its company's employees by accessing a system through the Internet or by Intranet (an internal corporate communications network based on Internet technology). 67 FR 69370.
Systems operate throughout the world. U.S. systems like Sabre and Worldspan market their services to travel agencies in foreign countries, and Amadeus is a major system in the Eastern Hemisphere. The systems had the following shares of worldwide CRS airline bookings in 2002, Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 18:
The European Union, Canada, and other governments have regulations governing CRS operations. The United States has entered into a number of international air services agreements that require each party to ensure that the systems operating in its country and their owners do not subject airlines and systems from the other country to discriminatory treatment. 67 FR 69371-69372.
The systems' practices have affected airline competition because of the importance of travel agents in airline distribution. The travel agency system has provided airlines with an efficient means of distribution. Travel agencies have acted as agents for virtually all airlines and generally hold themselves out to the public as sources of impartial advice on airline services and other travel services. 67 FR 69371.
In 2001, there were 18,425 travel agencies. The travel agency business is dominated by the largest travel agencies. In 2001, the 117 travel agencies with revenues of more than $50 million (as measured by sales of air transportation) accounted for 57.2 percent of all travel agency sales. The 1,015 travel agencies with revenues of $5 million to $50 million accounted for another 20.1 percent of all travel agency sales. “Upheaval in Travel Distribution: Impact on Consumers and Travel Agents,” National Commission to Ensure Consumer Information and Choice in the Airline Industry” (November 13, 2002), at 113.
As noted above, in 2002 the airlines obtained 58 percent of their bookings from “brick-and-mortar” travel agencies and 15 percent from on-line travel agencies. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 24. The three largest on-line travel agencies had the following shares of all on-line travel agency bookings in 2002: Travelocity, 28.5 percent; Expedia, 28.7 percent; and Orbitz, 21.3 percent. Sabre Comments, Salop & Woodbury Declaration at Table 2. Travelocity is a Sabre subsidiary, while Orbitz is owned by the five largest U.S. airlines—American, Continental, Delta, Northwest, and United. Travelocity has been using Sabre as its source of airline information and booking capabilities, while Expedia and Orbitz have been using Worldspan for these functions. Orbitz and Expedia have been developing direct connections with airlines that bypass Worldspan. Airlines that agree to be “charter associates” in Orbitz, which includes a commitment to make all publicly available fares available for sale through Orbitz, receive a rebate on their booking fees. 67 FR 69374.
The larger airlines still obtain most of their revenues from bookings made by travel agents. However, despite the continuing importance of travel agencies in airline distribution, the travel agency business has faced severe business problems in recent years, due to developments such as the airlines' elimination of base commissions (but not incentive commissions), the growing use of the Internet by many travelers, particularly leisure travelers, and the overall decline in airline traffic.
The nature of the travel agencies' operations is important to this proceeding, because we must consider the impact of our decisions on the travel agencies' business and because the rules have covered some features of the relationships between the systems and travel agencies. However, providing support for travel agencies that would offset other economic developments is not within our statutory authority and therefore not a proper goal of this proceeding. This proceeding must be, and is, limited to preventing system practices and related airline practices that would harm consumers by significantly reducing airline competition.
A critical factor in our decision-making is that travel agencies, unlike most airlines, can choose which system to use. Most travel agencies need to use only one system, and for most travel agencies no system has features and information that are indispensable, as discussed below. Because most travel agencies are free to decide to use one system rather than its competitors, the systems compete vigorously for travel agency customers. As noted above, systems usually pay travel agencies for choosing one system rather than another.
In past rulemaking proceedings, and in our notice of proposed rulemaking in this proceeding, we cited evidence that the systems' contracts with travel agencies often contained provisions that unreasonably restricted the travel agencies' ability to use more than one system or to use alternative electronic sources of airline information and booking channels. 67 FR 69405; 57 FR 43822. For example, each system formerly kept travel agencies from buying their own equipment and made them use equipment provided by the system for accessing its services. 57 FR 43796. The record further suggested that the systems' contracts with travel agencies typically included “productivity pricing” programs that imposed financial penalties on an agency that began using another system or other booking channel for making a substantial number of bookings, or that gave the agency incentive payments if it made most of its bookings through that system. 67 FR 69408. These types of restrictive contract provisions concerned us because they tended to preserve the systems' market power and denied airlines an opportunity to encourage travel agencies to use alternative electronic means for obtaining information on airline services and making bookings, such as direct links between a travel agency and an airline's own internal reservations system. Our notice observed, however, that the systems were giving at least some travel agencies more flexible terms. 67 FR 69405.
The proposals made by our notice fairly reflected industry conditions when the comments on our advance notices of proposed rulemaking were filed. Large Agency Coalition Comments at 7. However, the comments submitted in response to our notice of proposed rulemaking show that travel agencies since then have been successfully demanding more flexible contracts and winning the ability to use alternative booking channels. ASTA's October 2002 travel agency survey made the following finding (quoted in Sabre Comments at 151):
[CRS] vendors are introducing a new crop of more flexible contracts with less rigid productivity requirements and more pricing options. [C]ontract terms have gotten more favorable towards agencies with shorter overall length, lower required segments and a higher percentage of agencies receiving booking incentives.
For example, subscriber contracts typically have a term that is substantially shorter than the maximum permitted by our rules. Our rules prohibit contracts with a term of more than five years and require a system to offer a three-year contract to any travel agency offered a five-year contract. 57 FR 43825. For some time after we adopted that rule, few travel agencies had contracts with a term of less than five years. 67 FR 69405. Now, however, many travel agencies have contracts that are no more than three years in length. The percentage of travel agencies with five-year contracts has declined from 85 percent in 1998 to 47 percent in 2002, while the percentage with three-year contracts has risen from 9 percent in 1998 to 39 percent in 2002. Almost 60 percent of Worldspan subscribers had five-year contracts in 2002, while only 35 percent of Sabre's subscribers had such contracts. Sabre Comments at 17-18; Sabre Comments, Fahy Declaration at 14-15.
Travel agencies, moreover, have a substantial ability to switch systems when their existing contract expires. Half of the responding agencies in the ASTA survey stated they intended to obtain competitive bids at the end of their current contract, while another third stated that they might seek competitive bids and only one sixth stated they definitely intended to continue using the same system. Sabre Comments at 153. Nonetheless, switching systems can impose significant costs on travel agencies, at least for smaller travel agencies. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 81.
When we last readopted the rules, we added a provision giving travel agencies the right to use their own equipment to access a system and to use third-party software. Before then, each system typically demanded that its subscribers use equipment provided by the system and barred subscribers from accessing other systems and databases from that equipment. 57 FR 43796-43797. Travel agencies are increasingly using their own equipment. Only 70 percent of travel agencies leased equipment from a system in 2002, while 85 percent did so in 2000. ASTA Comments at 14. Sabre alleges that it seeks to exit the equipment-leasing business, that 73 percent of the equipment used by Sabre subscribers will be provided by third parties by the end of 2003, and that 62.5 percent of their equipment was being provided by third parties as of November 2002. Sabre Comments at 131. Amadeus states that only one fourth of its subscribers rely entirely on equipment provided by Amadeus. Amadeus Comments at 45. Subscribers to other systems are more likely to use equipment provided by the system. ASTA represents that systems do not resist subscriber efforts to use their own equipment instead of equipment provided by the system. ASTA Comments at 15. Sabre represents that it does not enforce the provisions in its older subscriber contracts that barred the travel agencies from using Sabre equipment to access other systems. Its subscribers are free to use multiple systems. Sabre Comments at 17, n. 17, and 71. Amadeus has made a similar representation. Amadeus Comments at 45.
Sabre further represents that the larger travel agencies often have complete flexibility in using the systems. Sixteen of Sabre's 20 largest “brick-and-mortar” travel agency customers use multiple systems, and many use their own software to direct bookings to a specific system, often in order to maximize their incentive payments. Those 16 agencies produce 35 percent of Sabre's total volume from “brick-and-mortar” travel agencies. Sabre Comments at 71. However, as discussed below in our market definition analysis, each location of a travel agency that subscribes to more than one system tends to predominantly rely on one system rather than make substantial use of every system whose services are being purchased by the parent firm.
Using alternate booking channels and sources of information has become easier for travel agents in recent years. New software, for example, allows travel agents to conduct fare searches simultaneously through a system and airline websites. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 29. The systems allegedly do not seek to block their subscribers from using alternative booking channels and sources of information, and they help develop tools enabling travel agents to use alternative sources of information. Galileo Comments at 64, 66-67. In 2002, 98 percent of all travel agencies had Internet access, according to an ASTA survey. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 81.
However, despite the widespread use of the Internet by travel agents, they make relatively few bookings through the Internet. According to the ASTA survey, travel agents made only 10 percent of their bookings through websites, and most of those bookings were for tours booked through tour operator sites. ASTA Comments at 12. The inefficiency of using the Internet for airline bookings is probably the most important deterrent to a greater use of the Internet.
Our notice further identified the systems' pricing practices as a factor that seemingly kept travel agencies from using alternative systems and booking channels. Each system's productivity pricing program generally gave travel agencies incentive payments if a subscriber used the system for a large majority of its bookings (or imposed financial penalties if it did not). We believed that such productivity pricing programs effectively deterred travel agencies from making significant use of alternative booking channels, such as airline websites. While we noted that the percentage of subscriber contracts with productivity pricing had been declining, most subscriber contracts still included productivity pricing. 67 FR 69408-69409.
The comments show that the systems' productivity pricing provisions have become significantly less widespread and less restrictive in the last few years. In 1998 91 percent of subscriber contracts had productivity pricing, but only 56 percent did in 2002. The average number of bookings required before a travel agency can obtain incentive payments has fallen from 252 in 1998 to 194 in 2002. ASTA Comments at 15; Sabre Comments at 69, 162. The Large Agency Coalition represents that the systems' incentive payment programs typically allow the travel agency to make up to thirty percent of its bookings outside the system before it suffers a financial penalty. Transcript at 231. Despite these changes, however, Sabre states that it has contracts with some small travel agencies that require the subscriber to use no system other than Sabre. Sabre argues that this requirement is reasonable under the circumstances because Sabre is providing support for the agency's operations that would otherwise not be economical. Sabre Comments, Salop & Woodbury Declaration at 20. Nonetheless, despite the greater flexibility allowed travel
The increasing flexibility of the contracts obtained by travel agencies is the result of changes in the travel agency business. ASTA states that travel agencies must have a greater ability to respond to changing technology, especially the growth of the Internet. The increasing uncertainties of the travel agency business itself, moreover, are likely to encourage many travel agencies to avoid long-term commitments if possible. ASTA Comments at 14. The large travel agencies created in recent years have more bargaining leverage with the systems.
In the past, we have endeavored to prevent system practices that would deter travel agencies from using multiple systems. We reasoned that the systems' market power over airlines would be reduced if travel agencies had the ability to use alternative sources of airline information and booking capabilities. 57 FR 43797. Travel agency parties had encouraged those efforts. 67 FR 69391; 57 FR 43796.
The travel agency commenters in this proceeding assert, however, that rules designed to encourage travel agencies to use multiple systems will be futile. They contend that almost all travel agencies predominantly or entirely use one system. ASTA thus alleges, ASTA Comments at 3-4:
Use of a single CRS is a function of the market reality that multiple CRS's are highly inefficient for travel agencies, who therefore do not employ them. No amount of realistically foreseeable inducement from competing CRS's or regulatory pressure from DOT is going to overcome the inefficiencies for most agencies of operating multiple CRS's in today's environment.
Using more than one system is generally inefficient for travel agencies, because, among other things, it requires training staff members to work with different systems and will cause the booking records of different customers to be in different places. Cardinal Travel Service Comments; Galileo Comments at 64-65; Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 79; ASTA Comments at 23-24; Large Agency Coalition Comments at 20. At travel agencies that have multiple offices, each office tends to use one system even though the firm subscribes to several systems. Carlson Wagonlit Comments at 11.
Travel agencies, moreover, assertedly have no need to use multiple systems. Large Agency Coalition Comments at 20; Transcript at 236-237. While some travel agencies use multiple systems, they appear to make relatively little use of the secondary system. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 79-80. The Large Agency Coalition is a group of 22 large, corporate-oriented travel agencies, all but one of which was included in a recent listing of 84 top corporate travel agencies. Although many of the 22 use two or three systems, they typically do so because (i) the dominant airline in a city other than the agency's headquarters city insisted that the agency use the system affiliated with the airline, (ii) a newly-won corporate client wished to keep its existing system at an on-site location rather than switch to the agency's primary system, or (iii) the agency acquired another agency which had a contract obligating it to continue using another system. Large Agency Coalition Comments at 1-3.
The Board's rules, adopted in 1984, included an expiration date to ensure that we would reexamine the rules after they had been in force for several years. We therefore reexamined those rules through our rulemaking completed in 1992. 57 FR 43780 (September 22, 1992). We readopted the rules, because we found that CRS rules remained necessary then to protect airline competition and to help ensure that consumers did not receive inaccurate or misleading information on airline services. We based our decision on the systems' control by airlines and airline affiliates, which could still use their control of the systems to prejudice airline competition if there were no rules. Airlines then relied on travel agencies for distribution and had no practical ability to induce travel agencies to use systems charging lower fees, and travel agencies did not choose systems on the basis of their treatment of airlines.
The rules adopted by us regulate the operations of systems owned or marketed by an airline or airline affiliate insofar as the system was providing services to travel agencies.
The current rules (i) bar each system from using carrier identity as a factor for editing and ranking services, (ii) prohibit systems from charging airlines discriminatory booking fees, (iii) require each system to make available to any participating airline the booking and marketing data generated by the system from bookings for domestic travel made through the system, and (iv) prohibit certain types of restrictive contract provisions that unreasonably limit the travel agencies' ability to switch systems or use more than one system. The rules also require each system to provide non-owner airlines with information and booking capabilities as accurate and reliable as those provided the owner airline, and they give each travel agency the right to use its own equipment in conjunction with a system and to access other systems and databases from the same terminals used to access its primary system, unless the agency uses equipment provided by that system. The rules additionally require each airline with a significant CRS ownership interest to participate in other systems at as high a level of functionality as it does in its own system, if the terms for participation are commercially reasonable (this is the mandatory participation rule).
Five years after our last overall reexamination of the rules, we revised the rules in two respects. First, we prohibited systems from enforcing “parity clauses” against airlines that did not own or market a competing system. 62 FR 59784 (November 5, 1997). The parity clauses required each airline to buy at least as high a level of service from the system as it did from any other system. The parity clauses made it unnecessary for systems to compete for airline participation at higher levels of service. Secondly, we strengthened the prohibition against display bias by requiring each system (i) to offer at least one display that does not give on-line connections a preference over interline connections and (ii) to either list one-stop and other direct flights before connecting services or use elapsed time as a significant factor in selecting flight options from the database. 62 FR 63837 (December 3, 1997). We strengthened the rule in large part because of evidence that United had caused Galileo to create displays that prejudiced United's competitors. 62 FR 63840-63841.
To ensure that the record in this proceeding would be as complete as possible and that all interested persons would have the opportunity to present their views and to respond to points made by other commenters, we have used procedures in addition to those required by the Administrative Procedure Act for informal rulemakings. We began this proceeding by issuing an advance notice of proposed rulemaking,
After reviewing the comments submitted in response to those notices, we issued our notice of proposed rulemaking on November 15, 2002. That notice, as stated above, proposed to readopt most of the existing rules but also asked for comments on whether the rules had become unnecessary. We additionally proposed to eliminate the mandatory participation rule and the prohibition against discriminatory booking fees. We tentatively concluded that we should not extend the rules to cover the distribution of airline tickets through the Internet. We asked for comment on whether we should change our policy statement requiring travel agents to disclose the full amount of airline fares to consumers so that travel agents would be obligated to state separately the amount of any travel agency service fee, as long as the fee did not exceed certain levels. We took into account the changes in the systems' airline ownership, although only Galileo and Sabre then had no airline owners. We tentatively believed that the systems might engage in practices that would undermine airline competition due to the marketing relationships and other ties that continued to exist between the systems and their former airline owners.
To make certain that interested persons had ample opportunity to present their evidence and positions on the issues, we established a lengthy comment period and asked for reply comments. 67 FR 69366. We later extended the comment period and reply comment period by two months and one month, respectively. 67 FR 72869 (December 9, 2002). To provide an additional opportunity for public participation, we also held a public hearing on May 22, where interested persons could present their views to a Department official, Michael W. Reynolds, the Deputy Assistant Secretary for Aviation and International Affairs, and answer his questions. 68 FR 25844 (May 14, 2003); 68 FR 27948 (May 22, 2003).
We received about 95 comments and 35 reply comments. The commenters included members of Congress, other Federal agencies, the systems, many U.S. and foreign airlines, many travel agencies and travel agents, firms that process the marketing and booking data sold by the systems, and several public interest groups. Because of the complexity of the issues and the varying effects of the rule proposals, the commenters do not share common views.
The Justice Department argues that we should readopt the rules prohibiting display bias and should not adopt any other rules except possibly transitional rules barring the systems from demanding most-favored-nation clauses in their contracts with participating airlines. Sabre, Worldspan, United, Expedia, and Travelocity contend that we should terminate all of the CRS rules. Amadeus, Galileo, Alaska, America West, Midwest, and U.S. Airways generally assert that most of the rules should be readopted. Orbitz, American, Continental, Delta, and Northwest argue that we should maintain some rules only for a transition period to ensure that the CRS industry's deregulation will succeed. The travel agency commenters largely support the continuation of rules governing the systems' contracts with their travel agency customers but object to any significant restrictions on the systems' incentive pricing programs. The public interest groups generally oppose continued regulation, but some argue that we should take action to prevent Orbitz' operations from reducing competition.
As stated above, we have determined not to make final our tentative proposals to readopt most of the rules. The comments on our notice of proposed rulemaking have shown that market forces in the CRS business are more effective than was shown by the comments submitted before we issued that notice: the airlines' control over access to their webfares has enabled them to obtain better terms for participation in some systems, the systems' subscriber contracts are giving travel agencies increasing flexibility to use alternative booking channels, and the airlines' share of revenues from travel agents has continued to decline. Furthermore, as a result of the Worldspan sale, no system is now controlled by U.S. airlines.
Before turning to the detailed discussion of the substantive issues, we will address the procedural questions raised by commenters.
For this proceeding we have followed the notice-and-comment procedures established by the Administrative Procedure Act for informal rulemakings, as we have done in all past CRS rulemakings. 67 FR 69369. We also held a public hearing and invited interested persons to submit reply comments as well as comments. These informal rulemaking procedures have given commenters a fair opportunity to present their evidence and policy and legal arguments and have enabled us to resolve the issues rationally and efficiently.
Some parties filed comments or reply comments after the due date for those documents. We have accepted all such documents, and we have considered them to the extent practicable.
Sabre's comments included several exhibits for which Sabre requested confidential treatment. Sabre thereafter concluded that some of these exhibits did not require confidential treatment, because their information was equivalent to that provided by other commenters without any request for confidential treatment. We were unable to work out an arrangement with Sabre on the remaining documents that would meet Sabre's interests in protecting the confidentiality of the information while satisfying our need to give all interested persons an adequate opportunity to review the information while preparing their comments. We are therefore returning those documents to Sabre, and we have not considered them at all in this rulemaking.
Some commenters requested a more formal hearing where they could cross-examine members of our staff and representatives for other commenters. We found such additional procedures would be unnecessary for the development of an adequate record in this proceeding. 68 FR 12883 (March 18, 2003).
Several commenters assert that the record is stale or incomplete.
We also disagree with those commenters who contend that we cannot reach a rational decision on the issues without learning the details of the marketing and other on-going relationships between Worldspan and its former airline owners.
Our notice of proposed rulemaking included an initial regulatory flexibility analysis as required by the Regulatory Flexibility Act of 1980, 5 U.S.C. 601
We also conducted a review under 5 U.S.C. 610 of the CRS rules, Part 255, in this proceeding. As discussed below, we concluded that changes were necessary to relieve regulatory burdens and respond to changed circumstances.
We adopted the current rules because we found that regulations were necessary to prevent the systems from engaging in anti-competitive conduct that was likely to prejudice competition in the airline industry (for example, display bias and unjustly discriminatory booking fees). We additionally concluded that some practices followed by the systems represented efforts to preserve their market power over airlines (for example, subscriber contract provisions that kept travel agents from using alternative booking channels). We further determined that, if there were no rules, the systems would probably bias their displays, thereby denying travel agents and their customers impartial and information on airline services. 57 FR 43781-43787. In addition, as the Justice Department observes, the system owned by an airline that dominated a region had a substantially greater ability to obtain subscribers than did other systems. If that system operated in ways designed to prejudice the competitive position of rival airlines, it would reinforce its owner's dominant position in the airline market. Justice Department Reply Comments at 9.
We based these conclusions on our findings that airlines relied heavily on travel agencies for distribution, that travel agents generally used a system to determine what airline services were available and to make bookings, that each travel agency predominantly or entirely used one system for these tasks, and that the resulting need of almost all airlines to participate in each system meant that market forces did not discipline the prices and terms offered by the systems for airline participation. We further relied on the fact that each system was then owned and controlled by one or more airlines or airline affiliates. 57 FR 43781, 43790, 43794.
Recent developments, such as the systems' ownership changes and the growth of on-line bookings, have seriously eroded the basis for the findings on which the current rules were based. We must thus examine whether the regulation of system operations remains necessary. When we issued our notice, one system was still controlled by three U.S. airlines, and we tentatively found that the rules remained necessary because the systems still had market power over airlines and because the continuing ties between the systems and their former owners created a likelihood that systems would engage in conduct that would prejudice airline competition. 67 FR 69377-69384. We nonetheless invited comments on whether we should allow all of the rules to sunset, 67 FR 69368, and we stated that we anticipated that the on-going changes in the marketing of airline tickets could in time make the rules unnecessary. 67 FR 69376.
The commenters disagree on whether rules are still necessary. The Justice Department recommends that we maintain only the rules prohibiting display bias and possibly short-term rules barring certain types of most-favored-nation clauses in the systems' contracts with participating airlines. Some commenters, such as Expedia and United, contend that the rules should be terminated now. Sabre argues that no rules are necessary unless a system is still controlled by U.S. airlines. Other commenters, like Orbitz, American, Continental, and Northwest, contend that we should adopt regulations for a transition period to ensure that the ultimate deregulation of the CRS business will be effective. And still others, like Midwest, argue that the regulations are likely to remain essential for a number of years. Some commenters, like United, argue that we may not regulate non-airline systems at all and that we should not regulate systems owned or controlled by airlines.
We have concluded that market forces are beginning to discipline the systems' prices and terms for airline participation, and the systems' competition for subscribers is in large part eliminating contract provisions that substantially restrict travel agents from using alternative electronic sources of airline information and booking capabilities. Furthermore, the record does not contain evidence showing a likelihood that a system will engage in conduct designed to distort competition in the airline industry, except for display bias. Readopting most of the existing regulations would not be
The only exceptions are the rules that prohibit display bias and foreclose certain contract clauses with airlines that would maintain the systems' market power. We find that the systems continue to have market power over airlines, as argued by the Justice Department; that there is some potential for conduct by the systems that could prejudice airline competition (most notably the sale of display bias); and that systems could engage in practices that could unreasonably preserve their market power. For these reasons, we will adopt these rules for a six-month period in order to facilitate an orderly transition to a completely deregulated distribution marketplace. We retain the power to reexamine this decision if unexpected developments show that continuing regulation may be necessary. We are also prepared to take enforcement action if a system engages in conduct that appears to violate section 411.
We explain in this section why we have concluded that most of the current rules are no longer needed, and that the remaining rules will be maintained only for a short transition period. The several types of system conduct that create concern require separate discussion, because they involve different groups of system users—airlines, travel agencies, and travel agents and their customers—and the degree and effectiveness of market forces for each group is different. For airlines, the question is whether competition disciplines the prices and terms for CRS services offered airlines. For travel agencies, the question is whether the systems can engage in conduct that tends to preserve any market power they may have over airlines by unreasonably restricting a travel agency's use of alternative information sources and booking channels. For travel agents and their customers, the question is whether the systems could engage in display bias and similar practices that would lead to consumer deception and undermine airline competition. As a separate matter, we must determine whether, assuming that the systems do have market power over airlines, they are likely to pursue practices that would distort airline competition, even though no U.S. airlines now control any system.
Most commenters supporting continuing regulation assume that any rules should apply equally to all systems, whether or not owned and controlled by airlines. None of the commenters argues that Amadeus' ownership by three European airlines provides a basis for regulating that system if the others are unregulated. We agree. We doubt that the alliance relationships between each Amadeus owner and one or more U.S. airlines will substantially increase the potential for anti-competitive behavior affecting the U.S. airline market, especially since the Amadeus owners belong to different alliances. In addition, Amadeus has substantial public ownership, and its obligations to its public shareholders should lessen any potential for action by Amadeus designed only to distort airline competition in the United States. Amadeus also has the smallest market share in the United States. Amadeus Comments at 32-33; Sabre Comments at 4, n.6.
The primary basis for our rule proposals was our belief that the proposals appeared necessary to prevent system practices that would constitute unfair methods of competition and that market forces would not prevent those practices. We will begin our explanation of the need for maintaining some short-term, residual regulation with our analysis of the systems' market power over most airlines, an analysis that begins with our conclusions on market definition. We then discuss whether systems are likely to engage in conduct that would prejudice airline competition, preserve their existing market power, or give consumers and their travel agents misleading information on airline services. Despite our conclusion that the systems have market power over airlines, we are allowing most of the existing rules to expire because we find that the systems are not likely to engage in practices that would prejudice airline competition or tend to maintain their existing market power, except for display bias and the potential imposition of some contract clauses on participating airlines that would reduce the airlines' bargaining power. Because we conclude that the systems would probably sell display bias if our prohibition against doing so were immediately terminated, thereby misleading travelers, we have decided to retain that prohibition for a six-month transitional period to furnish the industry notice of the change.
Where we find short-term, transitional regulation necessary, our analysis is substantially the same for both airline and non-airline systems. Elsewhere, as discussed below, our conclusions that rules are not necessary stems in large part from the lack of any U.S. airline control of the systems now operating in the United States. If Orbitz enters the CRS business, there would again be a system controlled by U.S. airlines. However, we are unwilling at this time to adopt general regulations based upon Orbitz' potential entry.
In judging whether any regulation is necessary, the fundamental question is whether market forces would discipline system practices. If competition would do so, no rules should be necessary.
When we adopted the current rules, we found that they were necessary because each system had market power over almost all airlines and market forces would not discipline the systems' anti-competitive practices. We also adopted rules governing subscriber contracts, even though we did not find that systems generally had market power over travel agencies, because the systems' contracts with travel agencies contained clauses that would maintain the systems' market power over airlines. 67 FR 69405. In the current rulemaking, we again made a tentative determination that the systems had market power over airlines.
Determining whether the systems have market power over airlines requires us to define the relevant market. The relevant market must contain all products or services that consumers—here the airlines—are likely to consider using for the same purpose. The relevant market includes all reasonably interchangeable products and services, because “the ability of consumers to turn to other suppliers restrains a firm from raising prices above the competitive level.”
In our notice of proposed rulemaking, we tentatively found that, for airlines, each system is a relevant market. Most airlines still obtain the great majority of their revenues from travel agents, each travel agency office normally uses only one system, and travel agents rarely make airline bookings outside a system. If travel agents routinely used several electronic sources of airline information and booking capabilities when making reservations for their customers, an airline could then afford to withdraw from one or more systems, because the travel agents' use of alternative systems would still enable the airline to obtain bookings. Travel agencies, however, typically rely entirely or predominantly on one system for investigating airline service options and making bookings. 67 FR 69375-69376, 69377-69381.
As a result, an airline that wants its services to be readily saleable by travel
Each CRS provides access to a large, discrete group of travel agents, and unless a carrier is willing to forego access to those travel agents, it must participate in every CRS. Thus, from an airline's perspective, each CRS constitutes a separate market and each system possesses market power over any carrier that wants travel agents subscribing to that CRS to sell its airline tickets.
We further noted that, due to the economics of the airline industry, the addition or loss of a few passengers on an airline flight will determine whether the flight is profitable. The importance of marginal revenues in the airline business meant that airlines cannot afford to lose access to any significant distribution channel. In that regard, we quoted the statement of one industry economist, Daniel Kasper, 67 FR 69375:
Airlines utilize many different distribution channels for the simple reason that they must do so in order to ensure that their products are easily accessible to the broadest possible array of prospective travelers. . . . Because attracting incremental passengers is critically important to an airline's profitability, each airline strives to match or surpass the visibility to purchasers enjoyed by its rivals. That is, airlines must compete for “shelf space” in any channel where consumers prefer to shop.
The comments support our tentative factual findings on market definition. First, most airlines still obtain the majority of their revenues from bookings made by travel agencies through a system. The Justice Department states that the five airlines that own Orbitz derived 65 percent of their total revenues in March 2002 from “brick-and-mortar” travel agency bookings. Justice Department Reply Comments at 14. America West states that 67 percent of its revenues in 2002 came from bookings made through the systems. America West Comments at 7. Alaska similarly states that it obtains 56 percent of its revenues from travel agencies. Alaska Comments at 5. Delta states that 55 percent of its revenues are produced by “brick-and-mortar” travel agencies and that another 10 percent are produced by on-line travel agencies through a system. Delta Reply Comments at 39. Sabre by itself produces about one-third of a typical airline's revenues. Orbitz Comments at 10. While the Justice Department suggests that the systems' use by on-line travel agencies (as opposed to “brick-and-mortar” travel agencies) adds little to their market power over airlines, because most consumers check two or more websites before making a booking on-line, the Justice Department agrees that the systems have market power due to their usage by “brick-and-mortar” travel agencies. Justice Department Reply Comments at 15. About 80 percent of CRS bookings made by travel agencies are made by “brick-and-mortar” agencies. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 24.
In arguing that the systems do not have market power, Sabre cites figures showing that less than half of all tickets will be sold this year by travel agencies using a system.
We agree with Sabre that the travel agencies' share of total bookings has been declining and will likely continue to decline.
Business travelers—the travelers that produce a disproportionate share of the network airlines' revenues—have been reluctant to make bookings on-line or otherwise outside the travel agency channel. Justice Department Reply Comments at 16; NBTA Comments at 11-14. Consumers make about five times as many on-line bookings as do corporate travelers. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 26, n. 40. We recognize that a growing number of business travelers are booking on-line, but they appear to be doing so through websites offered by travel agencies using a system, or through one of the corporate booking firms acquired by systems like Sabre. Sabre Reply Comments at 34-35; American Reply Comments at 25.
It may well be that within several years even a large proportion of business travelers will book their air travel outside of travel agencies using a system, but they do not do so now. Most airlines, including the major network airlines, derive the large majority of their revenues from bookings made through a system.
Secondly, travel agents continue to rely on systems for booking airline tickets. ASTA states that, on average, 87 percent of travel agency airline bookings are made through a system. ASTA Comments at 23. Galileo estimates that an even higher percentage of travel agency bookings are made through a system. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 25, n. 37. Travel agents generally have access to the Internet and use it, primarily for research on travel options, but they have not made much use of the Internet for airline bookings, as noted above, because using the Internet is significantly less efficient than using a system. ASTA Comments at 12-13.
Thirdly, to operate more efficiently, most travel agencies use only one system, as discussed above. While the largest travel agencies tend to have two or more systems, they do not seem to make substantial use of all of them. Those agencies typically rely predominantly on one system. The Large Agency Coalition states that its members—all large corporate travel agencies—do not subscribe to multiple systems in order to improve their ability to book airline travel, but because of continuing business relationships between the agency and the dominant airline in local markets, between some of their corporate customers and airlines, or between an acquired agency and its system. Large Agency Coalition Comments at 1-3. Carlson Wagonlit alleges that each of its branch offices relies predominantly on one system even though the travel agency firm subscribes to all of the systems: “Using multiple CRSs at one location creates numerous operational difficulties related to training agents on multiple CRSs and because client information is maintained within the CRS.” Carlson Wagonlit Comments at 11.
Fourthly, the airlines' dependence on marginal revenues requires them to participate in every significant distribution channel. No commenter denies that marginal revenues are critical in the airline industry. Sabre's experts agreed with our finding: “Air transportation involves high fixed costs and low marginal costs. Thus a few incremental bookings can spell the difference between profit and loss.” Sabre Comments, Salop & Woodbury Declaration at 29.
We are unconvinced by the claims of several commenters that airlines can nonetheless find substitutes for the
We recognize that airlines have been shifting some bookings away from the travel agency channel to their own websites. This shift has been much stronger for low-fare airlines than for the large network airlines. Despite these efforts, some believe that the Internet is unlikely to produce more than 40 percent of airline revenues by 2005. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 23-24. Airlines have also taken steps to encourage travel agencies to bypass the systems. For example, American has an arrangement with American Express that enables that travel agency to make bookings directly with American. Amadeus Comments at 12-13. The record does not indicate that direct booking arrangements will substantially reduce the agencies' use of the systems for airline bookings any time in the near future. As shown, the larger airlines still obtain the large majority of their revenues from bookings made through the systems.
Several commenters contend that travelers can use alternative distribution channels and are not locked into the travel agency channel, or, alternatively, can switch between travel agencies if one agency uses a system that provides inferior service.
The existence of one distribution channel that is attractive to a significant and growing number of travelers does not make that channel competitive with another channel that a larger if shrinking share of travelers finds preferable. With a very few exceptions, any airline that uses only one channel will not obtain the business of those travelers that prefer the other channel.
Some arguments made by the commenters opposing our preliminary analysis mischaracterize our reasoning. Sabre wrongly alleges that we concluded that systems have market power over travel agencies. Sabre Comments at 59, 71, 84. Nothing could be further from the truth. We expressly found that systems compete vigorously for travel agency subscribers, 67 FR 69371, 69405, and nowhere did we state that systems have market power over travel agencies. Sabre additionally misstates our analysis by asserting that we found that travel agencies control their customers. Sabre Comments at 59, 63.
Sabre has failed to show that the relevant market is not each system, but the broader market of providing travel information to consumers, or airline ticket distribution, a market in which each system's share would be relatively small. Sabre Comments at 57-59, 79. As a practical matter, airlines wishing to electronically provide information and booking capabilities to travel agencies currently have no effective substitute for participation in each system. Similarly, because travel agencies do not use multiple systems, Sabre's observation that no system has even a 50 percent share of the CRS business, Sabre Comments at 81, is irrelevant. Each system is a separate market insofar as airlines are concerned. Furthermore, each system has a dominant share of the CRS business at cities where its former airline owners were the dominant airlines. Justice Department Reply Comments at 22.
Because readopting CRS rules to block anti-competitive behavior will require a finding that the systems have market power over most airlines, we must determine whether they do have such power. If systems have market power over airlines, they will be able to charge them prices that exceed competitive levels, and the resulting costs will be passed on to consumers, even if many or most consumers can choose between different distribution channels when buying airline tickets.
We are following the definition of market power applied by the Supreme Court in antitrust cases. In
Our notice of proposed rulemaking stated our belief that each system still
Sales to consumers made over the Internet, via both airline websites and online agents, have provided significant new competition to CRSs, but each CRS typically remains the only means by which to reach the travel agents who use that system. Each CRS therefore continues to have significant market power based on the travel agents to which it has exclusive access.
First, until now an airline or other firm could not practicably create competitive alternatives for the systems. Among other things, building a new system would be costly and time-consuming, and the great majority of travel agencies already had contracts to use an existing system. 67 FR 69381. Entry into the business has become easier, as argued by Sabre. Sabre Comments at 52-85. However, because travel agencies generally rely entirely or predominantly on one system for information and bookings on airline services, new entry is unlikely in the near term to eliminate the systems' existing market power.
Secondly, airlines have generally been unable to persuade travel agencies to use one system rather than another. If they could, they would have some bargaining leverage against the systems. Airlines could then shift business to systems offering better terms for airline participants and away from systems offering poorer terms. Because travel agencies do not pay booking fees, they have no direct incentive to use the system charging the lowest fees. The record suggests, in fact, that the incentive payment programs used by the systems encourage travel agencies to choose the system that is the most expensive for participating airlines. The systems then obtain subscribers typically by offering to give them bonus payments. The revenues used for those incentive payments come from the fees paid by participating airlines (and to a smaller extent by other travel suppliers).
Airlines have had no effective incentives that they can offer travel agencies to encourage the use of one system rather than another, except in local markets where a dominant airline can influence travel agency choices by denying access to its corporate discount fares and marketing benefits to travel agencies that do not use its preferred system. As discussed in our notice of proposed rulemaking, airlines that dominate an area's airline markets, like Delta at Atlanta and American in southern Florida, can influence local travel agencies to use the airline's preferred system, because those travel agencies cannot easily succeed without the ability to sell the corporate discount fares offered by the area's major airline. 67 FR 69381.
Airlines have developed programs to encourage travel agents to agree to terms that offset some CRS costs, or to bypass the systems, but those programs do not yet seem to have had great success. American's “Everyfare” program gave travel agencies access to American's webfares if they agreed to assume the airline's booking fee liability. Amadeus Comments at 10-13. Northwest and other airlines have created websites designed for travel agent bookings. Sabre Supp. Reply at 2.
We recognize that airlines have been gaining bargaining leverage against the systems, a factor that caused us to propose the elimination of the mandatory participation rule and the rule barring discriminatory booking fees. Nonetheless, the systems currently have significantly greater leverage. An airline's greatest leverage for obtaining lower fees or better terms for participation will be a threat to withdraw from the system. If an airline withdraws, however, it will immediately begin losing bookings from that system, and those losses will not be entirely offset by increased bookings through the Internet. Any saving in CRS participation expenses will arrive later, and will not quickly offset the revenues lost from the reduction in bookings. Booking fees, after all, equal about two percent of the revenues obtained by an airline from sales made through a system. Orbitz Comments at 10, n.4.
It is true that an airline's withdrawal from a system will make that system less attractive to travel agencies, and over time the system will lose subscribers. Because the average travel agency contract has a term of three years, however, only a relatively small portion of the system's subscribers will have the ability to switch to another system in the short term.
Thus the airline's revenue losses from withdrawal will be substantial and begin occurring immediately, while the system's losses in subscribers will be gradual and occur only over a period of some months. In these circumstances, the system should have the upper hand in bargaining.
An airline could also put pressure on the system by attempting to reduce the number of tickets sold through the system without withdrawing completely. One possibility would be to increase their efforts to encourage travelers to book directly with the airline. These lost sales would lower the systems' revenues, but may also increase the airline's distribution costs.
An airline could put pressure on the system by lowering its participation level, because doing so would make the system less attractive to travel agencies that frequently book the airline without drastically reducing the airline's bookings from that system's subscribers. The lower level of participation would make it somewhat harder for travel agents to obtain information and reliably make bookings, and could block travel agents from conducting functions that are important to their customers. These functionality differences would not lead to a loss of as many bookings as would withdrawal but presumably would still result in lower revenues from the travel agents using that system. On the other hand, the lower level of participation would have less impact on the system's ability to market itself to travel agencies in the future. We expect that airline changes in participation levels will give airlines bargaining leverage.
Our notice of proposed rulemaking predicted that the airlines' control over access to their webfares could enable them to obtain better terms for system participation. 67 FR 69381. As discussed above, Sabre and Galileo have begun programs that give airlines a discount from the standard booking fee levels in exchange for a commitment to provide all publicly-available fares, including webfares. The commenters disagree over the implications of these programs. Some commenters assert that airlines have gotten little in exchange for the commitments required of them.
We believe that the airlines' ability to change their participation levels and their control over access to webfares is reducing the systems' market power. Overall, however, we find that the systems currently still have market power over most airlines, although the continuing changes in airline distribution, particularly the growing importance of the Internet for airlines,
We disagree with Sabre's contention, first made in its reply comments, that the airlines' contracts with corporate customers keep systems from having market power. Sabre asserts that system practices cannot significantly affect airlines, because “much business travel” involves fares directly negotiated with specific airlines, often booked through direct links. Sabre Reply Comments at 36; Sabre Reply Comments, Salop & Woodbury Declaration at 7-9. Airlines obtain substantial amount of business from corporate customers that do not have such contracts, and the contracts do not normally bar employees from traveling on alternative airlines.
We have based our finding of market power on the industry's structural characteristics, not on an analysis of whether the systems' fees are at supracompetitive levels. The best evidence of a firm's monopoly power would be a showing that it has been able to profitably charge prices that significantly exceed competitive levels. Because direct evidence of this ability is usually not available in Sherman Act monopolization cases, the courts usually rely on market structure evidence to determine whether a firm has monopoly power.
When we last compared the systems' prices with their costs, we concluded that the larger systems at least were charging supracompetitive prices.
The airline commenters generally support our finding that booking fees are not disciplined by competition and contend that the fees substantially exceed competitive levels. They point out, for example, that the network airlines' financial crisis since 2001 has enabled them to drive down costs from other suppliers while the systems have been raising their fees and reporting large profits.
In response, the systems have denied that their fees are not disciplined by competition, and they argue that the fees are reasonable. They contend that their costs have been rising due to increased functionality provided airlines and the growing number of messages carried by their communications links.
We continue to believe that the systems' fees exceed competitive levels for the reasons set forth in the notice of proposed rulemaking. We have not seen evidence that the systems' fees generally respond to market forces, although two of the four systems have made modest concessions in exchange for access to airline webfares. However, we have not done an analysis of the systems' costs and revenues that would demonstrate that their fees exceed competitive levels. As explained above, a finding that the fees are at supracompetitive levels is not necessary for our determination that the systems have market power over airlines.
We also cannot accept Sabre's claim that bookings made through a system are relatively inexpensive for airlines while bookings made through airline websites are not (and that bookings made through airline websites are more expensive than those made by an airline's reservations agents). Sabre Comments, Wilson Declaration at 22. Sabre's analysis is belied by the efforts of virtually every airline to shift bookings to its own website. Several low-fare airlines have claimed that their ability to obtain most of their revenues from direct sales gives them a great cost advantage over other airlines.
Our finding that each system has market power over airlines is not sufficient by itself to justify the adoption of rules. To adopt rules regulating the systems in order to prevent potential unfair methods of competition, we should have evidence that, if there were no regulations, systems would likely engage either in anti-competitive conduct designed to preserve their market power, a subject discussed below, or in conduct intended to distort airline competition. Any such conduct would harm consumers, either by causing airlines to pay supracompetitive prices for CRS services or by denying consumers the benefits of lower fares and better service created by competition between airlines.
When each system was owned and controlled by one or more airlines or airline affiliates, experience demonstrated that systems were likely to engage in conduct designed to prejudice the competitive position of rival airlines, for example, by biasing displays against the owner airlines' competitors and charging competing airlines discriminatorily high booking fees.
We have found, as shown, that the systems have market power over airlines. To the extent that they do, their booking fees may exceed the fee levels that would exist in a competitive market, and the service offered airlines by the systems may be below the level of service that would exist in a competitive environment. The systems' possession of market power, however, by itself would not justify rules regulating their practices. The antitrust laws permit firms with monopoly power to use that power as long as they do not engage in conduct that is designed to maintain or extend that power. “[M]erely possessing monopoly power is not itself an antitrust violation.”
Our notice of proposed rulemaking stated our belief that there was a risk that non-airline systems would engage
The systems continue to have marketing relationships and other relationships with their former owner airlines.
The record suggests that the systems are willing to sell preferential treatment to airlines at least insofar as display bias is concerned. Their willingness to do so is apparent from their own comments, which argue that we should allow systems to sell bias. Amadeus Comments at 53-54; Sabre Comments at 141-142. The Justice Department believes that the systems are likely to engage in display bias. Justice Department Reply Comments at 19-21.
Apart from bias, however, the record does not indicate that systems are likely to seek to operate in ways designed to prejudice airline competition. Our notice of proposed rulemaking expressly invited commenters to submit evidence on whether systems had sought to distort competition in other travel industries. 67 FR 69383. One speaker at our public hearing stated that he did not know of any system practices that distorted competition in other industries, Transcript at 85, and one commenter asserted that there is no evidence of competitive harm resulting from the systems' treatment of firms in other travel industries. Worldspan Reply at 17.
Furthermore, we cannot predict at this point what kinds of relationships may arise as a result of the CRS industry's deregulation. We do not wish to adopt rules now when we do not know what types of potential anti-competitive practices, if any, may occur. We therefore do not agree with the arguments of some commenters that rules should be maintained on the ground that systems have continuing marketing and other special arrangements with selected airlines.
We fully agree with the Justice Department, however, that there is a potential for contractual relationships between systems and airlines that would be designed to reduce competition in either or both the CRS and airline industries. The Justice Department has stated its intent to take action against any such agreements that violate the antitrust laws, and we also have statutory authority to take appropriate action if such contractual relationships appear to be unfair methods of competition that violate section 411. Under 49 U.S.C. 41708, formerly section 407 of the Federal Aviation Act, we can obtain copies of any agreements between airlines and systems if we see a need to investigate contractual relationships between systems and participating airlines.
While we have determined that most of the rules should not be readopted, even though each system continues to have substantial market power over airlines, we are readopting for a short transition period the rule prohibiting parity clauses and adopting an analogous rule prohibiting most-favored-nation clauses demanded as a condition for any participation in a system. These types of contract clauses would tend to maintain the systems' market power and reduce the bargaining leverage of participating airlines. Because we are essentially deregulating the CRS business notwithstanding the systems' market power, we decided to adopt the parity and most-favored-nation clause prohibitions for a period long enough allow affected parties to respond to the transition to complete deregulation.
We originally adopted the rule prohibiting systems from enforcing parity clauses (except as to airlines that owned or marketed a competing system) because three of the systems had imposed parity clauses on airline participants. These clauses required each airline to participate in the system at at least as high a level as it participated in any other system. Thus, for example, Sabre's parity clause required Alaska to participate in Sabre at the full availability level as long as Alaska participated in any other system at that level, even if Alaska considered Sabre's service at that level too costly or not as attractive as the comparable service offered by other systems. 62 FR 59786-59787, 59791-59792. Because these parity clauses eliminated some possibility of system competition for airline participants, and required each airline to buy a level of service that an airline might not wish to buy, we adopted a rule prohibiting the systems from enforcing airline parity clauses except as to airline participants that owned or marketed a competing system. 62 FR 59784.
We have concluded that this rule should be readopted for another six months. We are also adopting for the same period an analogous rule that will prohibit each system from requiring airlines as a condition to any
On the other hand, we have decided not to readopt rules designed to prohibit system contract practices that would unreasonably restrict travel agency subscribers from switching systems or using alternative systems or booking channels. In the past, the systems engaged in subscriber contract practices that appeared to be designed to preserve their market power. Travel agencies accepted such contract clauses even though most travel agencies could choose between systems. 67 FR 69405. We therefore adopted rules barring subscriber contracts from having a term that exceeded five years and giving travel agencies the right to use their own third-party equipment and software in conjunction with a system.
As discussed above, the record shows that travel agencies in recent years have been obtaining more flexible contracts from the systems. The term of the average subscriber contract, for example, is well under five years. While most subscriber contracts still have productivity pricing clauses, the productivity pricing clauses in the contracts currently offered travel agencies do not seem to effectively block travel agents from using alternative booking channels. And travel agencies appear to have a substantial ability to switch systems at the end of their contract term. While systems may have some contracts that may be unreasonably restrictive, their contracts in general do not seem to block travel agents from obtaining information and making bookings outside the system. Moreover, the market is moving in a more competitive direction—travel agencies are obtaining more flexibility, not less, in their newest contracts.
As a result, the current record shows that rules regulating travel agency contracts are no longer necessary. Several airline commenters and Orbitz have argued that we should continue to regulate the systems' subscriber contract practices, because the existing contracts are alleged to unreasonably lock travel agencies into using their existing system.
Display bias has been a concern since the systems were first developed. Experience has demonstrated that travel agents are likely to book one of the first services displayed by a system in response to a travel agent's request for information, even if services shown later in the display would better satisfy the customer's needs. If systems give preferential display positions to one airline's services, that display bias will harm airline competition and cause consumers to be misled. 57 FR 43801-43802, 43807-43808.
Our rules have prohibited systems from biasing their displays in order to prevent unfair methods of competition and deceptive practices. Display bias both prejudices airline competition, by reducing the airlines' ability to compete on the basis of the relative attractiveness of their schedules and fares, and causes travel agents to give misleading or incomplete advice to their customers.
Display bias is possible because of the way in which the systems present information on airline service options. The systems display information on computer screens. Each screen can display only a limited number of flights, so a system must use criteria for ranking the available flights. Display position is important, because travel agents are more likely to book the flights that are displayed first. The number of airline services available in most markets also requires the systems to edit their displays, because many services will be unattractive to travelers (Los Angeles-San Francisco travelers, for example, will not choose connecting services over Denver or Salt Lake City). Systems display airline services in several different ways. The display traditionally used by travel agencies ranks flights in a market on the basis of the criteria developed by the system and shows whether seats are available on the listed flights. Some systems rank flights in this type of display by listing all nonstop flights first, then one-stop flights and other direct flights, and finally connecting services. Others have ranked flights on the basis of relative quality, such as each flight's elapsed time or its displacement time (the time difference between the departure time requested by the traveler and the time of each flight). 67 FR 69370.
Every system also has a display that ranks flights on the basis of price, with the lowest being listed first. Travel agents use that display for customers whose major concern is finding the lowest fare. 67 FR 69370.
We have concluded that we should continue to prohibit display bias, both to prevent anti-competitive conduct, as recommended by the Justice Department, and to prevent consumer deception, but only for an additional six months. Were the rule terminated immediately, systems would likely be in a position to bias displays, as discussed above. Display bias could cause consumer harm by reducing airline competition and by causing travel agents to book customers at times on flights that do not best meet the traveler's needs.
Display bias can mislead travel agents (and thus their customers), because by definition it means ranking and editing airline services on some basis other than neutral criteria based on general consumer preferences. Before the Board adopted the rules on display bias, when each system was owned by one airline, systems constructed displays that put their competitors at a disadvantage by omitting services and fares offered by competing airlines that would be attractive to many consumers. Each system often listed flights operated by its owner airline above flights operated by competitors that better met the customer's travel requirements. 56 FR 12589. We later found it necessary to revise our rules on display bias because Apollo, Galileo's predecessor, created displays that essentially gave the connecting services operated by network airlines a preference over one-stop flights operated by point-to-point airlines. For example, Apollo could display an Alaska one-stop flight in the Seattle-Burbank market well after connecting services that left Seattle as much as an hour before the Alaska flight and that arrived in Burbank after the Alaska flight had landed. Apollo similarly displayed an Alaska one-stop Orange County-Seattle flight after connecting services that took substantially longer and that involved
Display bias also can reduce competition. Bias can shift enough passengers from disfavored airlines to a favored airline to make the former's flights unprofitable in the targeted markets. That can cause a disfavored airline to reduce or eliminate its service in those markets. As we stated above in our discussion of the systems' market power over airlines, the profitability of an airline flight often depends on marginal revenues, so the shift of traffic that may result from display bias can have large competitive consequences. Justice Department Reply Comments at 20, n.26. The resulting reduction in capacity and potentially in the number of competitors will enable the favored airline to raise fares and reduce service. Justice Department Reply Comments at 7. For example, two of the airlines that complained about the Apollo display discussed above—Alaska and Midwest Express—were point-to-point airlines whose services fared worst in the Apollo display. Alaska estimated that the display would reduce its annual revenues by $15 million, and Midwest Express estimated that its annual revenue losses would equal several million dollars. 62 FR 63837, 63841 (December 3, 1997).
Experience thus shows that bias can be effective, notwithstanding the travel agents' interest in finding and booking the services that best meet their customers' needs. As noted, travel agents tend to book one of the first flights displayed by the system. Travel agency customers depend on their travel agent to extract information from the system display, which only the travel agent sees. Travel agents generally work under time pressure that often keeps them from searching through several display screens to overcome the bias. ASTA Comments at 41; AAA Comments at 2; Carlson Wagonlit Comments at 16; British Airways Coments at 2-3. The systems can also hide the extent of their bias. 49 FR 32540, 32547 (August 15, 1984). A system arguably could choose to omit some services altogether. For example, Priceline, an on-line seller of airline tickets, agreed with Delta that Priceline would not sell seats offered by Delta's competitors on flights to or from Atlanta, Delta's hub. Justice Department Reply Comments at 20, n.27, and 30, n.37. As a result, bias could keep consumers in many cases from obtaining accurate and complete information on schedules and fares from travel agents relying on a system for their information.
Display bias, moreover, provides no apparent consumer benefits. It does not function like advertising, because it provides no information. In fact display bias “would divert passengers without regard to airlines’ prices or quality.” Justice Department Reply Comments at 19. Display bias is also unnecessary to help travel agents who, due to a customer's demands, are interested in seeing only services offered by one airline. The rules do not bar systems from enabling travel agents to create displays listing the services of a single airline.
When we readopted the rules against display bias at the conclusion of our last overall reexamination of the CRS rules, we addressed several theoretical arguments that assertedly showed that display bias was “beneficent.” Some commenters argued that a flight's display position would not affect travel agency bookings, that display bias reflected the preferences of a system's subscribers, and that other airlines could buy display bias. We found that these arguments were disproven by experience. 57 FR 43786-43787.
Several commenters have presented somewhat similar arguments here that bias would not work and that there is no reason to prohibit it. While these commenters may be correct in predicting that bias today would not be as effective as it was in the past, we are not convinced that systems could engage in display bias without causing consumer harm.
Systems clearly wish to be able to sell bias. That indicates that they believe airlines will be willing to buy bias, and obviously airlines will be willing to buy bias only if they expect it to be effective. Past experience with system efforts to bias displays suggests that their expectation is correct.
We question whether airlines injured by display bias can practicably take steps to offset it. In response to our example of the Galileo display that harmed Alaska's display position, Mercatus argues that Alaska could have either outbid United for the bias or cut its fares to attract additional passengers. Mercatus Comments at 10. While Alaska may have had the ability to take some steps to offset the effect of the bias, Mercatus has failed to show that those steps would have been practicable. Our concern, moreover, is not limited to the Galileo display's impact on competition. The display also caused travel agents and their customers to receive incomplete or misleading information on the available service options. The display was designed to cause travel agents to book customers on airlines like United even when Alaska provided significantly better service.
Travel agents use the Internet at times to search for alternatives to the services displayed by a system. In theory, as argued by some commenters, the Internet's availability as a check on the quality of displays offered by a system would deter a system from biasing its displays.
Travel agencies, moreover, cannot quickly shift to a different system if the system they are using biases its displays. While travel agencies have some ability to switch systems, many agencies would likely incur significant costs by switching from one system to another. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 81.
Any display bias by the systems would not be comparable to the practice of grocery stores selling preferential shelf positions to their suppliers. Unlike the grocery store shelf, which the shopper sees and can easily scan, the traveller never sees the system display
Delta contends that bias should not prevail if travel agencies really desire unbiased displays. Delta Reply Comments at 25. As noted, however, the systems assume they can sell display bias, and experience indicates that systems have some ability to hide the extent of the bias. Furthermore, the travel agents' interests are not our only concern—we wish to ensure that travel agency customers can obtain accurate information, and to prevent the harm to airline competition that could result if CRS display bias reappeared.
A travel agency customer's ability to go to another travel agency if one travel agency provides bad advice due to its use of a system that biases its displays would not prevent display bias from causing harm. The consumers' ability to switch travel agencies would deter bias if customers find out that better service was available and know that the travel agent booked the inferior service because the travel agent was using a system that provided inferior displays. That seems improbable. Customers instead are unlikely to know why the travel agent did not book the better service. Customers might assume that the better service was sold out, or that the better fare was not available when a customer's booking was made, as we concluded in our last major CRS rulemaking. 57 FR 43787.
While we conclude that systems are likely to bias displays in the absence of rules prohibiting such bias, we believe that on-going developments are likely to reduce the systems' market power over airlines over time. We further expect that these developments will enable travel agents and their customers to easily use alternative sources of information to an extent that should deter the kind of display bias that would significantly mislead travel agents and consumers. Accordingly, we have decided to retain the prohibition against display bias only for a transitional period of six months, with a termination date of July 31, 2004. Our expectation is that the notice provided by this transition period will help to accelerate developments in the market that reduce the harm display bias might otherwise engender.
Having concluded on economic policy grounds that some rules will remain necessary for the next six months, and that the remaining rules should cover all systems, not just those owned by airlines, we must address our statutory authority to adopt the rules and make them applicable to both airline and non-airline systems.
The basis for our adoption of CRS rules has been our authority under section 411 of the Federal Aviation Act, recodified as 49 U.S.C. 41712, to prohibit unfair and deceptive practices and unfair methods of competition by airlines and ticket agents in air transportation and the sale of air transportation. Section 411 states, “[T]he Secretary may investigate and decide whether an air carrier, foreign air carrier, or ticket agent has been or is engaged in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation.” If the Secretary “finds that an air carrier, foreign air carrier, or ticket agent is engaged in an unfair or deceptive practice or unfair method of competition, the Secretary shall order the air carrier, foreign air carrier, or ticket agent to stop the practice or method.” Congress modelled our authority under section 411 on the Federal Trade Commission's authority under section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, to prohibit unfair and deceptive practices and unfair methods of competition in other industries.
As noted, section 411 covers airlines (both U.S. and foreign) and “ticket agents.” The statute defines a ticket agent as “a person (except an air carrier, a foreign air carrier, or an employee of an air carrier or foreign air carrier) that as principal or agent sells, offers for sale, negotiates for, or holds itself out as selling, providing, or arranging for, air transportation.” 49 U.S.C. 40102(a)(40).
The courts have construed the meaning of deceptive practices and unfair methods of competition. A deceptive practice is one that will tend to deceive a significant number of consumers.
When several airlines sought judicial review of the original CRS rules, the Seventh Circuit affirmed the Board's adoption of the rules on the ground that section 411 authorized the Board to prohibit anti-competitive conduct even though the systems' conduct might not violate the antitrust laws.
While Section 411 allows us to prohibit some conduct that is not prohibited by the antitrust laws, it does not give us broad authority to regulate practices in the airline and airline distribution businesses. Airlines are generally free to determine how to distribute and sell their services, including sales through travel agencies, as long as they do not violate antitrust principles. The antitrust laws allow individual firms to choose how to distribute their products and services as long as they do not violate one of the provisions of those laws. 67 FR 69384, citing
Similarly, the courts have held that the FTC's comparable authority to prohibit unfair methods of competition in other industries does not empower that agency to regulate business conduct in order to make an industry more competitive. In
Our decision that most of the existing rules should be allowed to sunset follows from our conclusions that those rules are no longer necessary. That decision also reflects the limits placed by Congress on our authority to regulate airline distribution practices. As a result of Congress' decision to deregulate the airline industry, we may not require firms in the airline distribution business to change their practices without finding that those practices will violate section 411.
We based our proposal to readopt rules proscribing display bias on both our authority to prohibit deceptive practices and our authority to prohibit unfair methods of competition. No one has contested our authority to regulate the systems' display practices under our authority to prohibit deceptive practices, if the systems are ticket agents and our regulations are consistent with the First Amendment (several commenters dispute these assumptions). The argument over our authority to readopt the proposed rules involves both of our tentative conclusions that the statutory definition of ticket agents includes the systems and that system practices at issue could be unfair methods of competition. We address these issues in detail below.
In our notice of proposed rulemaking, we observed that section 411 also authorizes us to prohibit unfair practices by airlines and ticket agents, not just deceptive practices and unfair methods of competition, but that we had not relied on that authority as a basis for readopting CRS rules. 67 FR 69384. The FTC has advised us that the FTC has adopted a strict definition of “unfair practices” under the FTC Act and that Congress has since codified the Commission's definition. FTC Comments at 1-3. In its reply comments, America West briefly suggests that we should bar systems from charging supracompetitive booking fees on the ground that such fees violate public policy. America West Reply Comments at 16, n.30. We are unwilling to adopt America West's suggestion. We have not previously based the CRS rules on our authority to prohibit unfair practices, and we do not now intend to rely on that authority, when our notice did not propose to do so and other commenters have not had the opportunity to comment on America West's suggestion.
The U.S. airlines' divestiture of their CRS ownership interests requires us to resolve whether we may directly regulate the systems under section 411, because we based our authority to regulate system practices in the past on the systems' airline ownership. Neither we nor the Board ever decided that issue in the earlier rulemakings. 67 FR 69385. We tentatively concluded in our notice of proposed rulemaking that the systems were ticket agents subject to section 411. After considering the comments on this issue, we conclude that we may directly regulate the systems under section 411, even though most of them no longer are controlled by airlines. However, we are also adopting a rule barring airlines from attempting to induce systems to create displays that would not comply with the standards established by our rule prohibiting systems from engaging in display bias.
A few commenters have suggested that we need not decide whether section 411 authorizes us to directly regulate the systems, because each of the existing systems has ties with its former airline owners. We decline this invitation to avoid the issue. Achieving all of our goals without directly regulating the systems would be difficult. Neither relying on the existence of marketing relationships between the systems and airlines nor barring airlines and travel agencies from doing business with systems that engage in unacceptable practices would provide a sound basis for regulating all of the systems' operations.
Section 411 authorizes us to regulate the systems directly if they are “ticket agents” within the meaning of our statute. As noted above, the statute defines a ticket agent as “a person (except an air carrier, a foreign air carrier, or an employee of an air carrier or foreign air carrier) that as principal or agent sells, offers for sale, negotiates for, or holds itself out as selling, providing, or arranging for, air transportation.” 49 U.S.C. 40102(a)(40). Our notice of proposed rulemaking tentatively concluded that systems are “ticket agents.” 67 FR 69384-69385.
Sabre, Galileo, United, Expedia, Travelocity, and ASTA contend that systems are not ticket agents. Amadeus and America West, on the other hand, support our tentative conclusion that the systems are ticket agents subject to section 411.
After considering the comments, we conclude that the systems are ticket agents and that we may therefore prohibit them from engaging in unfair and deceptive practices and unfair methods of competition in the sale of air transportation.
As we explained in the notice, the systems are active participants in the sale of air transportation, not just communications links. 67 FR 69384-69385. The systems enable travel agents to conduct booking transactions, require airlines to accept any bookings made by a travel agent through the system, make credit card authorizations, and issue tickets. They charge airlines fees based on booking transactions. A system operates a central computer that collects information on airline schedules and fares and the availability of seats, arranges that information under its own editing and ranking criteria in displays that are provided to travel agents, and provides a booking capability enabling travel agents to make airline reservations for their customers. The systems also require airlines to allow any system user to make bookings on the airline through the system.
The systems' contracts with participating airlines reflect their function as an integral part of the distribution of airline tickets, not just as a communications link. America West's contracts with Sabre and Worldspan
In our view, the systems thus sell, offer for sale, and arrange for air transportation, activities which bring them within the statutory definition of ticket agent, because they are also carrying out these functions as a principal or agent.
The statutory definition of “ticket agent” states that anyone carrying out the listed functions as “principal or agent” is a ticket agent. This definition should cover everyone involved in selling, offering for sale, or arranging for air transportation no matter what status they may have under agency law principles. A person involved in the sale or offering for sale of airline tickets must be either a principal or agent. We do not see any third category of actor that would be applicable here, and the commenters arguing that the systems are not ticket agents do not contend that they are acting in some capacity other than principal or agent. We think Congress included the phrase “as principal or agent” to ensure that all persons conducting the listed functions were covered, whether or not they were acting as an airline's agent, acting under their own authority, or acting under someone else's authority. By using the terms “principal or agent,” Congress did not mean to make a person's status as ticket agent depend on whether that person was a party to an agency relationship. Congress surely meant to make section 411 applicable to persons who committed unfair methods of competition or unfair or deceptive practices while engaged in the sale or offering for sale of transportation, even if that person acted entirely independently.
We believe that the systems operate as principals in the offering for sale and arranging for air transportation. The systems act as independent firms that are involved in the distribution of airline services. The commenters arguing that systems cannot be ticket agents largely ignore the statute's inclusion of persons who act as principal and assume that a showing that a system is not an agent necessarily means it cannot be a ticket agent.
The commenters opposing the systems' inclusion within the definition of “ticket agent” argue that the systems are not the airlines' agents. They contend that the systems' contracts with participating airlines specifically disclaim any agency relationship.
Furthermore, we disagree with the argument made by some commenters that travel agents are the airlines' agents and that the systems, therefore, cannot be agents of the airlines.
The statute states that a person is a ticket agent if the person “sells” or “offers for sale” air transportation. The systems sell and offer for sale air transportation because they present the travel agent with air service options that the agent can purchase through the system. A system tells the travel agent what flights are being operated, what the fares are, and whether seats are available at each fare, and enables the travel agent to book the seat and pay for it on the customer's behalf by entering specified keystrokes. If the travel agent follows the proper procedures for making the booking, the airline is obligated by its contract to accept the booking as valid, whether or not any record of the transaction appears in the airline's internal reservations system. The system thus offers air transportation for sale and sells it.
We further find that each system “holds itself out as selling, providing, or arranging for air transportation.” As discussed, each system offers for sale and sells air transportation. A system also arranges for air transportation, because it enables the travel agent to choose the services best suited for the travel agent's customer and enables the agent to book whatever combination of services may be required by the customer. The system holds itself out as performing these functions, because it has informed its subscribers (and potential subscribers) that it offers these functions.
We do not agree with the contention made by some commenters that the systems may not be deemed as holding out the sale, provision, or arranging for air transportation, because no system deals directly with the public or holds itself out to the public as offering airline tickets for sale.
We therefore conclude that each system is a ticket agent. Interpreting “ticket agent” as including the systems would enable us to apply section 411 to firms whose critical role in airline distribution enables them to substantially affect airline competition and the accuracy of information provided consumers.
At the same time, our reading of the term “ticket agent” will not make firms providing only information on airline services or communications links subject to section 411. As shown, the systems do much more than just provide information or a communications facility because they are active participants in the sale of air transportation. As we explained in the notice, when a consumer uses the telephone to buy goods and services, the telephone line links the consumer with the firm selling the product or service, and the consumer conducts the transaction directly with the retailer. In contrast, a travel agent using a system to make a booking communicates
The contentions made by the commenters arguing that systems are not ticket agents are not persuasive. On the ground that the large majority of CRS bookings are now made directly with an airline's internal reservations system, Sabre characterizes the systems as communications links. Sabre Comments, Fahy Declaration at 23. However, Sabre concedes that a significant fraction of its bookings are not made directly in an airline's internal system. Furthermore, the widespread use of direct access (referred to as seamless connectivity by Sabre) does not negate the systems' role as distributors of airline transportation, not mere communications links. The system, not just the airline's internal reservations system, creates a record of the booking transaction, the passenger name record. Sabre Comments, Fahy Declaration at 23. The system, moreover, created the display that enabled the travel agent to choose which flights to book.
Our notice of proposed rulemaking cited the passive booking capability offered travel agencies by the systems as an example showing that the systems were more than communications links. 67 FR 69385. In response, Sabre argues that a passive booking—a booking record stored in the system's computer but not sent to any airline's internal reservations system—cannot support our conclusion that systems are active participants in the distribution channel because passive bookings are “not active.” Sabre Comments at 28 and Fahy Declaration at 23. The systems” creation of the passive booking functionality, however, demonstrates that they operate as more than just communications links. As Sabre states, a passive booking does not cause any communication to go to an airline's internal reservations system. The passive booking functionality, however, benefits many travel agents. Sabre Comments at 28. Travel agents can use the passive booking function to issue tickets for customers who booked their seats directly with the airline and to facilitate group bookings. 67 FR 69400. The systems created the functionality in order to assist their customers, the travel agencies, in their sale of airline services. This effort by the systems additionally confirms their role as active participants in the sale and offering for sale of air transportation.
Sabre further argues that the system contracts requiring participating airlines to accept all bookings made through a system do not show that the systems are active participants in the sale of air transportation. Sabre contends that the systems require airlines to accept all such bookings, even if they have no record of the transaction, as a result of travel agent demands and to avoid libel attacks. Sabre Comments at 27, n.29. Sabre has understated the importance of the systems' requirement. Firms operating as communications links, like a telephone or telegraph company, would not normally require the alleged recipient of a message to assume the obligation of complying with the message, whether or not the recipient actually received it. The requirement that airlines honor bookings made by subscribers demonstrates the systems' role as participants in the sales process.
Sabre additionally notes that the systems operate automatically as machines, unlike human travel agents, which assertedly shows that a system operates only to provide information and process transactions. Sabre Comments, Fahy Declaration at 22. We disagree. On-line travel agencies also operate automatically, except when a customer needs advice or has a problem, but surely no one would argue that an on-line travel agency is not a ticket agent because the great majority of its bookings are made on-line without human intervention. More importantly, the systems were not created by machines—they were developed by people, who also decide what services will be offered, how the systems will be marketed, and what kinds of contractual relationships they will have with their airline and travel agency customers, and who carry out these business strategies. The machines have not chosen the algorithms used to edit and rank air services, and they do not determine the types of restrictions, if any, included in the systems' contracts with participating airlines and travel agencies.
We are aware of the statement made in
In arguing that past judicial and administrative precedent otherwise shows that systems cannot be ticket agents, commenters cite other decisions which are not controlling. United, for example, cites
Expedia also argues that Congress amended section 411 to cover ticket agents in order to prevent the fraudulent conduct by individuals ostensibly selling tickets, especially on behalf on nonscheduled airlines. Expedia Comments at 17, citing S. Rep. No. 82-1508 and H.R. Rep. No. 82-2420 (1952).
Thus section 411 authorizes us to regulate the systems as ticket agents when necessary to prevent unfair and deceptive practices and unfair methods of competition, despite the divestiture of their ownership interests by the U.S airlines that formerly controlled the systems. Determining whether a system's conduct would be unfair or deceptive would not be affected by a system's ownership. The lack of U.S. airline ownership, however, could be very relevant to the question of whether the practices barred by our rules would constitute unfair methods of competition. We discuss that question next.
A system or airline practice will be an unfair method of competition if it violates antitrust laws or antitrust principles. In our past rulemakings, we determined that the system practices barred or restricted by our rules would be unfair methods of competition, either because the practices unreasonably limited competition in the CRS business or because they represented an effort to reduce competition in the airline business. We relied on the systems' ownership and control by airlines and airline affiliates. Because the systems are no longer controlled by U.S. airlines, we must reexamine whether the practices barred by our rules would be unfair methods of competition.
Our notice of proposed rulemaking tentatively concluded that section 411 authorized us to readopt most of the existing rules, because we found that the practices prohibited by them could be unfair methods of competition, even though two of the four systems then had no airline owners. 67 FR 69385-69387.
Several of the commenters, especially Sabre and United, argue that the practices at issue could not be unfair methods of competition. They primarily argue that, even if the systems had market power in the CRS business over airlines, system practices that affected airline competition could not violate antitrust principles because the systems did not compete in the airline industry. United Reply Comments at 16-20; Sabre Comments at 41-45.
We are readopting only the rules prohibiting display bias and adopting certain rules prohibiting parity and most-favored-nations clauses in contracts between systems and participating airlines, if those clauses are a condition to participation in the system. The record does not provide a factual basis for finding that the other system practices at issue would be unfair methods of competition.
We may prohibit display bias under section 411 on the grounds that it would constitute an unfair and deceptive practice and an unfair method of competition. We have found that display bias is likely to mislead a significant number of consumers by causing their travel agents to book relatively inferior flights when other flights would better meet the travelers' needs. The Seventh Circuit upheld the Board's rules barring display bias on the basis of findings that display bias would tend to deceive a significant number of consumers. We have made the same finding here. We may therefore readopt rules barring display bias under our authority to prohibit unfair and deceptive practices.
Display bias could also constitute an unfair method of competition to the extent that the system biases displays in order to benefit one airline at the expense of competing airlines. Presumably a system would not bias its displays in favor of one airline at the expense of rival airlines unless the favored airline had given the system inducements to engage in display bias. In that event, the system and the favored airline would be engaged in a joint effort to distort competition in the airline industry, an effort that could succeed only because of the system's market power over the disfavored airlines.
Display bias does not promote competition on the merits. Instead, it is designed to suppress competition by causing consumers and their travel agents to select inferior airline services over other available services that would better suit their needs. As the Justice Department points out, display bias “would divert passengers without regard to airlines” prices or quality.” Justice Department Reply Comments at 19. Display bias could deter entry or expansion by more efficient competitors and possibly cause competitors to exit some markets.
Contracts that unreasonably restrict one party's ability to buy products or services from competitors of the other party (or unreasonably restrict competitors of one party from buying products or services offered by the other party to the contract) can be unlawful, if they significantly restrict competition without promoting efficiency. For example, the FTC held that a series of contracts between a major retailer and its suppliers that restricted each supplier's ability to sell their products to the retailer's competitors violated section 1 of the Sherman Act.
In some cases, the courts have suggested that contracts giving one party a competitive advantage by causing consumers to be misled may violate the Sherman Act. As one court stated, “Competition would be harmed if consumers were routed to particular glass repair companies based on factors other than competitive pricing or quality in the marketplace.”
While these cases involve different factual circumstances and were in part decided under section 2 of the Sherman Act, they support a conclusion that arrangements between a system and an airline to bias displays would constitute an unfair method of competition that violates section 411. Display bias would be designed to undermine the competitive position of the targeted airlines by misleading consumers and their travel agents about which airline services would best satisfy a consumer's preferences. Any such arrangements would be intended to handicap the ability of competing airlines to compete on the basis of price and service quality. As such, they would be comparable to the agreements condemned in
Given the nature of airline markets, many of which are served by only a few airlines, display bias in some cases could facilitate an airline's acquisition of monopoly power in some such markets.
The other practices being prohibited by our rules are airline parity clauses and clauses requiring airlines as a condition to participation in a system to provide the system with all fares, including fares such as webfares that an airline would otherwise choose not to sell through the system. We are not prohibiting parity and most-favored-nation clauses that result from bargaining between a system and participating airlines, such as the clauses accepted by the airlines participating in the Sabre DCA and Galileo Momentum programs.
When we initially prohibited the enforcement of airline parity clauses, we found that such clauses constituted unfair methods of competition, because they unreasonably restricted airline choices on participation levels in different systems and were analogous to unlawful tying. 62 FR 59793-59797. As we said then, and as is still true, parity clauses imposed by a system may violate antitrust principles, because such parity clauses will maintain a system's market power. By denying an airline any opportunity to choose different levels of participation in competing systems, a system's parity clause makes it more difficult for other firms to enter the CRS business and undermines the airline's ability to offer higher-level information and booking capabilities to travel agencies through direct connections. 62 FR 59796. Parity clauses may also constitute an anti-competitive tying of services. A parity clause imposed on participating airlines represents a system's use of its market power to compel airlines to purchase services they may not want as a condition to obtaining any service. We therefore reaffirm our past finding that parity clauses may represent unlawful tying. 62 FR 59795-59796. Our conclusion is supported by the recent decision in the Visa/MasterMoney case, where the court's ruling largely denying various cross motions for summary judgment held that contract clauses imposed by the two credit card companies requiring stores to accept debit cards as a condition to obtaining authorization to make credit card sales could be an unlawful tie.
System clauses requiring participating airlines to provide all fares as a condition to participation may similarly constitute unfair methods of competition, because they unreasonably limit each airline's ability to choose how to market its services. That would buttress the systems' market power, by eliminating the potential development and use of alternative information sources and booking channels by travel agents who want to book webfares. The Justice Department thus states that such clauses “may reinforce CRS market power over airlines, particularly if they discourage the development of alternative distribution channels.” Justice Department Reply Comments at 26. Such clauses, moreover, would eliminate the airlines' ability to use their control over access to webfares as bargaining leverage to obtain better prices and terms for participation from the systems. The airlines' control over access to webfares has caused Sabre and Galileo to offer lower booking fees to airlines that agree to provide them with all such fares. A system's contract clause requiring an airline to provide access to all fares as a condition to any participation would also be analogous to an unlawful tying arrangement. The system would be denying access unless the airline agreed to make all fares available, even though airlines have typically chosen to make some types of fares, like webfares, available only through selected distribution channels.
Our decision not to readopt the remaining rules largely reflects our policy and economic judgment that those rules are unnecessary or unnecessarily restrictive. That decision also reflects the limits on our authority under section 411. We may adopt rules regulating system practices only if necessary to prevent practices that would violate the antitrust laws or antitrust principles or cause consumers to be misled.
While we are finding that each system has some market power over most airlines, that finding by itself does not authorize us to regulate system practices under section 411, even if a system's practices impose unduly high costs on participating airlines, as seems to be true with respect to booking fees. As the Justice Department points out, “Supracompetitive fees, even when not used to target specific airlines, are inefficient and harm consumers by artificially raising the cost of air travel.” Justice Department Reply Comments at 3. Nonetheless, a firm's possession of monopoly power in itself is not an antitrust law violation, even though the firm necessarily has the power to charge prices substantially above competitive levels.
America West nonetheless contends that section 411 authorizes us to regulate system practices even if we have no evidence that relationships between one or more airlines and a system will likely cause the system to take action to prejudice airline competition. According to America West, “charging a supracompetitive booking fee is . . . an unfair method of competition in the sale of air transportation.” America West Reply Comments at 16. America West provides no analysis showing how a system would be violating antitrust principles by charging supracompetitive prices. As shown above, the antitrust laws do not bar a firm from charging supracompetitive prices. America West's contention is inconsistent with the Federal Trade Commission's position that it would not consider practices by a monopolist to be unfair methods of competition if they affected a market in which the monopolist did not operate. FTC Reply Comments at 4.
On the ground that the primary purpose of section 411 is allegedly the prevention of consumer deception, Expedia argues that we cannot regulate the systems' practices in order to
When airlines controlled the systems, the systems were likely to engage in conduct that would violate section 411, and seemingly had done so before the Board adopted the initial CRS rules. Without airline control of the systems or other evidence of anti-competitive arrangements between systems and airlines, system practices that affect airline competition are not likely to violate antitrust laws or principles, except for display bias. The record does not indicate that the existing relationships between systems and their former owners, whether based on marketing agreements or otherwise, are likely to cause the systems to take actions that would distort airline competition. The commenters who urged us to readopt most of the rules, including the rule barring the systems from charging discriminatory booking fees, have failed to show that such rules must be adopted to prevent conduct likely to violate section 411.
Our notice of proposed rulemaking proposed an analysis that could enable us to make our rules applicable to the non-airline systems. Including the non-airline systems within the reach of the rules could be justified if the record indicated that systems would take actions intended to benefit the competitive position of some airlines at the expense of disfavored airlines. 67 FR 69387, citing,
We find that the practices regulated by the rules that we are adopting here may violate section 411, because they may unreasonably reduce competition in the airline and airline distribution industries and are analogous to antitrust law violations.
Our decision to readopt the rules against display bias and only a few of the other rules presents two other important legal issues, whether our regulations are consistent with the First Amendment, and whether our decision is consistent with the United States' obligations under its air services agreements with foreign countries that require the United States to prevent certain types of system conduct that would deny foreign airlines fair and nondiscriminatory treatment. We address the First Amendment issues in connection with our discussion of the display bias rules, and we discuss the United States' obligations under the air services agreements in our discussion of the international issues.
Our reexamination of the need for CRS rules in light of the changes in the systems' ownership and the on-going developments in airline distribution has convinced us that most of the rules are no longer necessary. This section states our conclusions on the need for the individual rules on which the notice of proposed rulemaking requested comments. As discussed above, we are willing to adopt rules regulating system practices only if they are reasonably necessary to prevent anti-competitive or deceptive practices that are likely to occur and that market forces are unlikely to remedy, if the rules will also be effective and enforceable.
We will begin our discussion of the major rulemaking issues by discussing the scope of the rules and certain definitional issues, which will be followed by our discussion of the rules that we have decided to readopt, the rules prohibiting display bias and certain contract clauses in the systems' contracts with participating airlines that appear to be anti-competitive. After that we will discuss (i) mandatory participation, (ii) booking fees, (iii) booking and marketing information, (iv) the use of third-party hardware and software by travel agencies and their ability to use one terminal to access several systems and databases, (v) travel agency contracts, (vi) Internet regulation, and (vii) international issues.
In our notice of proposed rulemaking, we proposed to modify the scope of the rules by making them applicable to all systems without regard to any airline ownership or marketing relationships. 67 FR 69382-69383. The existing rules cover systems owned or marketed by airlines that are used by travel agencies to obtain information, make bookings, and issue tickets for passenger air transportation. They do not cover computer systems that do not provide all of these functions, systems that are not owned or marketed by an airline or airline affiliate, and system services that are not used by travel agencies (for example, they do not cover CRSs when used by corporate travel departments). The rules also do not govern the operations of traditional travel agencies or on-line travel agencies. The description of the current rules' applicability is set forth in § 255.2, and the definition of “system” is in § 255.3.
We proposed to make the rules applicable to all systems, whether or not owned or marketed by airlines, but to maintain the systems' exclusion when providing services to users other than travel agencies. 67 FR 69389. The non-airline systems generally argue that there is no reason to regulate their practices due to their lack of airline ownership (and, as discussed above, they argue that section 411 does not authorize us to regulate systems not owned by airlines). Other commenters, notably Amadeus, argue that the rules should cover all systems equally. While no commenters advocate extending the coverage of all rules to the systems when providing services to corporate travel departments and other non-agency users, a few commenters essentially contend that the rules should cover selected CRS practices when corporate travel departments are using a system, because they urge us to regulate access to marketing and booking data and access to corporate discount fares.
We have determined, as discussed above, that the rules should cover non-airline systems. Systems are likely to engage in bias whether or not they are owned or controlled by airlines. We are prohibiting a few specific airline contract practices—mandatory parity clauses and demanding most-favored-nation clauses—because they would
While including non-airline systems within the definition of “system” represents an extension of the current rules, as a practical matter this change will have no immediate impact, because all four of the systems are either owned or marketed by airlines. Applying the rules to all systems will also be equitable, because all competing firms providing essentially the same kind of services will be subject to the same rules.
We recognize that this change in the definition of a system departs from our earlier reasoning on whether the practices of non-airline systems required regulation. In our last rulemaking, however, we were focusing on system practices that were designed to prejudice airline competition, such as the use of architectural bias, and on practices that unreasonably restricted the travel agencies' ability to switch systems or use multiple sources of information and booking channels when competition between the systems represented a form of competition between the airlines owning the systems. At that time, of course, every system was owned and controlled by one or more airlines. In this proceeding we are adopting only rules prohibiting display bias and certain contract clauses that would unreasonably deny airlines the ability to choose how to distribute their services and fares. This change in focus, and the possibility that both non-airline and airline systems will engage in display bias and seek to restrict airline choices on distribution channels, explain our decision to expand the scope of the rules.
As noted, some commenters suggest that the rules should cover some system operations when being used by corporate travel departments. We have decided not to extend the rules to cover the use of the systems by persons other than travel agents. In the past, even when we found that the systems' practices required strict regulation insofar as the systems were providing services to travel agents, we concluded that we did not need to regulate CRS practices when the system was being used by a corporate travel department or someone else besides a travel agent. 57 FR 43794-43795. The record in this proceeding does not show a need to expand the regulation of the systems' practices. Doing so would be inconsistent with our decision that virtually all CRS regulation should be ended.
Furthermore, the proposals for expanding CRS regulation involve areas such as directing certain airlines to make all of their services and fares, such as corporate discount fares, available through all systems and barring airlines from obtaining unrestricted access to the booking and marketing data generated by the systems from bookings made by travel agencies and corporate travel departments.
We proposed to revise the scope of our rules in a second respect, by excluding firms that do not provide airline information and booking capabilities to travel agencies under formal contracts. We expected that Internet-based firms such as Orbitz could enter the CRS business by providing CRS services on a transaction-by-transaction basis. We tentatively found that such Internet-based firms would be likely to offer new competition in the CRS business but not likely to obtain the kind of market power that made CRS rules necessary. We doubted that such firms would present a potential for anti-competitive conduct and deceptive conduct. We expected that travel agencies would use such a service as an alternative to one of the existing systems, either on a transaction-by-transaction basis or under short-term contracts. 67 FR 69389-69390.
Several commenters oppose this proposal on the ground that all systems should be treated the same and that Orbitz in particular should be covered by the rules because, unlike the four existing systems, it is owned and controlled by major U.S. airlines. Some commenters argue that using the existence of a formal contract to distinguish between systems covered by the rules and those not covered by the rules would be irrational.
Orbitz supports the proposal. If a travel agency used a system on a transaction-by-transaction basis, the system would assertedly have no assurance that the travel agency would continue using its services, and thus the system would have no market power. According to Orbitz, that would eliminate any basis for regulation. Orbitz Comments at 41-43.
We have decided not to modify the definition of “system” to exclude firms that do not offer services under a formal contract, as was proposed, or to create a different exception for Internet-based firms that offer services that are comparable to those being offered by the existing systems. Normally all competitors in an industry subject to general regulations should be treated alike, unless there are substantial reasons for a different result.
Moreover, we see a likelihood that any firm providing system services, even on a transaction-by-transaction basis, may engage in the kind of practices prohibited by our rules. Our proposal essentially assumed that travel agents would use an Internet-based system in addition to one of the existing systems, not as a substitute for such a system. The commenters generally agree, however, that the great majority of travel agencies will use a single system, not multiple systems.
The proposed distinction between systems providing services to subscribers under formal contracts and those that do so without formal contracts would likely be difficult to administer. Even a short-term commitment by a travel agency to use a system would arguably constitute a formal commitment. Amadeus Comments at 42. Galileo contends that such a distinction would encourage firms to game the system by developing business relationships that in form
We also do not believe that our decision will deter Orbitz or other firms from entering the CRS industry, assuming that doing so is otherwise an attractive business proposition. The remaining rules will prohibit display bias and certain types of restrictive clauses in airline contracts. Orbitz’ business plan has included commitments to offer unbiased displays, which Orbitz has honored. Office of the Inspector General, U.S. Department of Transportation, “OIG Comments on DOT Study of Air Travel Services” (December 13, 2002), at 7-8. We assume that our individual rules against display bias would not force Orbitz to restructure its displays. We see no evidence that Orbitz has planned to impose parity clauses and similar restrictions on airlines using its services. Orbitz’ most-favored-nation clause is consistent with the limited rule barring systems from demanding access to all publicly-available fares as a condition to any participation in a system, because Orbitz gives airlines a rebate on their booking fees if they agree to the most-favored-nation clause and will sell their services through Orbitz if they do not agree.
One firm, AgentWare, urges us to revise the definition to make sure that it does not inadvertently cover Internet-based software applications such as AgentWare's Travel Console. AgentWare Reply Comments. AgentWare does not explain why our definitions would create a problem, describe in detail how AgentWare provides information and booking services to travel agencies, or propose a change to the rules' definition that would avoid the stated problem. Our review of the description of AgentWare's products set forth on its website suggests that the rules should not apply to AgentWare, which appears to provide a link to other sites where bookings can be made, does not provide a booking function itself, and presumably is not charging airlines any fees.
American Express asks that we be sure to exclude direct connections between travel agencies and airlines and proprietary software used internally by a travel agency. American Express Comments. Our revised definition of “system” expressly does not cover direct connections and would not cover software used by a travel agency.
The rules currently govern the operation of each “system,” defined as a computerized reservations system that, among other things, is offered to subscribers, charges any airline other than its affiliated airlines fees for system services, and provides travel agents with the ability to make reservations and to issue tickets. The rules define “subscriber” as a ticket agent “that holds itself out as a neutral source of information about, or tickets for, the air transportation industry and that uses a system.” Section 255.3.
We proposed to change the definition of “system” and “subscriber” to reflect current industry conditions. Because the airlines are trying to phase out paper tickets, we stated that we planned to eliminate the requirement that a system be able to issue tickets. When we adopted the current rules, we assumed that travel agencies would not choose a system that did not offer a ticketing capability. Since then airlines have developed E-ticketing, and they often discourage passengers from demanding paper tickets (an E-ticket, unlike a paper ticket, is just a printed confirmation of the purchase of air transportation). The ability to issue tickets therefore may no longer be a crucial function needed by travel agencies. 67 FR 69390
Similarly, because many travel agencies have incentive commission arrangements with some airlines that are designed to encourage the travel agency to shift bookings to those airlines, we proposed to eliminate the requirement that a subscriber be impartial. While travel agencies generally offer impartial advice, the existence of preferred supplier relationships between many travel agencies and individual airlines might lead some to question whether the agencies were entirely impartial. We therefore proposed to amend the definition in order to eliminate any possible uncertainty over the rules' applicability. 67 FR 69390.
No one commented on our proposal to change the definition of “system” by deleting the ticket issuance function, and some support the proposed change in the definition of “subscriber.” ASTA Comments at 50; Amadeus Comments at 44.
We will therefore adopt these changes for the reasons stated in our notice of proposed rulemaking. In addition, our decision that most of the rules should not be readopted has made other definitions unnecessary, such as “system owner.” We are not readopting these definitions.
Our rules prohibit systems from biasing their displays in favor of individual airlines but do not prescribe how a system must display airline services. Each system may develop its own criteria for editing and ranking displays of airline services. Section 255.4. The rules define display bias as using carrier identity in selecting flights from the database and ordering the listing of flights in the display. Galileo, for example, may not give United's flights a preference just because they are operated by United. Other provisions additionally limit the potential for bias. One such provision requires each system to apply its editing and ranking criteria consistently to all markets. The system must select connecting points (and double connect points) for constructing connecting flights for each city pair on the basis of criteria that are applied consistently to all airlines and all markets. Participating airlines can designate five points to be used as connecting points in a market. Section 255.4(b)(1), (c).
Each participating airline must ensure that it provides complete and accurate information to each system in a form that will enable the systems to display flights in accordance with our rules on display bias. Section 255.4(f).
The rules do not prohibit systems from selling advertising on their displays.
The current detailed rules on display bias stemmed from findings by us and the Board that rules prohibiting or restricting specific display algorithms were necessary, due to the systems' creation of editing and ranking criteria that, while often ostensibly neutral, in fact gave the services of favored airlines an unwarranted advantage in the system's displays over the services offered by competing airlines.
The rules do not regulate the displays created by travel agencies and thus do not prohibit a travel agency from biasing the displays used by its travel agents. We determined in our last overall
In our notice of proposed rulemaking, we proposed to maintain the existing rules against display bias. We also proposed to bar airlines from inducing, or attempting to induce, a system to create a display that would violate the rules on display bias. 67 FR 69385, 69397, 69428.
We further proposed to modify the rules to address two other display issues. First, we proposed to limit the number of times an airline service could be displayed under different airline codes. 69 FR 69396-69397. Secondly, American had once offered travel agencies software that would enable an agency to create displays that gave American a strong preference. We tentatively determined that the rules should prohibit any airline from offering programs to travel agencies enabling agencies to bias their displays. 67 FR 69397. We did not propose to regulate the displays created by travel agencies. 67 FR 69397-69398.
The commenters disagree over our proposal to readopt the existing rules. Sabre, Delta, and Travelocity argue that no rules on display bias are necessary, and the Competitive Enterprise Institute (“CEI”) argues that any restrictions on system displays would violate the First Amendment. Other commenters assert that rules prohibiting display bias remain necessary.
After considering the comments, we have determined to maintain the existing rules prohibiting the systems from biasing displays for an additional period of six months. We will not adopt our proposals to bar airlines from distributing software that can bias displays and to limit the number of times a single service is displayed under different airline codes.
(b)
No commenter has argued that we must revise the existing rules, should we decide to keep regulations against display bias. The commenters who argue that rules on display bias are unnecessary have not suggested rule revisions that would minimize the regulation of the systems' editing and ranking of airline service options, nor have they shown that the rules impose any significant burden on the systems. We will therefore readopt the existing rules for a period of six months with a sunset date of July 31, 2004. We will actively continue to monitor market conditions. We, of course, retain the ability to propose readoption of rules against display bias if conditions indicate, contrary to our present expectation, that continuation of such rules is warranted.
(c)
No one has objected to this proposal, assuming that we have a basis for regulating display bias at all, so we will adopt it. While we believe that systems are ticket agents and thus subject to section 411, this rule provides an additional basis for enforcing the prohibitions against display bias during the six-month transitional period.
(d)
We believe that our rules against display bias will not violate the First Amendment, as was true when we adopted the existing rules. 57 FR 43792. The Supreme Court has held that government agencies may regulate commercial speech. As the Court has explained, “Commercial speech * * * is ‘linked inextricably’ with the commercial arrangement that it proposes, so the State's interest in regulating the underlying transaction may give it a concomitant interest in the expression itself.”
Furthermore, the First Amendment protects commercial speech that is not misleading. As the Court stated in
However, if displays of airline services of the kind proscribed by our rules were considered protected by the First Amendment, our rules would satisfy the test set forth in
In considering whether our rules on display bias are consistent with the First Amendment, the limited nature of the restrictions imposed by our rules is important. Unlike the typical commercial speech case, our rules do not prohibit the listing of any airline service or fare, nor do they prohibit airlines from advertising their services on CRS screens or elsewhere. Our notice of proposed rulemaking thus stated in the context of proposals to regulate on-line travel agencies that we do not consider banner advertisements to constitute bias. 67 FR 69412. Our rules, moreover, are in large part designed to keep systems from hiding or omitting information, for example, by constructing displays of connecting services that arbitrarily exclude the hubs of disfavored airlines as connecting points. The rules merely require systems to follow certain requirements in listing flights in their displays of airline services rather than prohibit the inclusion of information.
Our rules satisfy the first element of the commercial speech test, because we have a substantial interest in preventing system practices that would mislead consumers and harm airline competition. Congress has given us the responsibility to prevent unfair and deceptive practices and unfair methods of competition in the airline industry. Our readoption of the rules against display is, as shown, consistent with the Justice Department's position that display bias will injure consumers by causing a reduction in airline competition.
Our rules meet the second element of the test, because they directly advance our interest in preventing display bias that would harm competition and mislead consumers. Our rules impose display requirements that experience has shown are necessary to prevent systems from presenting displays that would mislead travel agents and their customers and that would harm airline competition.
Finally, our rules meet the third part of the
(e)
Several commenters urge us to adopt the European rule, which bars a single service from being displayed under more than two codes. Amadeus Comments at 55-56; American Comments at 35; Midwest Comments at 24-25; Air Carrier Ass'n of America Comments at 13. Southwest contends that no service should be listed more than once. Southwest Comments at 10-12. U.S. Airways prefers limiting the display of a domestic service to two codes and an international service to three codes. U.S. Airways Comments at 9-12. Continental argues that each service should be displayed once under each airline code. Continental Comments at 24-25.
During the comment period, we reviewed under 49 U.S.C. 47120 the domestic alliance planned by Delta, Continental, and Northwest. We concluded that the alliance presented significant competitive concerns but that we would not begin a formal investigation of whether the alliance's operations would constitute unfair methods of competition in violation of section 411 if the three airlines agreed to conditions alleviating our concerns. One of the conditions required the three airlines to ask the systems to display their services under no more than two of their three codes while we completed this rulemaking. We developed that condition because we believed that the use of all of the partners' codes on their services could create an unreasonable competitive advantage for the three airlines. 68 FR 10770 (March 6, 2003).
We have decided not to limit the display of code-share flights. While we remain concerned about the potential competitive effects of the multiple display of code-share services, we do not see a compelling reason to regulate the display of code-share services at this time. However, nothing in our rules, or in this discussion, should be read as prohibiting or discouraging systems from limiting the display of code-share
Orbitz suggests that the adoption of the European Union rule by Sabre and Amadeus violates our rule barring systems from discriminating against airlines that sell services under another airline's code, 14 CFR 256.4. Orbitz Reply Comments at 16, n.8. We disagree. The Board adopted that rule because United's system, Apollo, planned to stop displaying flights of airlines that operated entirely under another airline's code, such as the Allegheny Commuter airlines, which had no codes of their own and instead used US Airways' code. Under Apollo's plan, the system would list connecting services only under the code of the airline that operated the flight. 49 FR 9430 (March 13, 1984). In contrast, the practice followed by Sabre and Amadeus does not prevent an airline's code from being used on flights operated by a second airline. Instead, the two systems limit the number of times the code is displayed. We do not think that violates the rule, which prohibits a system from denying access to its system to airlines that share a single code or from discriminating against an airline on the basis of its use of another airline's code.
(f)
We thought that an airline's distribution of software to be used for biasing displays was essentially the same as a system's offering of a biased display. We recognized that travel agencies would decide whether to accept such software, but we anticipated that a travel agency would be under some pressure to accept such software from an airline that was the major airline in the agency's market. We saw no reason for allowing any airline to distribute such software. 67 FR 69397.
We have decided not to adopt a new rule that would prohibit airlines from distributing software that could be used to create biased displays, although we are prohibiting airlines from attempting to induce any system to create biased displays. Travel agencies have to compete against other travel agencies, and their need to satisfy their customers should check their willingness to create biased displays. The airlines' divestiture of their system ownership interests should alleviate any problem that might otherwise exist, because the airline affiliated with the system used by the travel agency would be the airline most able to cause the travel agency to accept biasing software. American, for example, distributed its software to travel agencies using Sabre. Furthermore, a travel agency that is intent on creating a biased display could probably obtain the necessary software from other sources. Delta Reply Comments at 60. Banning airlines from providing biasing software therefore seems unlikely to stop such conduct.
ASTA, moreover, alleges that the proposed rule is unnecessary. “A travel agency would only want to bias a display when it was working with a corporate client that had made an independent preferred fare arrangement with the favored airline. In such cases the agency's efficient servicing of that client will be enhanced if the agency has available to it a display that shows the favored carrier's flight first.” ASTA Comments at 41.
The lack of a rule may lead to some harm. Some travel agencies, despite their need to obtain repeat customers, may bias displays in ways that would cause customers to book flights that do not best meet their needs, and a rule prohibiting airlines from distributing biasing software would help prevent such conduct. The competitive pressures on travel agencies nonetheless should make the adoption of a general prohibition unnecessary. We do not wish to adopt rules that would prevent all potential problems, because doing so would impose a large body of regulation on industry participants and stifle innovation.
As is true on other issues, however, we will monitor the conduct of airlines and travel agencies to see whether the lack of general rules is leading to deceptive or anti-competitive practices that are not being corrected by market forces.
Amadeus argues that a system should also be able to sell software to travel agencies that would allow agencies to create biased displays if they wish. Amadeus Reply Comments at 12. Our proposed rule would have prohibited such conduct. We have decided not to bar systems from selling such software. A travel agency always has the option to decline to use such software and a system, unlike an airline that dominates a region, should have little ability to compel a travel agency into accepting software that the agency prefers not to use. In contrast, we are prohibiting systems from biasing their displays, because then an unbiased display is not available as an option.
(a)
There remains a significant risk that systems may use their market power to compel conduct that would limit the potential for competitive discipline in the CRS business. First, until we prohibited them from doing so, three of the four systems enforced parity clauses against participating airlines. A system's parity clause required each participating airline to buy at least as high a level of service from the system as it did from any other system. To ensure that each airline can choose its participation level in each system, we adopted a rule prohibiting systems from enforcing parity clauses against airlines that do not own or market a competing system, because we found that parity clauses denied airlines the ability to select their participation level (and therefore prevented competition that might otherwise exist). Section 255.6(e), adopted at 62 FR 59784 (November 5,
Secondly, we saw a risk that systems could try to take away the airlines' control over access to their fares, especially webfares, which airlines could otherwise use as leverage to obtain better terms from the systems. Travel agencies wish to be able to find and book webfares through their systems, because doing so is more efficient than using an alternative booking channel. 67 FR 69373, 69381. As discussed above, after we completed our notice of proposed rulemaking, two of the systems—Sabre and Galileo—began offering lower fees to airlines that agreed to make all their webfares available through the system. Sabre's comments on our advance notices of proposed rulemaking, however, indicated that a system might by contract attempt to compel participating airlines to make all fares saleable through the system. Sabre stated that its contracts required participating airlines to make all publicly-available fares saleable through Sabre, although Sabre had not yet required any airline to comply with that provision.
We also proposed to prohibit each system from enforcing clauses that bar airlines from discriminating against travel agencies because they used that system. Sabre had such a clause in its participating airline agreements. We thought that clauses barring discrimination could block airline efforts to persuade travel agencies to use systems that were less expensive for a participating airline. 67 FR 69393.
We believed that these proposals would be consistent with our rule prohibiting parity clauses, § 255.6(e). We did not propose to ban such clauses if they resulted from negotiations between the system and participating airlines. 67 FR 69392-69393.
The Justice Department states that most-favored-nation clauses like those that we proposed to prohibit can be anti-competitive, that the Justice Department supported our proposal to prohibit parity clauses in 1996, and that the Justice Department has filed antitrust enforcement actions against the use of similar clauses in other industries. Justice Department Reply Comments at 25. The clauses “may reinforce CRS market power over airlines, particularly if they discourage the development of alternative distribution channels.” Justice Department Reply Comments at 26. Such clauses can be beneficial, however, and any broad prohibition of most-favored-nation clauses by us would be harmful if it prevented airlines and systems “from freely negotiating mutually acceptable contracts,” especially when systems are willing to offer discounted fees to airlines willing to accept such a clause. Justice Department Reply Comments at 25-26. The Justice Department concludes that we could reasonably decide to prohibit parity clauses and clauses requiring an airline to make all publicly-available fares saleable through a system but that the opposite decision could also be reasonable (the Justice Department seemingly assumed, however, that our proposed rules would prohibit airlines from agreeing to accept parity clauses and clauses requiring them to make all fares available, which was not our intent). The Justice Department recommends against adopting the proposal to prohibit systems from barring airlines from discriminating against their subscribers. Justice Department Reply Comments at 27.
Orbitz and several airlines argue that we should prohibit most-favored-nation clauses like parity clauses and should not allow systems to enforce them against airlines that own or market a competing system. Orbitz Comments at 35-39; Alaska Comments at 8; American Comments at 24-29; Continental Comments at 14-17; Delta Comments at 33-39. Galileo supports the readoption of the existing rule barring parity clauses with the exception allowing a system to enforce such a clause against an airline affiliated with a competing system.
United contends that parity clauses clearly violate the antitrust laws but that enforcement action, not the adoption of a general rule, is the proper way to prevent such anti-competitive conduct. United Reply Comments at 46-54, 75-77.
Several commenters argue that systems should be able to negotiate for parity clauses or most-favored-nation clauses from participating airlines. Amadeus Comments at 46-48; Galileo Comments at 24; Sabre Comments at 133-135; Amadeus Reply Comments at 16; Mercatus Comments at 8.
(b)
These rules will sunset on July 31, 2004. The six-month period, we believe, will furnish the parties with notice of the forthcoming changes and an opportunity to prepare for the absence of these rules. The six-month period will, we believe, allow affected parties to arrange for an orderly transition to complete deregulation of computer reservations systems. We, of course, retain the authority to reexamine these issues at any time if warranted.
We agree with the commenters who contend that a system should be able to negotiate for most-favored-nation clauses from participating airlines. Amadeus thus states, “CRSs and airlines should be free to bargain for [parity clauses] as part of their overall negotiation of fees and terms of participation,” and “CRSs should have the right to bargain with airlines concerning whether an airline must provide to the system fares provided to any other system, or to any online travel site, or to any other distribution channel.” Amadeus Comments at 47. Our rules will not bar systems and airlines from doing so, and will not affect the ability of Sabre and Galileo to continue their existing programs to trade lower fees for access to webfares. Orbitz, of course, has a similar program, which enables airlines to obtain a partial rebate of their booking fees if they agree to make all of their publicly-available fares, including webfares, saleable through Orbitz.
We disagree with United's contention that we should rely on enforcement action rather than rules to prevent
Nonetheless, while we are not barring systems from creating and enforcing bargained-for parity clauses and clauses requiring an airline to provide all publicly-available fares to the system that are saleable through other distribution channels, most-favored-nation clauses can be anti-competitive in some situations, as pointed out by the Justice Department. America West complains that the Galileo and Sabre Momentum and DCA programs will insulate the two systems from competition from alternative distribution channels: “These programs essentially require America West to relinquish control over how and to whom it will distribute its inventory for a minimal discount off of Galileo's and Sabre's booking fees'' and would require America West to “forego any opportunity to encourage the development of alternative distribution channels by providing special fares exclusively through such alternate channels.” America West Reply to Supp. Reply at 3. The systems' market power possibly may enable the CRSs to obtain access to webfares without significant reductions in booking fees. At this time, however, we believe, as does the Justice Department, that systems should be able to negotiate for most-favored-nation clauses, which do offer participating airlines some reductions in booking fees and enable travel agents to obtain more comprehensive information on airline services from their systems.
(c)
The existing rule, as noted, has an exception allowing a system to enforce a parity clause against an airline that owns or markets a competing system. We created that exception because an airline affiliated with one CRS as an owner or marketer might participate in competing systems at a level lower than its level of participation in its own system in order to induce travel agencies in regions where it is the dominant airline to choose its affiliated system rather than a competing system. We therefore allowed a system to enforce parity clauses against airlines that owned or marketed a competing system. A system could not enforce a parity clause, however, until it had given us and the airline 14 days advance notice of its intent to do so. 62 FR 59797-59799.
Keeping such an exception would be inconsistent with our decision that the mandatory participation should not be readopted. An airline that owns or markets a system should have the ability to determine at what level it will participate in any system. In theory, such an airline may choose a lower participation level in some systems in order to give an advantage to the system that it owns or markets, but substantial changes in participation levels do not seem likely. The major network airlines need to be in every significant distribution channel, and most of them have chosen to provide their webfares to Sabre and Galileo rather than reserve them for Orbitz, even though they own Orbitz.
We note that Sabre argues that a rule barring parity clauses (or clauses requiring an airline to make all publicly-available fares saleable through a system), if such clauses are imposed as a condition to any participation in the system, would not violate antitrust principles. Sabre Reply Comments at 58-61. We disagree for the reasons set forth when we adopted the existing rule prohibiting the enforcement of parity clauses. Sabre, however, does not seem to oppose the actual rules we proposed. Sabre states that it seeks “the right to bargain for nondiscrimination.” Sabre Reply Comments at 57-58. We wish to give the systems that opportunity, for the record suggests that the result should be pro-competitive. The existing Sabre and Galileo programs whereby systems agree to charge lower fees in exchange for guaranteed access to all publicly-available fares should benefit all parties to the arrangements and consumers as well.
(d)
Contract clauses that required access to all publicly-available fares as a condition to any participation in a system could frustrate our efforts to allow airlines to create ways of bypassing the systems when doing so is more cost-effective and likely to establish competitive discipline for the systems' prices and terms for participation. As American contends, if we allow systems to demand that an airline provide all of its publicly-available fares as a condition to any participation, “Airlines would lose their most effective tool for creating and encouraging the growth of lower cost distribution channels.” American Comments at 27.
We originally proposed to bar contractual requirements that an airline provide fares that it had chosen not to distribute through travel agencies or any system. 67 FR 69393. On further consideration, we have determined that the proposal was too narrow. As shown, several airlines have agreed with Galileo and Sabre that they will provide all webfares to those systems in exchange for reduced booking fees. The original proposal would allow the other two systems to require those airlines to provide the same fares to them, even if they have offered nothing in exchange for the ability to sell the fares. Our rules should not be used to aid Amadeus and Worldspan in insisting that they be given access to the same fares when they have not offered better terms to participating airlines in exchange for the fares.
We are adopting this rule for six months even though our proposal stemmed from a Sabre contract clause that that system is not now enforcing. We think there is some likelihood that another system would seek to take such
This rule, like the rule barring parity clauses, will not have an exception allowing systems to demand access to all publicly-available fares from airlines that own or market a competing system. All airlines should be able to withhold access to attractive fares from a system unless the system offers acceptable terms for the right to sell the fares.
We recognize that travel agents could operate more efficiently and provide their customers more complete advice if every airline's publicly-available fares were saleable through each of the systems. Nevertheless, allowing systems to compel airlines to provide all such fares without providing any benefits in return would maintain the systems' market power and deny airlines an opportunity to use their control of webfares as a way to obtain lower fees. In addition, as explained below in our discussion of proposals that we require airlines to make all fares available for sale through all distribution channels, such a requirement would be contrary to long-established operating practices. Airlines have long chosen to offer some special fares only through selected distribution channels.
Two airlines—Delta and Northwest—urge us to adopt a broader rule that would prohibit systems from also demanding access to information and benefits such as frequent flyer awards if an airline has chosen not to provide those to the system. Delta Reply Comments at 34-35; Northwest Reply Comments at 11-12. We have no evidence that systems have attempted to compel airlines to provide such information and benefits. A broader rule, therefore, seems unnecessary at this time.
America West seeks a rule prohibiting each system from providing access to any airline's webfares for their subscribers, if the airline has not chosen to distribute the fares through that system. America West Comments at 31, 34-35. This proposal stems from the systems' use of firms like FareChase to search airline websites for better fares not available through the system and to tell the travel agent using the system when such fares are being offered. The travel agent who wishes to book such a fare, however, cannot do so through the system and must instead make the booking through the airline's website (or another site that has obtained access to the fares from the airline). Sabre Reply Comments at 48.
We are unwilling at this point to adopt such a rule. When FareChase searches airline websites for fares, it does not cause airlines to pay additional booking fees to a system. Sabre Reply Comments at 48. It may, however, increase the airline's costs for operating its website and internal reservations system. The record does not provide a basis for a careful analysis of the possible competitive effects of the systems' use of such services. We would need more information and comments from more interested persons before adopting a rule like that requested by America West. Barring systems from obtaining fare information from other sources for their subscribers could also present difficult questions of intellectual property law.
(e)
Several commenters complain that the language was ambiguous and would lead to problems of interpretation.
We continue to believe that an airline should be able to offer better service to the subscribers of one or a few systems without having to offer the same service to the subscribers of every system. An airline's ability to take such action could be used to encourage travel agencies to use the system that offers the airline better terms and lower prices for participation. However, commenters did not express strong support for the rule proposal, and the proposal's qualification that the difference in treatment should be based on lower fees and poorer service could create disputes about whether those conditions were met. Moreover, we think the rules barring systems from demanding access to all fares as a condition to participation will be a more effective and practicable means of providing airlines some additional bargaining power. In addition, no system thus far has enforced such a clause. If a system does so in circumstances suggesting that the system seeks to maintain its market power and deny an airline some bargaining leverage, we will consider taking enforcement action under section 411.
In our last reexamination of the rules, a number of commenters had complained that the systems engaged in architectural bias in an effort to obtain more bookings for their owner airlines. Architectural bias means the creation of system design features and functions in a way that enables travel agents to obtain information and make bookings on the owner airline more reliably and quickly than on other airlines. These features caused travel agents to book the favored airline in cases where another airline provided service that satisfied the customer's needs better. 57 FR 43810-43811. As a result, we adopted several rules designed to equalize the functionality for owner and non-owner airlines. We required systems to give all participating airlines equal access to enhancements and to provide equal treatment on the loading of information, and we prohibited systems from using default features that favored the owner airline. 57 FR 43814-43816. Because these rules had been effective, and because no one complained that they were unduly burdensome or unnecessary, we had proposed to readopt the equal functionality requirements without change. 67 FR 69398. On the other hand, we also proposed to eliminate the rule that essentially requires equal booking fees.
The Justice Department contends that we should eliminate the equal functionality rules, except for a rule requiring equal treatment on the loading of information. The Justice Department reasons that airlines should be able to bargain for special functionality as well
We agree with the position taken by the Justice Department. Maintaining the rules requiring equal functionality would be inconsistent with our decision to end the rule barring discriminatory booking fees. Airlines and systems should be able to bargain over functionality along with fees. Eliminating the rule, moreover, could encourage a system to share in the cost and risk of developing new functions, as the Justice Department points out, Justice Department Reply Comments at 32:
Such freedom might also allow CRSs greater leeway to share with airlines the development cost and risk of new functions. For example, an airline might be made the “launch partner” for a new CRS function and be granted a certain period of exclusivity in exchange for sharing in the development and testing cost for that function.
At the same time, the systems' interest in increasing revenues should encourage them to make new functionality available to all airlines, because doing so would increase their fee revenue. As Delta contends, systems have an interest in selling as much functionality as airlines will buy. Delta Comments at 19.
We will, however, maintain a requirement that each system provide participating airlines equal treatment in the care and timeliness with which information is loaded in the system, as suggested by the Justice Department. We agree with the Justice Department's position that “it is difficult to imagine a legitimate business reason for differential treatment” in the loading of information. Justice Department Reply Comments at 32. This requirement is essentially equivalent to the requirement that displays be unbiased. Any significant disparity in the loading of information would result in displays that did not equally list each airline's most up-to-date services and fares.
Under the current rule, systems must load information from participating airlines with the same care and timeliness as they do for an airline with a system ownership interest. However, because only Amadeus currently has airline owners, the rule does not cover the three systems with the largest market shares in the United States. To make the rule effective, we will revise it to require that systems load information for all airlines with the same care and timeliness. This change should not impose any significant burden on the systems.
Under our mandatory participation rule, section 255.7, an airline that has an ownership interest of five percent or more in a system (a “system owner”) must participate in competing systems at the same level at which it participates in its own system, if the other systems' terms for participation at that level are commercially reasonable, and must provide all systems with the fares that are commonly available to subscribers in its own system. We imposed this requirement because some U.S. airlines with an ownership interest in one system limited their participation in competing systems in order to encourage travel agencies in their hub cities to use their own system. Some airlines also withheld complete information on their fares and services from competing systems. U.S. systems have encountered similar conduct internationally by foreign travel suppliers that own or market a competing system. 56 FR 12608.
As a result of the U.S. airlines' divestitures of their system ownership interests, the only airlines currently subject to the rule are the three foreign airlines that own Amadeus: Lufthansa, Air France, and Iberia.
The commenters on our advance notices of proposed rulemaking disagreed over whether the rule should be kept, strengthened, or eliminated. Several major airlines and Orbitz argued that the rule was counterproductive, because it allegedly enabled systems to dictate terms for airline participation. Some other airlines and systems asserted that the rule should be maintained and extended to airlines that market a system, not just airlines with a significant ownership interest. Several commenters, including some travel agencies, argued that the rule should prohibit each system owner from denying access to its corporate discount fares to travel agencies that do not use its system. They argued that a system's airline owner could effectively compel travel agencies to use its system by denying them access to its corporate discount fares if they used a different system, even though the airline fully complied with the mandatory participation rule.
We proposed to end the mandatory participation requirement because some airlines might then be able to bargain for better terms for participation in return for participating at higher levels. However, we also invited comment on whether the rule should be kept and, if so, whether it should cover airlines that market a system and require owner airlines to make their corporate discount fares saleable through competing systems. 67 FR 69395.
Orbitz, Alaska, American, Delta, and Northwest support the proposed termination of the mandatory participation rule, but Amadeus, Galileo, Southwest, U.S. Airways, and ASTA contend that we should readopt the rule.
We have determined to end the mandatory participation rule as proposed. The rule was adopted, as noted above, when airlines owned each of the systems. The rule was intended to keep airlines that owned a system from using their dominance of regional airline markets to distort competition in the CRS business. Because no system is now owned by U.S. airlines, the rule currently has no practical effect on competition. The rule would have an impact if Orbitz goes ahead with its plans to enter the CRS business, since Orbitz” five airline owners would then become subject to the rule, but Orbitz has said that it will not begin operating as a system if doing so would trigger an obligation to comply with the mandatory participation rule. Transcript at 78-79.
More importantly, the rule limits the ability of owner airlines to bargain for better terms with the systems. If such an airline could credibly threaten to reduce its participation level in a system, it would have some leverage for obtaining lower fees or better service. The rule eliminates that option. As the Justice Department states, if the rule is eliminated, “the airline would therefore be in a better position to negotiate lower booking fees or to drive bookings toward lower-cost outlets.” Justice Department Reply Comments at 23.
We do not expect the rule's termination to cause significant harm to airline competition or consumers. As noted, the rule currently covers only the
We think it unlikely that airlines will make radical changes in their participation levels as a result of the termination of the mandatory participation rule, despite efforts by owner airlines in the past to put competing systems at a disadvantage by lowering their participation level. The revenue needs of the major network airlines, as discussed above, require them to participate in every distribution channel used by a substantial number of potential customers. Transcript at 140. Galileo thus states that the behavior of airlines that are not subject to the rule is generally the same as the behavior of those that are. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 64. The marketing needs of the larger network airlines, moreover, require them to participate at a high level in every system. Amadeus alleges that every major network airline currently participates in each system at the highest level. Amadeus Reply Comments at 24. Several of Orbitz' owner airlines have agreed to make their webfares saleable through Sabre and Galileo, even though doing so reduced one of Orbitz' principal competitive advantages, the superior access that it has had to those fares.
Furthermore, our fundamental goal is the promotion of competition between airlines, which will help consumers, not the promotion of competition between CRSs for travel agency subscribers. 67 FR 69394-69395. Due to the ownership changes and technological changes in the CRS business, competition between the systems is no longer a direct form of airline competition. 67 FR 69406. The mandatory participation rule, designed to promote competition in the CRS business, has thus lost its importance for strengthening airline competition.
In that regard, the record does not show that ending the mandatory participation rule will reduce airline competition. Galileo and US Airways predict that an airline affiliated with one system that dominates a regional airline market (Delta in Atlanta, for example) will lower its participation level in other systems so that its affiliated system will dominate the CRS business in that area. Other airlines serving that area will then be subject to the additional market power thereby obtained by that system. Galileo Comments at 16-18; US Airways Comments at 18-19. This theory assumes that Delta could actually lower its participation level substantially in other systems. Delta contends that it could not take such action. Delta Reply Comments at 39. Delta is probably correct. The competing systems will be the major systems in other areas served by Delta flights. Because lowering its participation level in those systems would cost the airline bookings in those areas, the airline is unlikely to drastically reduce its participation levels in competing systems.
We recognize that maintaining the mandatory participation rule could make fare information more widely available, if some U.S. airlines again became system owners.
Finally, making the mandatory participation rule effective would require expanding it to require each owner airline to provide every system with access to its corporate discount fares. Galileo Comments at 21-22. The current rules arguably do not require airlines to make those fares available to rival systems, yet experience has shown that an airline can effectively compel a travel agency operating in geographic areas dominated by that airline to choose the airline's affiliated system by allowing the agency to sell the airline's corporate discount fares only if it uses that system.
We are unwilling to engage in such additional regulation. The mandatory participation rule, if maintained, would unreasonably limit airline opportunities to bargain for better terms for system participation, and the rule, as shown, no longer appears to be necessary to promote airline competition.
(a)
When we last reexamined the rules, we maintained the prohibition against discriminatory booking fees and declined to adopt any rule that would directly limit fee levels, for example, by requiring fees to be reasonable or cost-based. 57 FR 43816-43818. At that time, of course, one or more airlines controlled each system and would have an incentive to charge competing airlines unreasonably high fees.
In their comments on the advance notices of proposed rulemaking, a number of airlines complained that booking fees are too high and that the systems also charge fees for transactions that are allegedly illegitimate and of no value to airlines.
Rather than continue to regulate fees, we proposed to eliminate the rule prohibiting unjustly discriminatory fees (and the mandatory participation rule) on the basis that doing so could give some airlines bargaining leverage against the systems. As we noted, in most unregulated industries a firm is free to demand better terms from its suppliers, even if its competitors cannot
We also invited commenters to address a zero fee rule, which would bar systems from charging airlines fees for participation. As shown, the systems compete for travel agency subscribers but not airline participants. Because travel agencies can choose between systems, the systems compete on price. A zero fee rule thus would cause the entire price for CRS services to be set by competitive market forces, although a major beneficiary of the CRS services would not be charged. We pointed out that such a rule could be disruptive, because the systems were obtaining the great majority of their revenues from airlines, not from travel agencies, and that it would enable airlines to obtain CRS services without payment. 67 FR 69399.
Amadeus, Galileo, America West, Midwest, and U.S. Airways oppose the proposal to eliminate the bar against discriminatory booking fees. Orbitz and its owner airlines support the proposal, as do several foreign airlines. Ass'n of Asia Pacific Airlines Comments at 6; British Airways Comments at 8; Lufthansa Comments at 3; Qantas Comments at 1. The Justice Department supports the proposed elimination of the rule. The Justice Department additionally suggests that the zero fee could be beneficial but is not recommending the adoption of any booking fee rule now. Justice Department Reply Comments at 3, 32-34. American, America West, and U.S. Airways urge us to adopt a zero fee rule.
(b)
Because no system is now controlled by U.S. airlines, a system's decision to charge one airline lower fees than another airline cannot fairly be characterized as discrimination. The differences between the fees charged one airline and those charged other airlines should not be viewed as discriminatory. A more accurate term would be differential pricing, for firms in other industries commonly charge different customers different prices. Any difference in prices will reflect market forces, not a seller's decision to arbitrarily discriminate against some buyers in favor of others.
Eliminating the rule barring differential booking fees should enable some airlines to bargain for lower fees. Though most airlines must participate in each system in order to make their services readily saleable by the travel agents using that system, each system has an incentive to obtain the participation of all important airlines, because travel agencies will be less inclined to use that system if those airlines participate only in the system's competitors. Furthermore, an airline's level of participation is important to travel agencies, because a travel agency can make bookings more reliably and quickly on airlines that participate at a higher level, and can use other service features that are important to agency customers. 62 FR 59793. We recognize, in view of our findings that each system has market power, that even the largest airlines may have little leverage to obtain lower fees despite the elimination of the rule. Nonetheless, eliminating the rule may provide some benefits.
On the other hand, the systems' ability to charge different airlines different fees should not significantly harm competition or consumers. We understand that airlines will not have an equal ability to bargain for lower fees. The Justice Department thus states, “[R]emoving the prohibition against discriminatory booking fees would inevitably result in carriers with less bargaining power having higher CRS costs than others.” Justice Department Reply Comments at 33. As we stated in our notice, “In most unregulated industries a firm is free to demand better terms from its suppliers, even if its competitors cannot successfully obtain the same terms.” 67 FR 69399. Differential pricing is widespread in other industries, including industries supplying other products and services to the airline industry, such as aircraft manufacturers. United Reply Comments at 40-41.
We disagree, moreover, with the commenters who argue that only the large airlines will benefit from the elimination of the prohibition against differential fees.
We doubt that the resulting differences in fees paid by different airlines will be substantial. Galileo states that the fees charged other travel suppliers do not vary by much. Transcript at 60. Although airlines are more dependent on the systems than are other travel suppliers, and although travel agents rely on the systems more for airline bookings than they do for other travel bookings, any differences in fee levels between airlines seem unlikely to be very large. We do not expect the systems' fee practices to duplicate those followed before the Board adopted the original rules. At that time there were substantial differences between the fees charged favored airlines and those charged disfavored airlines. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 60. Each system then was owned by one U.S. airline and had incentives to charge its owner's competitors unusually high fees in order to prejudice their ability to compete. Systems without U.S. airline owners should not have similar incentives. Sabre Comments, Salop & Woodbury Declaration at 26-30 and McAfee & Hendricks Declaration at 53-59.
We have determined not to readopt the rule barring differential booking fees on economic policy grounds. However, our authority to prohibit unfair methods of competition would not authorize us to readopt the rule, given the factual information and policy arguments in the record. Firms in other industries are not required to charge all customers the same price, and, as the Justice Department points out, a firm's offering of preferential terms to selected customers is not necessarily anti-competitive. Justice Department Reply Comments at 33, 34, n.39. The systems neither are owned by U.S. airlines nor compete in the airline business. The record does not show a likelihood that systems would charge some airlines discriminatorily high fees in order to prejudice airline competition. These circumstances would not support a finding that a system's willingness to give some airlines, but not others, lower fees is an unfair method of competition in violation of section 411.
While a number of foreign airlines supported the proposed elimination of the rule barring differential booking fees, a few opposed it, in part on the ground that the rule is required by the United States' commitment in bilateral air services agreements to prevent systems from treating foreign airlines discriminatorily. Air France Comments at 6. This issue is discussed below in the section on international issues.
Because we are ending the rule prohibiting differential pricing, we are not readopting the requirement that a system treat all non-paying airlines the same, § 255.11(a). When the rules do not require equal treatment for airlines paying booking fees, there is no reason to require equal treatment for airlines that do not pay booking fees.
We will not adopt a zero fee rule. As discussed in our notice of proposed rulemaking, adopting a zero fee rule would present serious practical difficulties. The only commenters now supporting a zero fee rule—American, America West, and U.S. Airways—have not convinced us that these difficulties are negligible. A zero fee rule would enable airlines to get system services for free, which would encourage all airlines to choose the highest level of participation. That would discourage systems from improving the services offered participating airlines. Sabre Reply Comments, Salop & Woodbury Declaration at 28; Worldspan Reply Comments at 22-23. A zero fee rule would also worsen the travel agency industry's financial position, because the systems would be forced to obtain all of their revenues from travel agencies. ASTA Reply Comments at 15-16. American and America West suggest that the impact on travel agencies can be adequately mitigated by phasing in the zero fee rule. America West Comments at 21; American Comments at 23-24. We disagree. A zero fee rule, even if phased in, would still shift a substantial cost burden unto travel agencies.
In addition, American, America West, and U.S. Airways essentially argue that a zero fee rule would create a more rational result in terms of economic efficiency: the systems' fees would be disciplined by market forces if the systems could impose fees only on the users who can choose between systems. America West Comments at 16-21; American Comments at 20-24; U.S. Airways Reply Comments at 7-8. Even if this economic efficiency argument is valid, we have no authority under section 411 to regulate business practices to create a more competitive or efficient industry, if the practices at issue do not violate the antitrust laws or antitrust principles.
A few commenters ask us to take action on one other issue, the systems' charging of booking fees for passive bookings.
The comments suggest that the systems have either stopped charging fees for passive bookings or taken other steps that have substantially cut the number of passive bookings. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 77-78; Sabre Comments at 111, 149; ASTA Comments at 33. Sabre represents that only seven percent of its total bookings consist of passive bookings. Sabre Comments at 149. Although America West contends that the rules should bar the imposition of fees for passive bookings, America West also states that passive bookings constituted 1.4 percent of its booking fee liability in 2002. America West Comments at 10. The airlines supporting restrictions on fees for passive bookings have not shown that the fees charged for passive bookings are so serious a problem that a rule is necessary. ASTA alleges that airlines take disciplinary action against travel agents who make abusive bookings through the passive booking function or otherwise. ASTA Comments at 33. Furthermore, as we noted in the notice of proposed rulemaking, limiting the systems' fees for passive bookings is unlikely to reduce a participating airline's total CRS costs. America West has conceded as much. America West Comments at 10.
Our rules require the systems to provide booking fee bills in sufficient detail so that participating airlines can audit the accuracy of the systems' charges. We adopted this rule largely to keep systems from evading the prohibition against discriminatory booking fees by imposing false charges on disfavored airlines. We stated, “The rule requiring [systems] to provide enough information to allow the auditing of bills for fees is accordingly essential to maintain the rule banning discriminatory booking fees.” 57 FR 43819.
We initially proposed to readopt this rule. 67 FR 69401. However, our decision to eliminate the predicate for the rule—the prohibition against discriminatory booking fees—removes the rationale for continuing to prescribe requirements for booking fee bills.
We assume that the systems may stop providing airlines with information that would enable them to audit the accuracy of their booking fee bills. However, as discussed above in connection with other rule proposals, section 411 does not allow us to regulate system practices in order to improve efficiency or prevent unattractive behavior. We cannot readopt this rule under section 411 unless we find that it is necessary to prevent unfair methods of competition. A firm's refusal to provide adequate billing data would not normally be an unfair method of competition. We adopted the billing data requirement when airlines controlled the systems and would engage in practices that would prejudice competing airlines. Because the systems no longer are owned by U.S. airlines, we see no basis at this time for a finding that a system's refusal to provide enough information backing up its bills would be an unfair method of competition.
The current rules have two other provisions governing contracts between systems and participating airlines that we are not readopting. Section 255.6(b) prohibits systems from conditioning participation on the purchase or sale of other goods and services, a provision adopted by the Board due to efforts by some systems to impose additional costs on airlines competing with a system's owner airline. 49 FR 32554-32555. Section 255.6(c) states that a system may condition participation in its system in the United States on the airline's agreement to participate in that system or affiliated systems in other
In keeping with our overall decision against readopting most of the existing rules, we will not readopt these rules. The rule barring the tying of system participation with the purchase of other goods and services should be unnecessary if no system is owned or controlled by a U.S. airline. In addition, readopting the rule would be inconsistent with our decision that we should end the prohibition against differential booking fees. When we are not requiring systems to charge equal fees, we should not tell them what other conditions may be required for participation unless, as is true of parity clauses and clauses requiring access to all publicly-available fares, the condition would entrench the systems' existing market power over airlines.
For similar reasons, we are not maintaining the rule limiting the systems' ability to require worldwide participation. It is not clear to us on the basis of this record that this practice would be comparable to unlawful tying under the antitrust laws.
However, if demands by a system that participating airlines purchase unrelated goods and services as a condition to participation or that they participate on a worldwide basis are likely to reduce competition in the airline or airline distribution businesses, we can take appropriate action under section 411 to block the system from enforcing such demands.
(a)
Section 255.10 of our rules requires each system to make available to all participating airlines the marketing and booking data that it chooses to generate from bookings made by system users. The rule does not restrict the systems' prices for the data. 57 FR 43820-43821.
While the rule does not require a system to generate any data, the systems have found it profitable to sell data to airlines (the usual term for the data is MIDT data) (for a description of the data sold by one system, see Amadeus Comments at 62-64). Initially almost all of the airlines purchasing the data were large airlines. In recent years, the systems have created smaller sets of data that would be attractive to smaller airlines. 67 FR 69402; Transcript at 176; United Reply Comments at 87. The information sold by the systems does not include fare amounts or information identifying individual passengers. Justice Department Reply Comments at 35, n.40; Transcript at 175-176; Amadeus Reply Comments at 47.
The rule also does not bar systems from providing data to anyone outside the airline industry. The rule blocks systems from providing data to any foreign airline that owns or controls a system in a foreign country, if that system does not provide comparable data to U.S. airlines. The rule further prohibits airlines receiving data derived from international bookings from giving anyone access to the data, except to the extent that an airline uses an outside firm to process the data, unless the system provides access to other persons.
(b)
Although we recognized the data's legitimate pro-competitive uses, our concern that the data could be used in anti-competitive ways led us to propose restrictions on airline access to the data in our notice of proposed rulemaking. The possible restrictions included the denial of access to the data on any airline's bookings if that airline objected to the disclosure of that information to any other airline or the denial of access to data showing the bookings made by any individual travel agency. Because airlines had legitimate uses for the data, we stated that any restrictions on access should be as few as possible to avoid interference with the data's legitimate uses. We noted, moreover, that any restrictions on access arguably should be limited to data on domestic travel. The complaints about the alleged misuse of the data all involved domestic markets. In addition, while airlines could obtain comparable data on domestic markets from other sources, comparable data appeared to be unavailable for bookings for international travel. 67 FR 69401-69404.
Our proposed rule would govern only the data derived from bookings made by travel agencies. We did not propose to regulate the availability of data derived from bookings made by corporate travel departments (or anyone else using a system to book airline travel).
America West, Southwest, the Air Carrier Association of America (a low-fare airline trade association), and some travel agencies support the proposed restrictions. The larger U.S. network airlines, the systems, firms processing the data for airlines that buy the data (DOB Systems and Shepherd Systems), and a number of foreign airlines (Lufthansa, Qantas, and Virgin Atlantic, for example) oppose the proposals. Several travel agency commenters favor restrictions on access to the data. ASTA Comments at 40-41 (each travel agency should be able to block access to data on its bookings); Carlson Wagonlit Comments at 12-15; Large Agency Coalition Comments at 36. NBTA alleges that the airlines' access to the data makes it harder for corporations to negotiate more favorable air transportation contracts. NBTA Comments at 21. The Justice Department opposes the proposals, because the record does not show that access to the data is causing significant competitive harm and because the proposed restrictions would interfere with the data's pro-competitive uses. Justice Department Reply Comments at 34-36.
The commenters disagree over whether comparable data are now available from other sources, or soon would be. Some commenters claim that equivalent data will become available. Amadeus Comments at 66, 73; Shepherd Systems Comments at 10-11. Other commenters argue that the type of data provided by the systems is not available from other sources. Delta Comments at 24; United Comments at 35-36.
(c)
We remain concerned over the possible misuse of the data. However, the record does not adequately demonstrate that the data's availability causes competitive harm that would justify the adoption of the proposed restrictions. The airlines obtaining the data have legitimate uses for the information.
Adopting a rule restricting access to information that is currently available would require substantial evidence in the record that airlines have used the data in ways that have significantly harmed airline competition. The record does not contain such evidence, although several commenters have stated that large airlines do use the data to compel travel agencies to stop buying tickets for their customers on competing airlines, or that the data could be used for that purpose. Transcript at 216-217; America West Comments at 29; Carlson Wagonlit Comments at 14. The use of the data to compel travel agencies to stop selling tickets on rival airlines may constitute an unfair method of competition. However, no airline has submitted evidence showing that it has lost a significant amount of bookings from travel agencies who had been subjected to pressure from large airlines, nor has any commenter estimated how widespread or frequent are the alleged anti-competitive practices. We could not adopt a rule that effectively reduced the data's benefits without detailed evidence showing significant harm to competition.
We recognize that such evidence may be hard to obtain, because travel agencies will be reluctant to complain about alleged mistreatment by an airline due to the airline's ability to retaliate. Transcript at 216-217; ASTA Reply Comments at 20-21. However, none of the low-fare airlines provided an estimate on the basis of its own experience how many travel agencies were coerced into ending their bookings with that airline, and that the data purchased from the systems were the source of the airline's information on the travel agency bookings. We note as well that American has flatly denied that it used the data to deter travel agencies in the Dallas area from booking Legend, a new entrant airline operating from Dallas' Love Field. American Comments at 46. That denial contradicts the statements made by Legend to Department staff members that were summarized in the notice of proposed rulemaking.
In addition, any harm resulting from the continued sale of the data should diminish. The airlines most interested in limiting access to the data, the low-fare airlines, are shifting their bookings away from the travel agency distribution channel. The low-fare airlines have operated much more profitably in recent years than the network airlines, who wish to continue buying the data. The low-fare airlines arguably would be more successful if the availability of the data has caused them substantial competitive harm, but their relative success despite the network airlines' access to the data is a further reason why the record does not convincingly show that the proposed rules are necessary.
On the other hand, the commenters opposing restrictions on the data allege that the data provide invaluable information used for a variety of pro-competitive purposes. A number of smaller airlines buy the data, as do foreign airlines serving the United States.
A restriction barring the release of data on bookings by individual travel agencies could undermine the value of the data for overall market planning and research. While airlines could still obtain aggregate data from each system for local and regional markets, the systems do not use the same geographic areas in their sorting of the data. The data from the four systems could not practicably be combined for any local market due to the lack of common market definitions. Shepherd Systems Comments at 11-12. Some airlines allege that they would no longer buy the data tapes if we adopted our proposed restrictions. Lufthansa Comments at 6, 8; Qantas Comments at 2.
Denying access to data on bookings by individual travel agencies would make the data useless for monitoring the performance of individual travel agencies under the airlines' incentive commission agreements, which enable travel agencies to obtain larger commission payments from an airline as it obtains a larger share of the agency's business. The major airlines' use of override commissions has raised competitive concerns, but we have not previously found that such incentive commissions are unlawful. 67 FR 69404. Without such a finding, we could not easily block airlines from obtaining the data needed to measure the performance of those travel agencies that have incentive commission agreements. ASTA Comments at 40.
Restricting access to the data would impose other costs as well. Obviously the firms that process the data for airlines would lose a substantial amount of business. Shepherd Systems Comments at 12; DOB Systems
Some commenters argue that the data tapes are unnecessary, because any airline can assertedly see market trends and the effectiveness of its sales efforts from data on its own bookings. Air Carrier Ass'n Reply Comments at 9-10. Although we tentatively believed that airlines did not need to see data on the success of their competitors' marketing efforts, 67 FR 69403, the comments have persuaded us that an airline reasonably needs to see data on the entire market in order to assess the effectiveness of its own marketing efforts. Data on an airline's own sales will not show overall market trends or enable an airline to compare the effectiveness of its marketing efforts with those of other airlines.
Some commenters charge that airlines use the data at times to “poach” customers from other airlines. Transcript at 237-238; ASTA Reply Comments at 20-21. The data, however, contain no information identifying individual passengers. An airline can often identify a corporate customer from the data, because corporations frequently have an on-site travel agency location. Transcript at 238. In any event, while poaching may be unethical, it may benefit travelers, because the poacher presumably has to offer more attractive terms to the travelers or their travel agencies in order to get them to switch. Transcript at 237.
We have also decided to eliminate the existing rule, which requires systems to make any data generated from subscriber bookings available to all participating airlines. The systems appear to be eager sellers of data. Because no system is currently owned or controlled by U.S. airlines, the systems should have no incentive to refuse to sell the data to any airline willing to buy the data. The systems should have incentives to sell as much data as airlines will buy. Delta Comments at 20. The rule thus is no longer necessary.
Eliminating the existing rule will also eliminate the restrictions on providing any data to a foreign airline that owns or controls a system in a foreign country that does not make comparable data available to U.S. airlines, section 255.10(b). We are not readopting these restrictions. The U.S. airlines that provide the most international service have not specifically asked us to maintain this restriction, and one of them, United, has argued that we should eliminate all of the CRS rules. The statutes administered by us, however, give us the authority to take countermeasures when a foreign airline engages in discriminatory conduct that injures U.S. airlines. 49 U.S.C. 41310. The termination of the rule will not affect our authority and willingness to take steps necessary to end discriminatory conduct by foreign firms.
In an effort to give travel agencies a greater ability to access multiple sources of airline information and booking channels, in our last overall reexamination of the CRS rules, we adopted rules allowing travel agencies to use their own hardware and software in conjunction with a system and to access any database with airline information or booking facility for airline services from that equipment. If the travel agency instead obtains its equipment from the system, the rule allows the system to determine whether the subscriber may access other databases or booking channels from that equipment. 57 FR 43796-43800.
We adopted these rules because the systems then barred their subscribers in the United States from using their own equipment and from accessing any other database or system from the equipment provided by the system. While travel agencies could obtain additional equipment from another source if they wished to access alternative electronic sources of information and booking capabilities, doing that would be inefficient. In adopting the rules, we reasoned that the travel agents' ability to access different systems and databases efficiently could enable airlines to obtain bookings from travel agents that would bypass the systems, which would place some market pressure on the systems' terms and prices for airline participation.
Experience has shown that these rules in recent years have been effective in important respects. 67 FR 69391. Many travel agencies have been acquiring their own equipment, and subscribers are using their equipment, whether or not owned by a system, to access the Internet and other booking channels, as discussed above in our review of current industry conditions. However, travel agents are not making a significant share of their airline bookings through the Internet or other channels outside the travel agency's primary system. As discussed above, the commenters in this proceeding generally agree that travel agencies will rarely be willing to make airline bookings outside their primary system due to the inefficiency of doing so, even when travel agents can access the Internet from the same equipment used to access their primary system.
In our notice of proposed rulemaking, we proposed to readopt the rule and to strengthen it by eliminating a system's ability to keep subscribers from using system-owned equipment to access other systems and databases. 67 FR 69391. We also invited comment on whether we should adopt a rule preventing systems from discriminating against subscribers who used a back-office system in conjunction with bookings made outside a system and from charging discriminatorily high fees to subscribers who bought their own equipment. 67 FR 69392.
We have decided, in line with our overall approach in this proceeding, not to readopt the rule. We recognize that the rule has had pro-competitive effects and that any restrictions on a subscriber's acquisition of third-party hardware and software or on a subscriber's use of any equipment to access other systems or databases or booking channels would likely present competitive concerns. However, market developments have made the rule unnecessary.
ASTA states that it knows of no evidence that systems now discourage travel agencies from getting their own equipment. ASTA Comments at 14-15. Sabre represents that it is withdrawing from the equipment-leasing business and that most Sabre subscribers have their own equipment. Sabre Comments at 19-20, 131. Amadeus similarly states that most of its subscribers own their own equipment, and it alleges that it does not restrict its subscribers from accessing other databases and booking channels when they use equipment provided by Amadeus. Amadeus Comments at 45. Notwithstanding these statements from Sabre and Amadeus, most travel agencies continue to use equipment provided by a system. Orbitz Comments at 56. However, the record does not indicate that systems in recent years have been placing roadblocks in the way of subscriber efforts to use alternative booking channels. Even if Galileo and Worldspan subscribers have had less success in using third-party equipment (or in accessing other databases and booking channels), a travel agency that wants more flexibility in these areas should be able to obtain it by switching to Sabre or Amadeus.
Furthermore, as discussed above, the systems' subscriber contracts are giving travel agencies increasingly more flexibility. Recent experience indicates
We are basing our decision to sunset the rules on third-party hardware and software on our expectation that doing so will not lead to anti-competitive behavior. Any unreasonable efforts by a system to restrict a subscriber's use of other systems or databases would presumably constitute an unfair method of competition. In any such cases we will consider taking appropriate enforcement action. We have full authority to prohibit systems (and airlines and travel agencies) from engaging in conduct that would violate section 411 even if we have no rule prohibiting that conduct.
(a)
We regulated the systems' subscriber contracts, because practices that limit competition between the systems were likely to impair airline competition. An airline would be handicapped in entering new markets if its affiliated system could not obtain travel agency customers in the region. Furthermore, system contracts that restrict competition between systems (or keep travel agents from using alternative systems and booking channels) would entrench the systems' existing market power and keep airlines from finding alternative ways of conducting the functions provided by the systems. 57 FR 43823-43824. In addition, an airline that used its dominance of a region to obtain more subscribers to its system thereby would increase its dominance of the regional airline market. Justice Department Reply Comments at 9.
We have stated, however, that effective regulation would be difficult, and some restrictions on the relationships between a travel agency and a system or its airline owners might well be unenforceable or be evaded by the system.
Our notice of proposed rulemaking proposed to readopt the existing rules on subscriber contracts and to make them stricter, although we recognized that the systems competed vigorously for travel agency subscribers. We requested comments on whether we should shorten the maximum permissible length of subscriber contracts, for example, by adopting the European Union rule which allows a subscriber to cancel its CRS contract on three months notice after the contract has been in force for one year. We asked whether we should restrict the types of damages obtainable by a system from a subscriber who cancels a contract before the end of the contract term and whether we should prohibit airlines from tying access to an airline's marketing benefits with the agency's use of the airline's affiliated system. We additionally invited comment on whether we should bar systems from demanding a new contract if they provided additional equipment to a subscriber during the term of an existing contract. And we proposed to restrict productivity pricing, a form of incentive pricing that appeared to encourage subscribers to use the system for all or almost all of their bookings. 67 FR 69406-69410.
We made these proposals because the record in this proceeding then suggested that the systems were effectively using these kinds of contract provisions to keep subscribers from using alternative booking channels. 67 FR 69405. However, our notice specifically requested more detailed information on the current relationships between travel agencies and the systems and on the systems' business practices. 67 FR 69406. We further noted that the U.S. airlines' divestiture of most of their system ownership interests was eliminating one of the bases for the regulation of subscriber contracts, the interest of an owner airline in obtaining subscribers for its system in cities that it planned to enter. 67 FR 69406. As we pointed out, “[T]he systems compete vigorously for travel agency subscribers” and “the systems’ competition for travel agency customers usually disciplines the price and quality of services offered travel agencies.” 67 FR 69405.
The Justice Department recommends that we eliminate the rules on subscriber contracts. It contends that the travel agencies' unwillingness to use multiple systems means that any rules designed to encourage them to do so will be ineffective. The systems compete for travel agency subscribers, and “behavioral rules that regulate the terms of CRS-subscriber contracts may be unnecessary because competition among CRSs for subscribers is apparently eliminating contracts that limit subscriber options.” The existing rules also present significant enforcement problems. Justice Department Reply Comments at 28-29.
The travel agency commenters strongly oppose restrictions on the systems' incentive payments, which assertedly are essential for the survival of many agencies, although some support restrictions on the systems' ability to enforce the penalty provisions in their productivity pricing arrangements.
Orbitz and several airlines argue that tougher rules are necessary, because the systems' existing contracts unreasonably keep travel agencies from switching systems.
Galileo supports the continuation of the existing rules, while Amadeus suggests that additional rules should be adopted.
(b)
The comments show that the nature of subscriber contracts has changed substantially in the last few years, as discussed above in our description of the travel agency business. As stated there, the systems no longer obtain contracts that will keep travel agencies from using other electronic channels for obtaining information and making bookings. Large Agency Coalition Comments at 7. A declining portion of subscriber contracts contain productivity pricing provisions, current productivity pricing provisions allow travel agencies to obtain bonuses (or avoid penalties) despite booking airline tickets outside the system, and the length of the term of the typical subscriber contract has shrunk dramatically. The agencies' ability to obtain more flexible contracts is consistent with our finding that the systems compete aggressively for travel agency subscribers. A system that does not satisfy travel agency demands for greater flexibility will lose subscribers. Given industry trends, we assume that future subscriber contracts will provide travel agencies with even greater flexibility. Transcript at 232.
While the systems have always competed for subscribers, in earlier years that competition did not keep them from obtaining contract clauses that effectively deterred travel agencies from using multiple systems or booking channels and from switching systems. For example, 12 years ago Worldspan alleged that it abandoned its efforts to obtain more subscribers by offering less restrictive contracts, because doing so was not increasing its subscriber base. 57 FR 43824. Moreover, while our 1992 rules required systems to offer travel agencies a three-year contract in addition to a five-year contract, for some years the systems were able to obtain five-year contracts from most of their subscribers. 67 FR 69405. In contrast, the record shows that the average contract term now is three years. Sabre Comments at 17-18. Similarly, while the great majority of subscriber contracts once contained productivity pricing provisions that effectively discouraged travel agents from using alternative booking channels for any significant share of their sales, the record does not indicate that this is the case now.
The record does not show that we should adopt a rule requiring systems to provide new equipment to a subscriber during the term of a contract without requiring a new long-term contract for the added equipment. ASTA states that it considers it unlikely that a system “will refuse equipment additions late in a contract term or gouge the agency on price,” because doing so “could persuade the agency to buy its own equipment or even to switch vendors altogether.” ASTA Comments at 32. While ASTA nonetheless suggests that we should bar systems from requiring a new contract for the added equipment, we think that the systems and subscribers should negotiate their own arrangements. As ASTA alleges, travel agencies have some leverage with systems on this issue. If we restricted the systems' contractual flexibility by regulation, moreover, that might discourage them from agreeing to provide any new equipment. 57 FR 43825-43826.
We see no reason to adopt stronger rules, or keep the existing rules, when market forces are enabling travel agencies to obtain less restrictive contracts and when the systems' contracts do not appear to impose unreasonable restraints on the subscribers' ability to switch systems or use several electronic information sources and booking channels in addition to their primary system.
The systems' current contract practices, moreover, are not necessarily unreasonable. Long-term contracts, for example, offer significant efficiency advantages, as we pointed out in our notice of proposed rulemaking. Long-term contracts reduce the parties' negotiating expenses. Sabre Comments at 153-154. Although Amadeus favors the European rule, which allows travel agencies to cancel contracts on short notice after the first year of a subscriber contract, Amadeus admits that the European rule could lead to somewhat higher transaction costs. Amadeus Reply Comments at 64. One travel agency argues that a five-year term is the best term for a subscriber contract. Travel Management Alliance Comments. Some travel agencies, moreover, would like the opportunity to obtain contracts with terms longer than allowed by our current rules. Transcript at 241-242; AAA Comments at 2.
Similarly, contracts offering customers incentives to rely on a supplier for a greater share of its goods or services are also not unreasonable. Many airlines, after all, offer travel agencies override commission programs that enable travel agencies to obtain larger commissions from an airline if they book a larger share of their business with the airline. Amadeus Comments at 86. Also, virtually every airline has a frequent flyer program that rewards passengers for traveling more with that airline.
In addition, we have recognized that systems should be able to obtain damages for breach when a subscriber cancels its contract before the end of the term without cause. 57 FR 43827.
We do not view the systems' use of productivity pricing as a strategy created to maintain their market power over airlines, but as a response to their competitive struggle for subscribers and each travel agency's knowledge that its choice of one system rather than the others will enable the winning system to obtain a stream of booking fees from airlines.
Subscriber contract terms that give a system some assurance that its subscribers will continue using its services also give the systems “incentives to make investments that enhance their value to travel agencies, including increased automation, customized features and other functionality enhancements, and the provision or upgrade of equipment.” Justice Department Reply Comments at 28. Sabre concedes that it has contracts with small travel agency subscribers that deny those subscribers incentive payments if they make bookings through another system, but these provisions are allegedly reasonable because Sabre provides substantial support for such an agency, the cost of which is offset by the booking fees obtained by Sabre if they continue using Sabre for their bookings. These subscribers account for a small part of Sabre's total subscriber base.
In any event, insofar as the rules are intended to allow travel agencies to use multiple systems, the rules will not work. Travel agencies will rarely use more than one system because doing so is inefficient, as discussed above. If the systems' productivity pricing programs provide a disincentive to use alternative booking channels, airlines can offer incentive payments of their own that could encourage travel agents to make bookings directly with an airline. Galileo Comments, Guerin-Calvert, Jernigan & Hurdle Declaration at 81.
Efforts to regulate travel agency contracts also present a practical problem, the difficulty of obtaining effective compliance (in contrast, the rules on display bias, equal functionality, and non-discriminatory booking fees have been effective and complied with). Experience with our past attempts to prevent certain contract practices has shown that systems can evade restrictions by devising alternative contract terms that achieve the same result as the prohibited terms but comply with the letter of our rules. 57 FR 43827. If we adopted rules prohibiting productivity pricing arrangements, travel agencies and systems would have incentives to maintain them, and enforcing those rules would be impracticable. Justice Department Reply Comments at 29; Delta Reply Comments at 52-53.
The record shows that the profitability of many travel agencies depends on the incentive payments provided by productivity pricing contracts.
In any event, on balance, the systems' current productivity pricing clauses seem to allow travel agencies to make a significant number of bookings through different booking channels. Large Agency Coalition Reply Comments at 13-16. The systems do not discourage subscribers from accessing the Internet, and the growing use of programs like AgentWare's service, which provides travel agents links to other booking sites, suggests that travel agents are able to make bookings outside their primary system. We recognize that several commenters contend that the systems' productivity pricing clauses contain provisions that deter travel agents from using alternative booking channels. For example, while ASTA opposes restrictions on incentive payments, it suggests that we should eliminate penalty clauses in the systems' productivity pricing agreements because penalty clauses do deter travel agents from using the Internet for bookings. ASTA Comments at 26, n. 44, and 34-35.
Other considerations make us reluctant to regulate many of the subscriber contract issues. The U.S. airlines' divestiture of their system ownership interests has ended the direct link between system competition and airline competition that was a principal basis for the adoption of subscriber contract rules. Travel agency decisions to use one system rather than another, and to accept longterm contracts for CRS services, should not affect airline competition. In exercising our authority to prohibit unfair methods of competition under section 411, our primary goal has been the protection of airline competition. Regulating subscriber contracts for the most part would not further that goal.
Given the record evidence on current market conditions, it is doubtful whether section 411 would enable us to maintain rules governing travel agency contracts. Practices like longterm contracts and incentive payment programs are not inherently anti-competitive, as discussed above. If the systems' current subscriber contracts effectively deterred travel agents from using alternative booking channels (direct links with an airline's internal reservations system, for example), the contracts could constitute an unfair method of competition, because they would help preserve the systems' existing power over airlines, unless the contracts were justified by legitimate business reasons that outweighed any adverse impact on competition. Because the systems are ticket agents subject to our jurisdiction under section 411, we may regulate their contract practices if they are engaged in unfair methods of competition that affects airline distribution. The record in past proceedings indicated that the systems' contract practices could violate section 411, because the systems imposed contract terms on travel agencies that appeared designed to preserve the systems' market power by deterring travel agents from using alternative booking channels. 57 FR 43823-43825.
We recognize that prospective entry into the CRS business, by Orbitz, for example, would be more successful if the systems' existing subscriber contracts were nullified, thereby enabling all travel agencies to make a new choice of which system to use. Orbitz otherwise may be able to obtain subscribers only from those travel agencies whose contracts are expiring. Orbitz in fact seeks to give subscribers an option to void all existing contracts that do not comply with new subscriber contract rules. Orbitz Comments at 50, 53. Northwest, one of Orbitz' owners, similarly argues that we should enable any travel agency to terminate its existing contract with a system, if any of the airlines serving the agency's city withdraws from participation in that system. Northwest Comments at 3-4.
Ending any substantial number of existing subscriber contracts would be disruptive and impose substantial negotiating costs on the systems and travel agencies.
Orbitz and other commenters are legitimately concerned about the impact of potential system contract practices that would unreasonably restrict travel agency usage of alternative booking channels. We will monitor the systems' practices to ensure that the end of our rules on contract practices does not lead to new efforts to obtain contracts from subscribers that will unreasonably limit airline competition.
Our concern that an owner airline would use its dominance of airline markets in some cities to obtain dominance in the CRS markets in those cities led the Board to adopt a rule prohibiting an airline that owned a system from tying a travel agency's commissions to the agency's use of the airline's system. Dominance in the local CRS market would reinforce the airline's power in the local airline markets. Justice Department Reply Comments at 9. For the same reasons, we have considered proposals to prohibit the tying of a travel agency's access to an airline's marketing benefits, such as the ability to waive advance-purchase restrictions on discount fares, with the agency's choice of the system affiliated with the airline. We did not adopt such a rule because we expected that any such requirement would be unenforceable. 57 FR 43828.
A few commenters complain that airlines affiliated with a system have distorted competition in the CRS business by refusing to provide marketing benefits (or the ability to sell the airline's corporate discount fares) to travel agencies that do not use the system owned or marketed by the airline. Some commenters believe that such airlines have also tied access to override commissions with the travel agency's use of the airline's affiliated CRS, even though doing so would violate our rule.
Our notice of proposed rulemaking stated that we were willing to revisit the issue of the tying of marketing benefits to the use of the airline's affiliated system, although we again expressed our concern about the potential unenforceability of any such rule. 67 FR 69409-69410.
ASTA and Amadeus support the proposed prohibition against the tying of a travel agency's access to marketing benefits with the agency's choice of a system. ASTA Comments at 39-40; Amadeus Comments at 86-92. Other commenters oppose the proposal. Delta Reply Comments at 53-58; Northwest Reply Comments at 24-25; United Reply Comments at 54-65.
After considering the comments, we have decided to terminate the current rule rather than broaden it. First, no U.S. airline currently owns a system, so the existing bar against tying now covers only the three European airlines that own Amadeus. Secondly, the existing and proposed restrictions on tying, even if effective, seem unlikely to significantly affect airline competition, because no system has U.S. airline ownership. Thirdly, an airline that is affiliated with a system may have legitimate reasons for wanting to encourage travel agencies to use that system. Bookings made through that system, for example, may be less costly for that airline. United Reply Comments at 64-65. Also, some commenters (but not Amadeus) allege that the airlines marketing a system do not aggressively sell the system and that tying is a vanishing practice. Large Agency Coalition Reply Comments at 16-17. Fourthly, a prohibition against the tying of marketing benefits would not keep airlines that wished to use their dominance of local airline markets from using their position in the airline market to compel travel agencies to use their affiliated system. Airlines can achieve that result by tying a travel agency's choice of their favored system to the agency's access to corporate discount fares. Finally, we continue to believe that prohibitions against tying are likely to be unenforceable, a view that the Justice Department shares. Justice Department Reply Comments at 24. Although the current rules thus prohibit the tying of a travel agency's ability to obtain commissions with the agency's choice of a system, Amadeus alleges that it has lost subscribers (or failed to win new subscribers) because an airline that owned or marketed a competing system threatened to terminate the agency's commissions if it chose Amadeus. Amadeus Comments at 90-92;
Nonetheless, we will watch for any anti-competitive behavior in this area and take enforcement action if appropriate.
When we last reexamined the need for the CRS rules and their effectiveness, the Internet did not play a role in airline ticket distribution. The systems were used by travel agencies, corporate travel departments, and by some consumers through on-line services. At that time, “brick-and-mortar” travel agencies sold about 80 percent of all airline tickets, and consumers bought most of the remainder directly from the airlines. Few travelers bought tickets on-line. 57 FR 43794-43795. Our rules regulate the systems insofar as they are used by travel agencies but do not otherwise regulate the systems, and they do not cover the operations of travel agencies.
In recent years, the Internet has become a major avenue for the sale of airline tickets. Both airlines and travel agencies have established websites where consumers can research airline service options and make bookings. The number of tickets sold through the Internet has been growing steadily, from 18 percent of all tickets in 2001 to an estimated 25 percent of all tickets in 2003. Airline websites account for about half of all tickets sold through the Internet. Galileo Comments, Guerin-Calvert, Jernigan, & Hurdle Declaration at 24. Some firms have established themselves as on-line travel agencies, like Travelocity, Expedia, and Orbitz, but many “brick-and-mortar” travel agencies have also established websites. 67 FR 69374.
Our supplemental advance notice of proposed rulemaking asked for comments on whether we should regulate the on-line distribution of airline tickets. 65 FR 45557. While a number of commenters argued that no Internet activities should be regulated, others contended that some rules were necessary.
After considering the comments, we tentatively concluded that we should not now adopt rules that would generally govern the Internet's use in airline distribution. Rather than propose rules on the basis of a relatively short experience, we wished to see how the Internet's use in airline distribution develops and whether its evolving use threatens airline competition and consumer access to accurate and complete information on airline services. We found that our experience with the Internet thus far does not confirm that broad regulations are necessary. We invited commenters who
We did propose a change to our policy statement on fare advertising concerning one Internet-related issue, the requirements for disclosure of travel agency service fees. We plan to address that question in a separate final rule.
We still believe that we should not adopt rules governing airline distribution over the Internet, whether through airline websites or on-line travel agencies. As we stated in the notice, we intend to continue watching the Internet distribution practices of airlines and on-line travel agencies and will take action if that becomes necessary. The absence of rules specifically governing Internet distribution practices will not excuse airlines and travel agencies from complying with section 411, which prohibits unfair and deceptive practices and unfair methods of competition in the distribution of airline tickets. In addition, existing rules requiring travel agencies to provide accurate information on airline services, 14 CFR 399.80, are applicable to on-line ticket sales by travel agencies. We are ready to take enforcement action against any travel agency (or airline) that provides deceptive information on airline services through the Internet, and we have done so in several cases.
The issues presented by the comments concern (i) regulation of on-line travel agencies, (ii) regulation of airline choices on which distribution channels should be given access to all publicly-available fares, and (iii) Orbitz.
We affirm our tentative decision that rules are not needed to regulate airline websites. The commenters have not challenged that tentative decision. Consumers assume that an airline website will favor the airline's own services and not present an impartial display of all airline services. Any airline offering a website will seek to promote its own services and those of any allied airlines. 67 FR 69411.
(a)
We thought that on-line travel agencies, like “brick-and-mortar” travel agencies, want to keep their customers satisfied. That should deter them from providing inaccurate or misleading advice to customers and so would keep them from biasing their displays. Newspapers and magazines occasionally compare the quality of service offered by different on-line travel agencies, which should discourage the agencies from offering biased displays. And because consumers usually search several sites before making a booking, they should not be harmed if one on-line travel agency biases its displays. The record, moreover, did not show that bias is a serious problem at on-line travel agency websites. Finally, a rule requiring on-line travel agencies to follow prescribed display rules could discourage new methods of offering airline tickets on-line, such as those developed by Priceline and Hotwire. 67 FR 69411-69412.
A few commenters contend that we should adopt rules governing on-line travel agency displays. America West Comments at 37; US Airways Comments at 5-9. Amadeus contends that the systems should not be regulated if on-line travel agencies are not regulated. Amadeus Comments at 93; Amadeus Reply Comments at 54-59. Midwest alleges that some on-line travel agencies offer displays that are biased and inaccurate and do not show that its service is superior to the coach service typically provided by other airlines. Midwest Comments at 10-16.
These commenters have not convinced us that on-line display bias is a widespread problem that harms consumers and requires the adoption of rules. The examples cited by Midwest, if accurate, are troubling, but we believe that individual enforcement action would be the better approach if an agency is offering displays that mislead consumers.
In finding that the record does not show a need for rules barring display bias by on-line travel agencies, we are not determining that consumers have a greater ability than travel agents to work around bias. We are instead finding that the on-line travel agencies do not appear to be biasing their displays and that they are unlikely to do so, because most consumers check more than one website and because newspapers and other publications rate the relative accuracy and value of the different on-line travel agencies. These factors should effectively discourage on-line travel agencies from engaging in display bias, even though many consumers investigate airline services on only one website and not all consumers read published reports comparing the different on-line travel agencies. 67 FR 69411. If an on-line travel agency does create displays that mislead consumers, we can and will take appropriate enforcement action.
We also see no reason to exempt the systems from regulation if we do not adopt rules regulating the on-line travel agencies. The systems are not direct competitors of the on-line travel agencies, and the systems' possession of market power over airlines mandates the adoption for a transitional period of some rules designed to prevent practices intended to maintain that market power or to use it in ways that could cause consumer deception. The on-line travel agencies do not have that kind of market power. Justice Department Reply Comments at 15.
(b)
We declined to propose any rule requiring airlines to make all fares available through all distribution channels, as was sought by a number of commenters. Telling airlines how they must distribute their services and fares would likely deter them from offering some fares that they wish to sell only through selected distribution channels. Moreover, individual airlines have always given some travel agencies access to fares and other benefits not given other travel agencies. A rule requiring airlines to treat all distribution channels the same, in terms of access to fares, would be contrary to the industry's established practices (and contrary to practices followed by the
After we prepared our notice of proposed rulemaking, the National Commission to Ensure Consumer Information and Choice in the Airline Industry, which had been charged by Congress to study this and related issues, issued its report. That report concluded that airlines should not be required to make all fares available through all distribution channels. The Commission reasoned that such a requirement would substantially harm consumers, because airlines would stop offering some low webfares, would be contrary to the industry's use of different distribution channels to dispose of specific types of inventory, and would not solve the travel agency industry's basic problems, particularly the growing use of the Internet. “Upheaval in Travel Distribution: Impact on Consumers and Travel Agents,” “National Commission to Ensure Consumer Information and Choice in the Airline Industry” (November 13, 2002), at 56-58.
Several commenters continue to assert that airlines should be required to make all publicly-available fares saleable through all distribution channels. Large Agency Coalition Comments at 38-39; AAA Comments at 3; Carlson Wagonlit Comments at 3.
Airlines object to any such requirement.
We remain unwilling to require airlines to make their webfares (or other publicly-available fares) available to each system so that travel agencies can easily book them. For the reasons stated in our notice of proposed rulemaking, any such requirement would be outside our authority under section 411 and lack an economic or policy justification. Such a requirement would deny airlines the ability to choose which distribution channel best meets their needs. As shown, Southwest and JetBlue, two successful and growing airlines, have chosen to distribute their services through only one system, Sabre, and to encourage travelers to make bookings directly with the airline, either through the airline's website or a reservations agent. The requirement would be contrary to the airlines' established practice of selling some fares only through a few selected channels. America West points out that it makes special fares available only through some channels, like one or two of the on-line travel agencies, rather than through all channels. America West Comments at 33. As noted, our decision is consistent with the National Commission's conclusions, and we agree with the Commission's analysis. As the Commission stated, requiring airlines to make all fares available through all distribution channels will encourage airlines to eliminate those fares that they wish to make available only through selected distribution outlets.
Requiring airlines to make all publicly-available fares saleable through all channels would be more efficient for travel agents and their customers, because they would no longer need to search multiple places to check all the fares, and would be able to make bookings through their primary system, which has been the most efficient booking process for travel agencies. Our authority to prevent unfair methods of competition would not allow us to override individual airline decisions on how to distribute tickets unless we can show that doing so is necessary to prevent conduct that would violate the antitrust laws or antitrust principles. The record in this proceeding would not support such a finding. In addition, a requirement that airlines must make all fares available through all channels would deter airlines from offering many discounts, including presumably their webfares. Airlines would have less incentive to offer discounted fares if they were required to sell those fares through all channels, including the most expensive. America West Comments at 32; United Reply Comments at 51-52.
Furthermore, the market is addressing this issue. Sabre and Galileo, as shown, have created programs whereby airlines that make their webfares saleable through the system will obtain lower booking fees in exchange. A number of major airlines have agreed to provide their webfares to the two systems on these conditions. As a result, Galileo and Sabre subscribers now have access through their systems to the webfares offered by most major airlines. Amadeus and Worldspan can similarly offer airlines terms attractive enough to obtain the right to sell webfares. In any event, systems should obtain access to webfares by making their sale through a CRS attractive for airlines, not by Government edict.
(c)
A number of parties had complained that any website owned by two or more airlines, such as Orbitz and Hotwire, may well be operated in a manner which will reduce competition and lead to consumers receiving biased or inaccurate information. 67 FR 69413. Galileo contends, for example, that the most-favored-nation clause used by Orbitz has led to fewer and smaller fare discounts. Galileo Comments, Hausman Declaration. Travel agencies contend that Orbitz' most-favored-nation clause is intended to eliminate them from the distribution business.
We decided not to propose rules regulating the operation of joint airline websites in this proceeding. The only two significant jointly-managed airline websites were Orbitz and Hotwire. Adopting general rules governing the operation of joint airline websites would be premature. The enforcement process would be the best means for addressing any problems with deceptive practices and unfair methods of competition created by such a site. An enforcement proceeding could effectively take into account the characteristics of an individual website while a rule might be unable to do so. 67 FR 69413.
We further noted that we had been informally examining Orbitz' business plan and strategy to see whether it might have been engaged in deceptive practices or unfair methods of competition. Our progress report to Congress on that investigation, “Report to Congress: Efforts to Monitor Orbitz,” did not reach any definitive conclusions on whether Orbitz' operations may violate antitrust principles, in part
If Orbitz or its owner airlines engage in unlawful conduct, we can and will use our authority to end any unlawful practices.
For the reasons stated in our notice of proposed rulemaking, we are not adopting rules specifically governing joint airline websites like Orbitz at this time. We also see no basis now for instituting any formal investigation into Orbitz' operations. Our own informal review has not shown that such a proceeding would be justified, and the Justice Department has concluded after an extensive investigation that it has no evidence indicating that Orbitz has violated the antitrust laws. Moreover, as we stated in the notice of proposed rulemaking, Orbitz and any other website operated jointly by two or more airlines are subject to the antitrust laws and section 411. The antitrust laws prohibit competing firms from operating a joint venture in ways that unreasonably restrict competition.
Insofar as Expedia's concerns reflect the greater availability of webfares on Orbitz than on competing on-line travel agencies, the market appears to be addressing that issue. As discussed above, two of the systems have obtained access to the webfares of several airlines by providing booking fee reductions in return, and we see no reason why the other two systems could not create similar arrangements. Expedia itself could seek to obtain access to webfares by bargaining with the airlines that offer them.
Each system generally follows a practice of requiring every participating airline to agree that its services can be booked by every user of the system, including all “brick-and-mortar” and on-line travel agencies. A non-accredited travel agency, a corporate travel department, an on-line computer service, or a consumer accessing the system through a travel agency website thus can book the services of each participating airline through the system. Several airlines had asserted that airlines should be able to determine which website could sell their services and that the systems should be barred from tying access to a system's on-line users with access to its “brick-and-mortar” travel agency subscribers. 67 FR 69414-69415.
We asked for comments on whether such a rule should be adopted. Such a rule could be beneficial by giving airlines a greater ability to determine which distribution channels could sell their services. A rule barring tying could enable market forces to discipline the systems' terms for participation in the services they offer to on-line travel agencies and other Internet users, because airlines might be able to decline participation if the terms were unreasonable. 67 FR 69414-69415.
We noted, however, that such a rule might be unnecessary. Southwest had been able to keep on-line travel agencies from selling its tickets, and Northwest successfully threatened to stop one on-line travel agency from selling its tickets if the agency did not change its business practices. We asked the parties to comment on whether a prohibition against tying would be technologically feasible, and whether an individual airline could effectively block any Internet site (or a “brick-and-mortar” travel agency) from selling its tickets. 67 FR 69415.
Continental and Northwest support the proposal, while Amadeus and Sabre oppose it.
We have decided not to adopt a rule barring the tying of access to “brick-and-mortar” travel agencies with access to on-line travel agencies using a system. The comments have not persuaded us that such a rule is necessary, because airlines seemingly already have some ability to stop individual travel agencies from selling their tickets. None of the commenters supporting the proposal has explained why such a rule is necessary when an airline already has the authority to stop an individual travel agency from selling its tickets. Sabre and Amadeus assert that each airline can bar an agency from selling its services by denying it an appointment as its sales agent. Sabre Reply Comments at 68; Amadeus Comments at 101-102. Northwest, moreover, was able to obtain better terms from Travelocity and Expedia by denying them commissions on their bookings. Orbitz Comments at 17-18. Our notice pointed out that Southwest had been able to keep on-line travel agencies from selling its tickets. Sabre also asserts that implementing such a rule would be costly, for its programming expenses would exceed $1.5 million. Sabre Reply Comments at 69.
America West contends without explanation that the systems' market power would currently preclude an airline from ending an on-line agency's authority to sell its tickets. America West Comments at 36. Because other commenters disagree with America West's position, we could not adopt the rule proposal without additional evidence and analysis from America West and other commenters.
In addition, the systems' worldwide participation agreements do not appear to violate the antitrust laws or antitrust principles. Sabre has argued that the antitrust laws' prohibition against tying rule does not apply to the systems' practice of requiring worldwide participation, since the offering of system services to “brick-and-mortar” travel agencies and the offering of the same services to on-line travel agencies do not constitute separate products. Sabre Reply Comments at 67.
United, which argues that all of the rules should be terminated, asserts that we should adopt the proposal on tying if we maintain CRS rules. United further argues that the systems' worldwide participation agreements violate the antitrust laws. United Reply Comments at 78-80. United essentially contends that access to each subscriber is a separate product under tying principles. We disagree that a system is necessarily engaged in the tying of two separate services when it demands that a participating airline agree to allow all of the system's subscribers to sell its
Our rules govern the systems' operations within the United States. Section 255.2. This rulemaking nonetheless presents international issues, because the systems operating in the United States operate throughout the world, because foreign airlines serving U.S. points obtain ticket sales from bookings made through the systems in the United States, and because the United States' bilateral air services agreements (and one multilateral agreement) with a number of foreign countries obligate each party to ensure that airlines domiciled in the other country are not subject to discriminatory treatment from any system. 67 FR 69372. In addition, the European Union, Canada, Australia, and other foreign countries have adopted their own CRS rules. The basic principles for all of the rules are similar, but the actual rules are different, as in some respects are the underlying regulatory philosophies. 67 FR 69372, 69415.
The major international consideration is the United States' obligation under the air services agreements to keep systems operating in the United States from engaging in conduct that discriminates against foreign airlines, such as charging discriminatory booking fees to foreign airlines and biasing displays against foreign airlines. Congress has directed us to exercise our authority consistently with the United States' obligations under international agreements. 49 U.S.C. 40105(b)(1)(A).
Several of the commenters, notably Amadeus, contend that we must readopt the existing rules and impose them on all systems in order to comply with the obligations imposed by these agreements. Amadeus Comments at 36-41; Amadeus Reply Comments at 20-22.
The final rules adopted in this proceeding no longer include the prohibitions against discriminatory treatment contained in the existing rules. We recognize that different airlines may obtain different treatment from the systems as a result, especially on booking fees. However, because no U.S. airline now controls any system operating in the United States, the systems should have no incentive to discriminate against foreign airlines. Sabre Comments at 147. As noted, our proposal to eliminate the rule barring discriminatory booking fees was supported by several, though not all, foreign airline commenters. We have also found that the elimination of those rules will benefit consumers and not harm airline competition.
In addition, the statutory authority for our rules has always been section 411, which authorizes us to prohibit unfair and deceptive practices and unfair methods of competition. We may adopt rules that will prevent practices that violate the antitrust laws or antitrust principles, but we do not have general authority to regulate the business practices of the systems (or airlines). To adopt any rule regulating CRS practices, we must find that the rule is necessary to prohibit conduct that would violate section 411. Our decisions that several of the rules should not be readopted at all, such as the rule prohibiting discriminatory booking fees, flow from our decisions that the practices regulated by those rules no longer appear to be violations of section 411 or that the rules have become unnecessary for other reasons. As a result, section 411 does not authorize us to maintain those rules indefinitely.
We recognize the United States has signed bilateral air services agreements obligating each party to ensure that airlines domiciled in the country of the other party are not subjected to discriminatory treatment from systems operating in its own territory. While we will no longer have rules carrying out all of the obligations imposed by the bilateral air services agreements, we and the other agencies of the United States government intend to take such action as is necessary and appropriate to ensure that foreign airlines have a fair opportunity to compete for travelers in the United States.
Amadeus has suggested that we attempt to harmonize our rules with those of the European Union. As we stated in our notice of proposed rulemaking, we understand that a greater similarity between our rules and the European rules (and the rules of other countries) would provide benefits, especially by avoiding the need for the systems to follow potentially different business practices in different jurisdictions. However, our ability to regulate CRS practices is subject to the limits of our authority under section 411 to prohibit unfair and deceptive practices and unfair methods of competition by airlines and ticket agents and our obligation to adopt only those rules whose benefits will outweigh their costs. We cannot make our rules conform to those of the European Union unless doing so will meet the requirements established by Congress.
In some cases in the past, as discussed in our notice of proposed rulemaking, a foreign airline limited its participation in a U.S. system (or imposed restrictions on travel agencies using a U.S. system in its homeland) to deter travel agencies in its homeland from choosing a U.S. system instead of the system owned or marketed by the foreign airline. In a few such cases, we proposed countermeasures to encourage the foreign airline to end its discriminatory conduct. We acted under the International Air Transportation Fair Competitive Practices Act, recodified as 49 U.S.C. 41310, which has authorized us to impose countermeasures when a
To further deter discriminatory treatment, our current rules authorize a system to engage in discriminatory conduct against a foreign airline that operates a foreign system, if that system subjects a U.S. airline to discriminatory treatment and the system has given us and the foreign airline 14 days advance notice of its plan to take countermeasures. Section 255.11(b).
We did not propose to strengthen this rule, although Sabre asked us to do so. We explained that we would in any event continue to take appropriate action when a U.S. airline or system is subject to discriminatory treatment by a foreign firm designed to prejudice the U.S. firm's ability to compete. 67 FR 69415-69416.
Although Sabre has argued that we have no authority to regulate its operations under section 411 and that there is no longer any economic justification for the rules, Sabre has urged us to strengthen our existing rule, but only if we maintain CRS regulations. Sabre Comments at 168-169. Delta, on the other hand, argues that the existing rule should be eliminated. Delta Reply Comments at 58.
We intend to carry out Congress' mandate that action be taken when foreign airlines and systems engage in discriminatory conduct against U.S. firms. We can take such action without maintaining the existing rule. We have determined, however, not to readopt the rule authorizing a system to take countermeasures against a foreign system that discriminates against U.S. airlines. If we were to readopt the rule, we would presumably have to modify it, because we are eliminating the major rules barring each system from engaging in discriminatory treatment of participating airlines. The rule should authorize self-help only when a foreign system biases its displays against U.S. airlines.
Furthermore, the rule as written is outdated. The Board originally adopted the rule at a time when each significant system operating in the United States was owned by a major U.S. airline with international operations. As written, the rule made sense because it allowed the system to take countermeasures if its airline owner (but not the system itself) was subject to discriminatory treatment from a foreign system that was owned or controlled by a foreign airline. 49 FR 11668-11669. Sabre no longer has any airline owners and so should have little incentive to take countermeasures if a U.S. airline is subjected to discriminatory treatment overseas from a foreign system. The rule, moreover, would allow Sabre to subject the offending foreign airline to discriminatory treatment, not to take direct action against the foreign system. We think that we can more rationally protect Sabre's interests by reaffirming our willingness to take appropriate action authorized by statute.
Our rules have had a sunset date to ensure that we would reexamine the need for the rules and their effectiveness. Section 255.12. In our notice, we tentatively decided not to propose a new sunset date for the rules in our notice of proposed rulemaking. Instead, we stated that we would review the rules when necessary and would consider comments on when that should be done. 67 FR 69416.
Some commenters asked us to establish a new sunset date that would establish a time when the rules would be reexamined, while other commenters argued that a new sunset date should establish the time when the rules would end without further reexamination.
Whether the rules should have a sunset date, and when that date should be, are essentially moot issues as a result of our final decision in this proceeding. We are readopting very few of the existing rules. The other rules will therefore automatically expire on January 31, 2004. The rules adopted here will be terminated as of July 31, 2004. We will, however, actively monitor conditions in the market in order to verify our assumption that rules against display bias will not be necessary beyond that time. We retain the authority to propose a continuation of rules against display bias if, contrary to our expectation, continued regulation is warranted.
The Administrative Procedure Act states that new rules normally should take effect no less than thirty days after their publication. Our notice of proposed rulemaking invited comments on whether we should give firms additional time to comply with any new requirements mandated by our final rule in this proceeding. 67 FR 69416-69417. In response to our notice of proposed rulemaking, which proposed to readopt most of the rules and adding additional requirements for some of them, like the rules on subscriber contracts, a number of commenters asserted that one or more provisions of our proposed CRS rules should take effect on a delayed schedule due to the expense or difficulty of compliance within thirty days of the rules' publication date. See,
We have decided to make January 31, 2004, the effective date of this rule. That date is the sunset date for the existing rules. We have determined for good cause to make the rule effective on that date, rather than thirty days after publication as required by the Administrative Procedure Act except for good cause shown. 5 U.S.C. 553(d). We are maintaining for a six-month transition period the current rules prohibiting display bias and, with some changes, the current rule prohibiting parity clauses in the systems' contracts with participating airlines. Our transitional rule barring airlines from inducing systems to bias displays is new in form but merely bars airlines from encouraging systems to violate their existing obligation to provide neutral displays. We are adopting a transitional rule prohibiting each system from demanding that an airline provide all public fares as a condition to any participation in the system, but this rule is analogous to the existing rule prohibiting parity clauses. These rules will not require any changes, as far as we know, in the systems' existing operations. Making them effective on less than thirty days notice accordingly will not impose an undue burden on anyone. If the rules did not become effective on January 31, 2004, there would be a short gap between the expiration of the current rules and the effectiveness of the new rules, which
The elimination of other rules on participating airline contracts (the prohibition against discriminatory booking fees, for example), and the rules on subscriber contracts will not require any immediate change in the operations of airlines, systems, and travel agencies. The parties are free to maintain their existing contracts while they develop new agreements that take advantage of the flexibility on these matters offered by our final decision. We cannot create a transitional period by readopting the existing rules for a short period, because the record in this proceeding would not justify doing so.
Amadeus has filed a petition asking us to eliminate the rules' existing sunset date, January 31, 2004. Docket OST-2003-16469. Amadeus notes that we have submitted a final rule to OMB review but that the review process may not be completed before the sunset date. In addition, Amadeus claims that industry participants will need several months to adjust to any substantial change in the current regulatory structure, such as partial deregulation. Galileo supports Amadeus' petition, but Delta, Northwest, Sabre, United, and Worldspan oppose it.
We see no need to eliminate the sunset date. As noted, we have decided that most of the existing rules should be terminated. Maintaining the existing rules beyond January 31 would prevent airlines, systems, and travel agencies from taking immediate advantage of the industry's deregulation. Moreover, we are not directing any firms to change their current methods of operation. They may continue to follow their existing business practices until they determine how best to modify them in response to deregulation, if not compelled to change them sooner due to market forces.
The American Antitrust Institute and US Airways have suggested that we should require the divestiture of all airline ownership of any system. They argue that airline ownership of a system creates the incentive (and ability) to operate the system in ways that will reduce airline competition. US Airways Comments at 23; American Antitrust Institute Comments at 6-7.
Amadeus opposes any such requirement. It contends that such a requirement would be unfair and unlawful, because it would require the European airlines that own the majority of Amadeus' stock to divest it, even though the company is located in Europe. Amadeus Reply Comments at 41-42.
We will not require divestiture. We did not propose such a rule, and we did not require divestiture when the systems operating in the United States were controlled by U.S. airlines. 57 FR 43830.
However, our decision that most of the current rules should not be readopted in large part reflects the complete divestiture by U.S. airlines of their CRS ownership interests. A system's ownership by U.S. airlines would raise competitive concerns. The Justice Department thus states, “Finally, DOJ's recommendation assumes that the recent divestitures represent a permanent change in the ownership structure of the industry.
DOT should therefore make clear that any attempt at reintegration into CRS by airlines will be closely scrutinized by the appropriate enforcement agencies.” Justice Department Reply Comments at 4. As we stated above, we already intend to monitor airline distribution developments during the next six months and beyond. We will pay particularly close attention to any airline efforts to establish control over a system. We retain the authority to bring enforcement cases against firms that violate the statutory prohibition against unfair methods of competition, and we will take appropriate action if we have evidence of unlawful conduct.
We recognize that Orbitz, owned by five major airlines, may enter the CRS business, a prospect not specifically addressed by the Justice Department. The Justice Department has been investigating Orbitz’ operation as an on-line travel agency and concluded that it had no evidence that Orbitz’ current operations are harming consumers or reducing competition. Statement by Assistant Attorney General R. Hewitt Pate Regarding the Closing of the Orbitz Investigation (July 31, 2003). As we noted in our notice of proposed rulemaking, the antitrust laws significantly restrict the operations of a joint venture among competitors. 67 FR 69414. The Justice Department will enforce those laws if necessary. Furthermore, our examination of the CRS industry's developments after the effective date of our new rules will include a review of Orbitz’ operations as a system, if it chooses to enter the business.
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538, requires Federal agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditures by State, local, or tribal governments, in the aggregate, or by the private sector, of more than $100 million annually.
The legal authority for the rule is provided by 49 U.S.C. 41712, which authorizes the Department to prohibit unfair or deceptive practices and unfair methods of competition in air transportation or the sale of air transportation. The Department is authorized by 49 U.S.C. 40113(a) to implement that authority by adopting rules defining and prohibiting unfair or deceptive practices and unfair methods of competition.
The rule would not result in expenditures by State, local, or tribal governments because no such government operates a system or airline subject to the proposed regulation. The Regulatory Assessment below provides detailed discussion of the costs and benefits for the rule. The Regulatory Assessment also presents alternatives to the rule.
Executive Order 12866, Regulatory Planning and Review (58 FR 51735, October 4, 1993), defines a significant regulatory action as one that is likely to result in a rule that may have an annual effect on the economy of $100 million or more or adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities. Regulatory actions are also considered significant if they are likely to create a serious inconsistency or interfere with the actions taken or planned by another agency or if they materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of the recipients of such programs.
The Department's Regulatory Policies and Procedures (44 FR 11034, February 26, 1979) outline similar definitions and requirements with the goal of
The Department has determined that these regulations are not an economically significant regulatory action under the Executive Order, because the record does not show that the rules would likely have an annual impact on the economy of $100 million or more. The rules will not impose significant costs on the systems or other firms. The cost of complying with the prohibitions against display bias should be small, because the systems have been complying with those requirements and must continue to comply with similar requirements imposed by other countries. The rules will reduce the systems' revenues by barring them from selling display bias, but nothing in the record indicates that the revenue loss would exceed $100 million, and the systems have not claimed that the continuation of the rules barring display bias will reduce their revenues by $100 million or more.
The rules are significant under the Department's Regulatory Policies and Procedures because of the amount of public interest they are likely to generate. The Department has prepared a regulatory assessment for this final rule, which has been placed in the docket for this proceeding. These rules have been reviewed by the Office of Management and Budget under the Executive Order.
The notice of proposed rulemaking contained a preliminary regulatory impact analysis of the proposed rules. That analysis tentatively concluded that the benefits of the proposed rules would exceed the costs of those rules. The analysis relied on a qualitative assessment of the costs and benefits of the proposed rules, because we did not have information of the kind and detail necessary for a quantification of those benefits and costs. We requested interested persons to provide detailed information on the potential consequences of the proposed rules. 67 FR 69419.
Our final regulatory assessment concludes that the benefits of the final rule will outweigh its costs. The final rule will benefit airline competition by preventing systems from agreeing with some airlines to bias displays in their favor and against other airlines. If the final rule did not prohibit display bias, the systems would be likely to bias their displays. That could harm consumers by causing system users to obtain misleading information and by reducing airline competition. A system has some ability to bias its displays, because participating airlines have little ability to cause systems to stop biasing displays, travel agencies can live with some bias, a system that sells display bias can offer better terms to travel agency customers, and a travel agency would incur switching costs if it changed systems in order to avoid one system's bias. Display bias has the potential to undermine airline competition and distorts consumer choices. We believe that a rule prohibiting display bias will impose relatively small costs on the systems.
The rules prohibiting systems from demanding that airlines agree to parity clauses or clauses requiring an airline to make all of its publicly-available fares saleable through a system as a condition to any participation will give airlines some leverage in negotiating for better terms for participation. During the transition period, this will offset to some extent the systems' existing market power and furnish airlines an opportunity to prepare more effectively for the termination of the prohibition. The transition will give airlines some ability to promote alternative distribution and booking channels and thereby promote innovation.
Terminating the rest of the existing rules over time will promote efficiency and reduce costs for firms involved in airline distribution and the airlines themselves.
The final regulatory assessment concludes that the costs of readopting the other rules would exceed their benefits.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601
Our existing CRS rules primarily regulate the systems' operations, although they do impose some obligations on airlines participating in the systems and indirectly regulate travel agencies by prohibiting certain types of conduct in the travel agencies' relationships with systems and their airline owners. Our notice of proposed rulemaking proposed to maintain most of the existing rules and to strengthen certain parts of those rules, primarily the rules governing the systems' contractual relationships with travel agency subscribers. We also proposed, however, to eliminate the rule barring discriminatory booking fees and the mandatory participation rule. We additionally asked for comment on whether we should terminate more of the rules.
If adopted, the proposals would not have subjected small entities to direct regulation, except for certain obligations imposed on participating airlines, but would have affected the systems' relationships with airlines and travel agencies. The notice included an initial regulatory flexibility analysis, which relied in part on the factual, policy, and legal analysis set forth in the remainder of the notice, as allowed by 5 U.S.C. 605(a). We tentatively concluded that our proposed rules would have a significant economic impact on a substantial number of small business entities, especially travel agencies and air carriers, including regional air carriers. The proposals would have given travel agencies a greater ability to use multiple systems and booking channels. To the extent that airlines could operate more efficiently and reduce their costs, the rules would also affect all small entities that purchase airline tickets, since airline fares may be somewhat lower than they would otherwise be, although the difference may be small. We expected that our proposals to prohibit or restrict productivity pricing could increase CRS costs for some travel agencies, but that the affected travel agencies would be the larger agencies. 67 FR 69423-69424.
We invited comments on our initial regulatory flexibility analysis. 67 FR 69424. We additionally gave interested persons ample opportunity to file comments and reply comments on our rule proposals and to participate in a public hearing. Members of the Congressional committees on small business, travel agency commenters, and the NFIB Legal Foundation assert that our initial regulatory flexibility analysis was inadequate and that we must give interested small entities a better opportunity to comment on the proposals and their potential impact on small businesses.
At the final rule stage, we have decided not to adopt most of the existing rules and not to adopt our proposals to strengthen the rules on subscriber contracts. We are not
Our final rule will still affect the airlines' relationships with the systems, because it will prohibit display bias and bar systems from imposing certain types of contract requirements on participating airlines.
The Regulatory Flexibility Act requires us to publish a final regulatory flexibility analysis that considers such matters as the impact of a final rule on small entities if the rule will have “a significant economic impact on a substantial number of small entities.” 5 U.S.C. 605(b). The rule may have a significant economic impact on a substantial number of airlines that are small entities, because almost 400 U.S. passenger airlines come within the definition of a small entity, according to the Small Business Administration. That impact will be beneficial, as the final rule will prohibit certain system practices that would likely harm the business position of small airlines. In view of the concerns expressed by commenters about the impact of any rule on travel agencies that are small entities, we are also discussing the final rule's impact on travel agencies, even though the impact is indirect. That impact should also be beneficial. As shown by the following discussion, we have carefully considered how the final rule may affect travel agencies and other small entities.
For a six-month period, our final rule will maintain the existing rules against display bias and will prohibit each system from requiring airlines to accept parity clauses and clauses requiring the airline to provide all of its publicly-available fares to the system as a condition to any participation in the system. These rules are necessary for preventing display bias, which could mislead travel agents using a system and their customers, and preventing contract practices that could reduce competition for the systems and deny airlines discretion on how to market their services through the systems and alternative booking channels. The rules' objectives are to prevent consumer deception, promote airline competition, and encourage market forces to discipline the systems' prices and terms for airline participation. These objectives will promote airline competition and lower costs for airline distribution, which would lead to lower airfares and more efficient airline operations.
Several commenters contend that our rule proposals would cause significant harm to small entities, primarily small travel agencies, and that our initial regulatory flexibility analysis was inadequate.
As a result of these comments as well as comments submitted by other persons and the on-going changes in the airline distribution and CRS businesses, we have decided not to adopt the proposed changes to the rules on subscriber contracts, including the proposed restrictions on productivity pricing, and to eliminate the existing rules regulating the contracts between the systems and subscribers. We have further decided to make final our decision to eliminate the mandatory participation rule and our decision not to adopt rules requiring each airline to make its webfares or other fares available through all distribution channels rather than just those channels selected by the airline.
We have discussed above in detail the basis for each of our decisions on the significant rulemaking issues. We will summarize that discussion in this regulatory flexibility statement.
In general, we have decided to terminate most of the existing rules, because the record does not show a need for continued CRS regulation in most areas. Our primary goal in adopting CRS regulations has always been the prevention of system practices that would prejudice airline competition. The systems are no longer subject to control by U.S. airlines, and the record does not show that any non-airline system is likely to operate in a manner that would distort airline competition, except insofar as the systems appear willing to sell display bias. We are maintaining the rules prohibiting display bias, but not the other rules that were originally designed to keep systems affiliated with airlines from prejudicing the competitive position of rival airlines. The record shows that, in other respects, the current rules unnecessarily limit the business discretion of systems and airlines, are no longer necessary in light of market developments, or are unlikely to be effective and enforceable.
Secondly, our statutory authority does not give us the authority to generally regulate the relationships between the systems, on the one hand, and airlines and travel agencies, on the other hand. As a result of Congress' decision 25 years ago to deregulate the airline industry, we have no overall authority to regulate the airlines' distribution practices or to adopt rules requiring changes in airline practices in order to promote fairer competition. Our authority for CRS rules, section 411, authorizes us to prevent unfair and deceptive practices and unfair methods of competition. We adopted the existing CRS rules under our authority to prohibit unfair methods of competition, except insofar as we have adopted rules prohibiting display bias, which we also based on our authority to prohibit deceptive practices. We may adopt the rule proposals discussed in the comments on our initial regulatory flexibility analysis only if we find those rules are necessary to prevent unfair methods of competition. As explained in our discussion above of the individual rule proposals, the record would not support a finding that several of the rule proposals advanced by travel agency commenters are necessary to prevent unfair methods of competition.
Against this background, we will discuss the final rules and alternative rule proposals of concern to the travel agencies and small airlines, beginning with the proposals on subscriber contracts, followed by the proposals to readopt the mandatory participation rule and to adopt a rule requiring airlines to make all publicly-available fares saleable through all systems, the rules governing the relationships between airlines and the systems, and the rule prohibiting display bias.
(a)
The comments submitted in response to our notice of proposed rulemaking allege that the systems' recent contracts now give travel agencies more flexibility.
The commenters additionally allege that any rules designed to encourage travel agencies to use multiple systems rather than one system will inevitably be ineffective. Travel agencies are unwilling to make substantial use of more than one system because using multiple systems is inefficient for travel agencies.
The record thus suggests that the systems' current contracts do not prevent travel agencies from using alternative booking channels, like the Internet, when travel agents wish to use them, that any efforts by us to encourage travel agents to use multiple systems will be unavailing, and that the systems' competition for travel agency subscribers will continue to enable travel agencies to obtain flexible contracts if we did not readopt the existing rules. We have therefore decided that we should neither readopt our existing subscriber contract rules nor adopt any of the rule proposals on which we invited comment. Our decision not to adopt restrictions on the systems' productivity pricing arrangements is, of course, consistent with the position taken by almost all travel agency commenters.
Our decision not to readopt the existing rules on subscriber contracts is consistent with the position taken by some commenters that the rules should not limit the terms of contracts between systems and travel agencies, although some travel agency commenters support the readoption of some restrictions on subscriber contracts. Our decision to allow those rules to expire will not harm travel agencies, because the systems are already offering travel agencies better terms than those required by our rules.
(b)
The travel agencies' interest in these rule issues arises because of their desire to be able to book webfares through their systems. If travel agents can only book webfares through an airline's own website, or through on-line agencies that have access to webfares, travel agents will be unable to operate as efficiently. Travel agents want access to webfares, even though webfares make up a small share of all ticket sales, because webfares can be significantly lower than other fares.
While maintaining the mandatory participation rule and the adoption of a rule requiring each airline to provide each system with access to all of its publicly-available fares could benefit travel agencies, the record in this proceeding would not justify the imposition of such requirements on airlines, as explained next, starting with the mandatory participation rule.
(i)
We have concluded that maintaining the mandatory participation rule would unreasonably restrict the ability of airlines to negotiate with the systems for better terms for participation. An airline with a system ownership interest should be able to choose whether and at what level it will participate in competing systems, and its ability to choose will give it some bargaining leverage that may enable it to obtain better terms for participation.
Furthermore, the U.S. airlines' divestiture of their CRS ownership
More importantly, eliminating the mandatory participation rule should not harm travel agencies, even if the rule covered several U.S. airlines rather than only three European airlines. Recent experience suggests that the elimination of the mandatory participation rule will not lead to radical changes in CRS participation levels by the airlines that have had a system ownership interest. Each system has some market power over most airlines, because the airlines' distribution needs require most airlines to participate in each system. All of the major network airlines participate in each system at the highest level, and they do so in order to promote the sale of their services by the travel agents using each system. Transcript at 140; Amadeus Reply Comments at 24. United has chosen to participate at the highest level even though it has not been subject to the mandatory participation rule for some time. In addition, each of Orbitz’ owner airlines has agreed with Sabre and Galileo to make its webfares saleable through the system in return for reduced booking fees and other commitments, even though Orbitz” ability to sell webfares had been a major selling point for that on-line travel agency and some airlines complain that the booking fee reductions were not as large as they should have been. The willingness of these airlines to sell their webfares through Sabre and Galileo supports our expectation that the elimination of the mandatory participation rule will not lead airlines to deny the systems reasonable access to their fares and services.
Even if the record suggested, however, that the elimination of the mandatory participation rule would harm travel agencies by leading to major changes in participation levels, we would likely be unable to readopt the rule. Section 411 authorizes us to prohibit practices that violate the antitrust laws or antitrust principles, as discussed above, but does not empower us to impose requirements on airlines in order to increase the efficiency of travel agency operations or give travel agencies a better opportunity to compete against other distribution channels. For purposes of our regulatory flexibility analysis, we are not obligated to treat rule proposals that could not be adopted under our statutory authority as alternatives that must be considered in the final regulatory flexibility analysis.
(ii)
A rule requiring airlines to offer all fares through all channels no longer appears necessary. Two of the systems—Sabre and Galileo—have gained access to the webfares of several major airlines by offering to reduce their booking fees in exchange for a commitment to make all publicly-available fares saleable through the system. Subscribers to Sabre and Galileo, which together have a 65 percent market share, now have access to the webfares offered by major airlines. The other two systems—Amadeus and Worldspan—should be able to obtain access to many webfares by making similar offers to participating airlines.
Requiring airlines to make all publicly-available fares saleable through each system would provide efficiency benefits for travel agents and make it easier for consumers to obtain comprehensive information on the fares and services available in each airline market. Consumers, however, would be unlikely to obtain all of the low fares now being offered by airlines. If airlines had to make all fares, including webfares, available through all distribution channels, no matter how costly, airlines would presumably cut back their offering of discount fares like webfares. Airlines are more willing to offer lower fares when they can use distribution channels that are less costly. Because the travel agency/CRS distribution channel is a relatively costly channel for airlines, requiring airlines to make low fares available through that channel would probably eliminate the low fares that can be economically offered only when doing so will save distribution costs. America West Comments at 32; United Reply Comments at 51-52.
Such a requirement would also unreasonably limit each airline's discretion on how it should best distribute its services. Airlines should be free to offer special fares and services through distribution channels that are less costly or more effective. Airlines in fact have long given selected distribution channels the ability to sell fares that other channels cannot sell.
Airlines, moreover, should be able to use their control over access to their webfares as a bargaining tool for getting better terms for CRS participation. Amadeus Comments at 10; American Comments at 27. The airlines' ability to deny access to their webfares has caused two of the systems, Sabre and Galileo, to give airlines booking fee reductions in exchange for the ability to sell their webfares.
The National Commission to Ensure Consumer Information and Choice in the Airline Industry, which had been charged by Congress to study travel agency access to webfares and related issues, issued a report that concluded that airlines should not be required to
Furthermore, our authority under section 411 would not allow us to adopt a rule requiring airlines to make all fares—or even all webfares—available through all distribution channels. Such a rule accordingly is not an available alternative to the rules we are adopting. As shown, section 411 authorizes us to prohibit practices that violate the antitrust laws or antitrust principles. The antitrust laws generally do not prohibit firms from choosing to distribute their products and services through some outlets and not others. The antitrust laws do not restrict a firm's distribution choices, even if those choices undermine the ability of some distributors to stay in business, unless the firm's conduct unreasonably restricts competition. While section 411 gives us somewhat broader authority over business practices in the airline and airline distribution businesses, the record in this proceeding would not justify a finding that an airline's decision to limit the offering of some fares or services to selected distribution channels is an unfair method of competition.
(iii)
The commenters on our initial regulatory flexibility analysis did not address the potential impact of our rule proposals on airlines that are small entities. The final rule, as indicated, will prohibit certain types of system conduct that could unduly prejudice the competitive position of some airlines and deny them a reasonable opportunity to determine how best to distribute their services. These provisions will give smaller airlines more choice. The final rule will also maintain the rules prohibiting display bias. These provisions should benefit participating airlines, particularly smaller airlines. At the same time, we are not readopting other provisions, such as the prohibition against differential booking fees, which could protect smaller airlines against potential system practices that might undermine the competitive position of individual airlines. As discussed earlier in this rule, we have concluded that the record in this proceeding and the limits of our authority under section 411 would not allow us to readopt those rules. In particular, the record would not justify a finding that a system would be engaged in an unfair method of competition if it charged some airlines higher fees than those paid by other airlines.
The earlier discussion in this document explains the overall basis for our decision to bar the two types of unreasonably restrictive clauses in contracts between airlines and systems. These rule provisions will impose no burden or restriction on airlines. These provisions will benefit airlines that are small entities, because the provisions will prevent system practices that would deny an airline the ability to choose the level of service that it will buy from each system and to choose which distribution channels (and which systems, if any) will have access to its most attractive fares, including its webfares. Airlines could potentially reduce their distribution costs if they could choose to buy a lower level of service in one system without being compelled by a parity clause to pay for a higher level of service in that system. Similarly, an airline could encourage travellers to use lower-cost distribution channels, which would lower its distribution costs, if it could reserve attractive fares for the lower-cost channels rather then be required by contract to make the same fares available for sale through travel agents using a system, which tends to be a higher-cost method of distribution. Of course, airlines may bargain for lower CRS fees by agreeing to make all of their fares available for sale through a system and by accepting parity clauses. To the extent that systems may have market power and could therefore impose unreasonably restrictive terms for system participation if not barred from doing so, such system practices would be more likely to harm smaller airlines than larger airlines.
(iv)
Immediately ending the prohibition against display bias would enable systems to sell bias—preferential display positions—to individual airlines. While an airline's purchase of bias would enable that airline to obtain more bookings, even if rival airlines offered more attractive service or better fares, the airline would incur the cost of buying the bias, which would increase its total expenses. Moreover, allowing systems to sell preferential display positions could increase the airlines' aggregate expenses while not generating increased traffic. Display bias could benefit larger airlines at the expense of smaller airlines, because larger airlines could have additional resources for purchasing bias, and operate route systems of greater scope.
Some airlines and travel agency commenters urge us to broaden the rule against display bias by prohibiting systems from displaying a single service under multiple airline codes. We have determined not to adopt that proposal. The multiple display of code-share services for a single flight can put competing airline services at a disadvantage by lowering their position in a system's display. Code-sharing arrangements generally involve at least one large airline. However, the arrangements typically involve smaller airlines as well, such as commuter airlines serving smaller communities from a major airline's hubs or airlines like Alaska that have entered into code-share agreements with larger airlines. Two of the systems—Sabre and Amadeus—already limit the display of code-share services, and the other two systems could do so if they wish. Because the systems no longer are owned or controlled by U.S. airlines, they should have an incentive to limit the display of code-share flights if travel agents consider the multiple listings of a single service under different codes to reduce the value of the display.
(c)
Most U.S. airlines are small entities, and our final rule will bar systems from imposing certain types of contract requirements on participating airlines. The statistics given us by the Small Business Administration (“SBA”)
The rule will not apply to any other small entities. The rule will indirectly affect travel agencies, most of which are small entities, primarily because the rule will continue to prohibit display bias, a practice that decreases the efficiency of travel agency operations and the ability of travel agents to select the airline services that best meet their customers' needs. The final rule maintains none of the existing rules regulating contracts between systems and subscribers. The SBA has concluded that less than 500 travel agencies are not small entities. In 2001, there were 18,425 travel agencies, of which 117 had annual airline ticket sales that exceeded $50 million while 1,015 had annual airline ticket sales between $5 million and $50 million and the remaining 17,293 had annual airline ticket sales of less than $5 million. “Upheaval in Travel Distribution: Impact on Consumers and Travel Agents,” National Commission to Ensure Consumer Information and Choice in the Airline Industry” (November 13, 2002), at 113.
The NFIB Legal Foundation suggests that we should consider the interests of small businesses as consumers of air transportation, particularly because many of them rely on travel agents for researching and booking air transportation. NFIB Legal Foundation Comments at 2. We expect that our final rule will encourage more competition in the airline and airline distribution businesses, which will benefit consumers. The Regulatory Flexibility Act, however, requires a final regulatory flexibility statement only insofar as the agency rule directly regulates small entities.
(d)
(e)
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law. 104-121, we want to assist small entities in understanding the rule so that they can better evaluate its effects on them and take it into account in operating their businesses. If the rule affects your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or requirements, please consult Thomas Ray at (202) 366-4731.
These rules contain no collection-of-information requirements subject to the Paperwork Reduction Act, Public Law 96-511, 44 U.S.C. Chapter 35.
These rules will have no 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. Therefore, in accordance with Executive Order 13132, dated August 4, 1999, we have determined that the rules do not present sufficient federalism implications to warrant consultations with State and local governments.
These rules will not effect a taking or private property or otherwise have taking implications under Executive Order 12630, Government Actions and Interference with Constitutionally Protected Property Rights.
These rules meet 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 have analyzed these rules under Executive Order 13045, Protection of Children from Environmental Heath Risks and Safety Risks. These rules do not concern an environmental risk to health or risk to safety that may disproportionately affect children.
These rules will not have tribal implications, will not impose substantial direct compliance costs on Indian tribal governments, and will not preempt tribal law. Therefore, they are exempt from the consultation requirements of Executive Order 13175. No tribal implications were identified during the comment period.
We have analyzed these rules under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that they are not classified as a “significant energy action” under that order because they are a “significant regulatory action” under Executive Order 12866 and would not have a significant adverse effect on the supply, distribution, or use of energy.
These rules will have no significant impact on the environment. Therefore, an Environmental Impact Statement is
Air carriers, Antitrust, Consumer protection, Reporting and recordkeeping requirements, Travel agents.
49 U.S.C. 40101, 40102, 40105, 40113, 41712.
(a) The purpose of this part is to set forth requirements for the operation of computer reservations systems used by travel agents and certain related air carrier distribution practices so as to prevent unfair, deceptive, predatory, and anticompetitive practices in air transportation and the sale of air transportation.
(b) Nothing in this part operates to exempt any person from the operation of the antitrust laws set forth in subsection (a) of the first section of the Clayton Act (15 U.S.C. 12).
This part applies to firms that operate computerized reservations systems for travel agents in the United States, and to the sale in the United States of interstate, overseas, and foreign air transportation through such systems.
“Availability” means information provided in displays with respect to the seats a carrier holds out as available for sale on a particular flight.
“Carrier” means any air carrier, any foreign air carrier, and any commuter air carrier, as defined in 49 U.S.C. 40102(3), 49 U.S.C. 40102(22), and 14 CFR 298.2(f), respectively, that is engaged directly in the operation of aircraft in passenger air transportation.
“Display” means the system's presentation of carrier schedules, fares, rules or availability to a subscriber by means of a computer terminal.
“Integrated display” means any display that includes the schedules, fares, rules, or availability of all or a significant proportion of the system's participating carriers.
“On-time performance code” means a single-character code supplied by a carrier to the system in accordance with the provisions of 14 CFR Part 234 that reflects the monthly on-time performance history of a nonstop flight or one-stop or multi-stop single plane operation held out by the carrier in a CRS.
“Participating carrier” means a carrier that has an agreement with a system for display of its schedules, fares, or seat availability, or for the making of reservations or issuance of tickets through a system.
“Subscriber” means a ticket agent, as defined in 49 U.S.C. 40102(40), that holds itself out as a source of information about, or reservations for, the air transportation industry and that uses a system.
“System” means a computerized reservations system offered to subscribers for use in the United States that contains information about schedules, fares, rules or availability of carriers and provides subscribers with the ability to make reservations, if it charges any carrier a fee for system services. It does not mean direct connections between a ticket agent and the internal reservations systems of individual carriers.
(a) All systems shall provide at least one integrated display that includes the schedules, fares, rules, and availability of all participating carriers in accordance with the provisions of this section. This display shall be at least as useful for subscribers, in terms of functions or enhancements offered and the ease with which such functions or enhancements can be performed or implemented, as any other displays maintained by the system vendor. No system shall make available to subscribers any integrated display unless that display complies with the requirements of this section.
(1) Each system must offer an integrated display that uses the same editing and ranking criteria for both on-line and interline connections and does not give on-line connections a system-imposed preference over interline connections. This display shall be at least as useful for subscribers, in terms of functions or enhancements offered and the ease with which such functions or enhancements can be performed or implemented, as any other display maintained by the system vendor.
(2) Each integrated display offered by a system must either use elapsed time as a significant factor in selecting service options from the database or give single-plane flights a preference over connecting services in ranking services in displays.
(b) In ordering the information contained in an integrated display, systems shall not use any factors directly or indirectly relating to carrier identity.
(1) Systems may order the display of information on the basis of any service criteria that do not reflect carrier identity and that are consistently applied to all carriers and to all markets.
(2) When a flight involves a change of aircraft at a point before the final destination, the display shall indicate that passengers on the flight will change from one aircraft to another.
(3) Each system shall provide to any person upon request the current criteria used in editing and ordering flights for the integrated displays and the weight given to each criterion and the specifications used by the system's programmers in constructing the algorithm.
(c) Systems shall not use any factors directly or indirectly relating to carrier identity in constructing the display of connecting flights in an integrated display.
(1) Systems shall select the connecting points (and double connect points) to be used in the construction of connecting flights for each city pair on the basis of service criteria that do not reflect carrier identity and that are applied consistently to all carriers and to all markets.
(2) Systems shall select connecting flights for inclusion (“edit”) on the basis of service criteria that do not reflect carrier identity and that are applied consistently to all carriers.
(3) Systems shall provide to any person upon request current information on:
(i) All connecting points and double connect points used for each market;
(ii) All criteria used to select connecting points and double connect points;
(iii) All criteria used to “edit” connecting flights; and
(iv) The weight given to each criterion in paragraphs (c)(3)(ii) and (iii) of this section.
(4) Participating carriers shall be entitled to request that a system use up to five connect points (and double connect points) in constructing connecting flights for the display of service in a market. The system may require participating carriers to use specified procedures for such requests, but no such procedures may be unreasonably burdensome, and any procedures required of participating carriers must be applied without
(5) When a system selects connecting points and double connect points for use in constructing connecting flights it shall use at least fifteen points and six double connect points for each city-pair, except that a system may select fewer such connect or double connect points for a city-pair where:
(i) Fewer than fifteen connecting points and six double connect points meet the service criteria described in paragraph (c)(1) of this section; and
(ii) The system has used all the points that meet those criteria, along with all additional connecting points and double connect points requested by participating carriers.
(6) If a system selects connecting points and double connect points for use in constructing connecting flights it shall use every point requested by a participating carrier up to the maximum number of points that the system can use. The system may use fewer than all the connect points requested by participating carriers to the extent that:
(i) Points requested by participating carriers do not meet the service criteria described in paragraph (c)(1) of this section; and
(ii) The system has used all the points that meet those criteria.
(d) Each system shall apply the same standards of care and timeliness to loading information concerning every participating carrier. Each system shall display accurately information submitted by participating carriers. Each system shall provide to any person upon request all current data base update procedures and data formats.
(e) Systems shall use or display information concerning on-time performance of flights as follows:
(1) Within 10 days after receiving the information from participating carriers or third parties, each system shall include in all integrated schedule and availability displays the on-time performance code for each nonstop flight segment and one-stop or multi-stop single plane flight, for which a participating carrier provides a code.
(2) A system shall not use on-time flight performance as a ranking factor in ordering information contained in an integrated display.
(f) Each participating carrier shall ensure that complete and accurate information is provided each system in a form such that the system is able to display its flights in accordance with this section.
(g) A system may make available to subscribers the internal reservations system display of a participating carrier, provided that a subscriber and its employees may see any such display only by requesting it for a specific transaction.
(a) No system may require a carrier to maintain any particular level of participation or buy any enhancements in its system on the basis of participation levels or enhancements selected by that carrier in any other foreign or domestic computerized reservations system, as a condition to participation in the system.
(b) No system may require any carrier as a condition to participation to provide it with fares that the carrier has chosen not to sell through that system.
The obligations of a system under § 255.4 shall not apply with respect to a carrier that refuses to enter into and comply with a participating airline contract with that system.
No carrier may induce or attempt to induce a system to create a display that would not comply with the requirements of § 255.4.
Unless extended by a document published in the