The regulations in 7 CFR part 318 prohibit or restrict the interstate movement of fruits, vegetables, and certain other articles from Hawaii, Puerto Rico, the U.S. Virgin Islands, and Guam to prevent the introduction and dissemination of plant pests into the continental United States.

Within part 318, “Subpart—Sweetpotatoes” (§§ 318.30 and 318.30a, referred to below as the regulations) quarantines Hawaii, Puerto Rico, and the U.S. Virgin Islands because of the sweetpotato scarabee ( Euscepes postfasciatus Fairm. [Coleoptera: Curculionidae], also known as the West Indian sweetpotato weevil) and the sweetpotato stem borer ( Omphisa anastomosalis Guen. [Lepidoptera: Crambidae], also known as the sweetpotato vine borer) and restricts the interstate movement of sweetpotatoes ( Ipomoea batatas Poir.) from those places.

In an interim rule effective and published in the Federal Register on June 26, 2003 (68 FR 37931-37936, Docket No. 03-062-1), we amended the regulations governing the interstate movement of sweetpotatoes from Hawaii by providing for the use of irradiation as a treatment for sweetpotatoes to be moved interstate from Hawaii. The interim rule provided that the sweetpotatoes must be irradiated at a dose of 400 Gy (40 krad) and must also meet certain additional requirements, including inspection and packaging requirements. The interim rule provided an alternative to fumigation with methyl bromide for the treatment of Hawaiian sweetpotatoes.

Comments on the interim rule were required to be received on or before August 25, 2003. We received three comments by that date. The comments were from an entomologist, a public interest group, and an industry association. The comments are discussed below by topic.

One commenter noted that sweetpotato growers in the mainland United States have made continuing efforts to control insect pests that affect their production of sweetpotatoes, such as wire worms, cucumber beetle, flea beetle, grubs, fusarium, pox, and nematodes. This commenter further noted that sweetpotato breeders are working to develop varieties of sweetpotato that are resistant to these pests. The commenter recommended that, rather than risk the introduction of new pests of sweetpotatoes into the mainland United States, the Hawaiian growers interested in moving their sweetpotatoes interstate contract with sweetpotato breeders to develop varieties of sweetpotato that are resistant to the pests named in the pest risk assessment (PRA) that we conducted as a basis for the interim rule.

Prior to the interim rule, sweetpotatoes from Hawaii were allowed to move interstate if they had been fumigated with methyl bromide to mitigate the risks identified in the PRA. The interim rule simply provided sweetpotato growers with an alternative treatment, irradiation, that we believe is equally effective at mitigating the same risks. Hawaiian sweetpotato growers are free to develop varieties of sweetpotato that are resistant to sweetpotato pests present in Hawaii, but the Animal and Plant Health Inspection Service (APHIS) has no authority to compel them to do so. We believe that both fumigation and irradiation effectively mitigate the risk of pest introduction associated with the interstate movement of sweetpotatoes from Hawaii. We are making no changes in response to this comment.

One commenter pointed out two spelling errors in the preamble of the interim rule and requested two other nonsubstantive clarifications to language in the preamble. Because these comments do not affect the regulatory language we established in the interim rule, we are making no changes to the interim rule in response to these comments. However, we have corrected the spelling of the previously misspelled terms and used the clarifications suggested by the commenter in the discussion of comments below.

One commenter objected to the inclusion of the ginger weevil ( Elytroteinus subtruncatus [Coleoptera: Curculionidae]) on the list of quarantine pests associated with the interstate movement of sweetpotato from Hawaii. (The PRA that was the basis for the interim rule included the ginger weevil as a quarantine pest associated with such movement because it had been found as a hitchhiker on sweetpotato from Hawaii.) This commenter stated that the ginger weevil has not been documented as a pest of sweetpotato and that the interception data did not provide a sufficient basis for including the ginger weevil as a quarantine pest associated with the interstate movement of sweetpotato from Hawaii.

As the PRA stated, we do not have evidence that can confirm that sweetpotatoes do not serve as a host for the ginger weevil. In any case, fumigation with methyl bromide or the alternative irradiation treatment provided by the interim rule remains necessary to neutralize the sweetpotato scarabee and the sweetpotato stem borer, whose association with the interstate movement of sweetpotatoes from Hawaii this commenter did not dispute. Therefore, we are making no changes to the alternative irradiation treatment provided for by the interim rule in response to this comment.

One commenter requested that we clarify the meaning of the term “neutralize” as it applies to the effects of irradiation treatment on plant pests.

A pest is considered to have been neutralized by a treatment if the treatment has prevented the pest from establishing itself in an area where it is not currently present. For irradiation treatment, neutralizing a pest generally refers to either sterilizing the pest or preventing it from achieving sexual maturity, although irradiation treatment can in some cases kill pests that may be present.

Two commenters objected to the fact that the interim rule was promulgated before specific research was completed to determine the dose necessary to neutralize the three pests that the PRA identified as targets for treatment: The ginger weevil, the sweetpotato scarabee, and the sweetpotato stem borer. One commenter pointed out that, although we based the dose of 400 Gy required by the interim rule on estimated minimum absorbed doses in the International Plant Protection Convention (IPPC) Guidelines for the Use of Irradiation as a Phytosanitary Measure (ISPM Publication No. 18), the research from which these estimated minimum absorbed doses were developed does not provide specific doses for neutralizing the ginger weevil or the sweetpotato stem borer. Both commenters requested that APHIS prohibit the treatment of sweetpotatoes moved interstate from Hawaii with irradiation until pest-specific research has been completed.

APHIS published a notice of policy titled “The Application of Irradiation to Phytosanitary Problems” in the Federal Register on May 15, 1996 (61 FR 24433-24439, Docket No. 95-088-1). In the section of that notice dealing with research protocols for determining appropriate doses and conditions for quarantine treatment, we stated that “In some instances, efficacy [of a minimum absorbed dosage] may be inferred from the literature for related species and commodities when complete laboratory investigations are not possible.”

As we discussed in the interim rule, immediate action to allow the use of irradiation as an alternative treatment was warranted to alleviate the negative economic effects that Hawaiian growers and shippers faced as a result of our previous regulations, which identified fumigation as the only acceptable treatment for Hawaiian sweetpotatoes moved interstate. Fumigation facilities are unavailable on some islands in Hawaii on which sweetpotatoes are grown, and producers of sweetpotatoes on those islands must pay additional transportation costs for treatment before moving their sweetpotatoes interstate. Because a more accessible irradiation facility that provides the desired phytosanitary security was available to these producers, the requirement that sweetpotatoes must be fumigated to be moved interstate imposed an unnecessary economic hardship on these producers. Because we needed to take immediate action, we were not able to complete pest-specific research; therefore, in accordance with our notice of policy, we reviewed the available literature on related species and commodities to determine what dose would be effective at neutralizing the pests of concern.

The estimated minimum absorbed doses for certain responses for selected pest groups found in Appendix I of the IPPC guidelines were based on literature reviews by G.J. Hallman and the International Atomic Energy Agency's International Database on Insect Disinfestation and Sterilization (IDIDAS). 1 As discussed above, specific research has not been completed to determine the dose necessary to completely neutralize the ginger weevil, the sweetpotato scarabee, and the sweetpotato stem borer. However, the IDIDAS does cite a study indicating that a dose of 100 Gy (10 krad) is sufficient to induce 90 percent sterility in the sweetpotato scarabee.

The sweetpotato scarabee and the ginger weevil are stored product beetles classified under the order Coleoptera; the sweetpotato stem borer is a borer classified under the order Lepidoptera. The IDIDAS and the literature review by Hallman include references to studies of other pests of the order Coleoptera and other pests of the order Lepidoptera; the IPPC estimated minimum absorbed doses were derived from a general assessment of these references. The IPPC guidelines recommend a minimum absorbed dose of 50 to 400 Gy (5 to 40 krad) to sterilize actively reproducing adults of pests of the order Coleoptera and a minimum absorbed dose of 100 to 280 Gy (10 to 28 krad) to sterilize actively reproducing adults of pests of the order Lepidoptera. The dose of 400 Gy (40 krad) required by the interim rule is well above the IPPC guidelines' minimum dose range for borers of the order Lepidoptera and at the top of the minimum dose range for stored product beetles of the order Coleoptera. In our literature review, we determined that the ginger weevil, the sweetpotato scarabee, and the sweetpotato stem borer are biologically similar enough to other members of their respective orders, most of which are neutralized at doses well below 400 Gy (40 krad), that we believe that the 400 Gy (40 krad) dose required by the interim rule is a conservative minimum requirement that will be effective at neutralizing those three pests.

In addition, as we stated in the interim rule, preliminary research conducted by the USDA's Agricultural Research Service on the sweetpotato scarabee and the sweetpotato stem borer indicates that irradiating sweetpotatoes with a dose of 400 Gy (40 krad) kills all of these pests if they are present in the sweetpotatoes. According to this research, a dose of 250 to 300 Gy (25 to 30 krad) is sufficient to stop reproduction in these pests. (In the preamble of the interim rule, we incorrectly stated that the preliminary research mentioned here had found that a dose of 200 Gy [20 krad] was sufficient to stop reproduction in these pests; one commenter supplied us with the revised figure, and we have used it here.) Given this information, we continue to believe that the minimum dose of 400 Gy (40 krad) required by the interim rule is a conservative minimum requirement that will neutralize all three of the pests targeted by the treatment. We are making no changes in response to these comments.

One commenter noted that the preamble of the interim rule stated that requiring visual inspection for the gray pineapple mealybug and the Kona coffee root-knot nematode as a condition of the interstate movement of sweetpotato from Hawaii “is consistent with the recommendations of the pest risk assessment.” The commenter also noted that the PRA states at one point that “Port of entry inspections appear insufficient to safeguard U.S. agriculture.” The commenter believed that these statements were inconsistent.

The statement “Port of entry inspections appear insufficient to safeguard U.S. agriculture” can be found in the executive summary of the PRA; it refers to the overall pest risk presented by the interstate movement of sweetpotatoes from Hawaii before mitigations are applied and is not a characterization of any of the mitigation measures recommended in the PRA for any specific pests. The PRA found that the gray pineapple mealybug and the Kona coffee root-knot nematode have pest risk potential values of “medium” and “low,” respectively. Pests with pest risk potential values of “low” typically do not require specific mitigation measures, while specific phytosanitary measures may be necessary for pests with values of “medium.” Because the two pests in question are external pests, we believe they can be visually detected by inspectors. We are making no changes in response to this comment.

One commenter questioned the reliability of visual inspection for detecting whether the gray pineapple mealybug and the Kona coffee root-knot nematode are present on sweetpotatoes moved interstate from Hawaii.

We are confident that all inspectors have the training and skills necessary to visually detect these pests.

One commenter asked what safeguards were in place to prevent the escape of pests from Hawaiian sweetpotatoes moved interstate if the sweetpotatoes were moved to a facility within the continental United States for irradiation treatment.

The interim rule requires that sweetpotatoes moved interstate from Hawaii to a facility within the continental United States for irradiation treatment must be moved under limited permit. Any shipping containers of sweetpotatoes moved interstate from Hawaii to a facility within the continental United States for treatment must also be sealed. In addition, the sweetpotatoes must be visually inspected and found to be free of gray pineapple mealybug and the Kona coffee root-knot nematode before they are moved interstate from Hawaii for treatment. We believe these safeguards are adequate to prevent the escape of any pests that may be present prior to the irradiation of the sweetpotatoes. We are making no changes in response to this comment.

One commenter questioned the economic viability of Hawaiian sweetpotato production in the context of the interim rule. The commenter noted that the economic analysis in the interim rule gave the farm price of Hawaiian sweetpotatoes as 50 cents per cwt  2 for 2001, as reported by the Hawaiian Agricultural Statistical Service, while the farm price of sweetpotatoes in the mainland United States averaged 17 cents per cwt in 2002. In addition, production per acre of Hawaiian sweetpotatoes was far less than sweetpotato production per acre in mainland States. Given the additional costs of treatment and transportation from Hawaii to the mainland United States, the commenter asked how Hawaiian sweetpotato growers could expect to make a profit by moving their crop interstate. This question, in the commenter's view, cast doubt on the wisdom of allowing irradiation to be used as an alternative to fumigation with methyl bromide as a treatment for sweetpotatoes moved interstate from Hawaii, as the use of irradiation as an alternate treatment increased the risk of pest introduction via sweetpotatoes moved interstate from Hawaii and would not benefit Hawaiian producers of sweetpotatoes, since they would be unable to compete with mainland producers.

The sweetpotatoes grown in Hawaii and intended for interstate movement are a special purple variety, known as the Okinawan sweetpotato. Because the sweetpotatoes produced in Hawaii are a specialty product, the prevailing price for the crops of Hawaiian sweetpotato growers may be different than that of the crops of mainland sweetpotato producers. We have clarified this point in the economic analysis in this affirmation of the interim rule. However, this information does not affect our conclusion that irradiation is an effective alternative treatment to fumigation with methyl bromide for sweetpotatoes moved interstate from Hawaii.

Two commenters expressed concern that allowing irradiation as an alternative to fumigation with methyl bromide for treatment of sweetpotatoes moving interstate from Hawaii might result in significant economic effects for producers of sweetpotatoes in the mainland United States. One stated that the opening of the market for sweetpotatoes in the mainland United States for sweetpotatoes from Hawaii would probably result in increased production in Hawaii, and that the increased production would compete directly with the sweetpotatoes produced in the mainland United States; thus, even though current production of Hawaiian sweetpotatoes would not have a significant impact on a substantial number of small entities, the commenter asserted that such an impact was possible in the future. The other commenter, in reference to our statement that “even if the irradiation treatment leads to increased production of sweetpotatoes, sweetpotato shipments from Hawaii are unlikely to affect mainland producers negatively,” asked how we had determined this, and further asked why we had not determined the elasticity of demand for sweetpotatoes before issuing the interim rule. The commenter also asserted that any amount of additional competition in the mainland market for sweetpotatoes is likely to have significant negative economic effects on mainland sweetpotato growers.

In the economic analysis in the interim rule, we stated that any increases in the volume of sweetpotatoes moved interstate from Hawaii due to the addition of irradiation as an alternative treatment would not significantly affect mainland sweetpotato producers because Hawaiian sweetpotato production is extremely small compared to total U.S. sweetpotato production. Hawaiian sweetpotato production in 2001, the last year for which State data are available, was 1.8 million pounds; total U.S. sweetpotato production in 2003 is estimated by the U.S. Department of Agriculture's Economic Research Service (ERS) to be 1.36 billion pounds. Producers have started new plantings of Hawaiian sweetpotatoes since the interim rule became effective and the irradiation treatment became available; however, even with these plantings, Hawaiian sweetpotato production will still be extremely small as a percentage of total U.S. sweetpotato production. In addition, as noted above, Hawaiian sweetpotatoes are intended for niche markets due to their special purple color. Thus, as long as sweetpotatoes moved interstate from Hawaii are treated in accordance with the regulations, there is no apparent reason for APHIS to expect these shipments to affect mainland producers negatively. Based on this evidence, we believe an extensive analysis of U.S. demand for sweetpotatoes is unnecessary.

Regarding the comment that the interim rule opened the mainland U.S. sweetpotato market to Hawaiian sweetpotatoes, we would like to emphasize that Hawaiian sweetpotatoes had previously been allowed to move interstate after fumigation with methyl bromide. The interim rule simply provided that irradiation could be used as an alternative to fumigation.

In the economic analysis in the interim rule, we cited statistics indicating that domestic sweetpotato production grew 15 percent between 1989-1991 and 1999-2001. Two commenters stated that this statistic could be misleading. One pointed out that per capita potato consumption has remained flat since 1989-1991 at 4.1 pounds per person, according to ERS. The other asserted that sweetpotato production has become essentially cyclical in the last 30 years, as rising prices lead to increased production, which leads to falling prices, which lead in turn to less production.

The statistics we cited in the interim rule referred to production, and not to consumption; they were cited to provide background on U.S. sweetpotato production. We stated in the economic analysis in the interim rule that sweetpotato production had peaked in 1932 and then demonstrated a long-term downward trend. However, analysis of the time series data shows that—though the long-term trend has been declining, and production fluctuated from year to year—an increasing trend in sweetpotato production has prevailed since 1989.

Responding to the statement in the interim rule's economic analysis that the total volume of sweetpotatoes moved interstate from Hawaii was not likely to exceed 100 containers due to production limitations, one commenter asked us to express that amount in pounds.

A typical shipping container used to transport Hawaiian sweetpotatoes can hold about 24,000 pounds of sweetpotatoes, so the total volume of sweetpotatoes moved interstate from Hawaii each year would not be likely to exceed 2.4 million pounds, even if Hawaii were to produce its maximum possible volume of sweetpotatoes. As noted earlier, current yearly Hawaiian sweetpotato production is 1.8 million pounds.

Approximately 30,000 to 40,000 pounds of sweetpotatoes are now moved interstate from Hawaii to the mainland United States per week, although these shipments have occurred during the low season and industry representatives expect their volume to increase. We have added this information to the economic analysis in this affirmation of the interim rule.

One commenter asked several questions about the capacity of the irradiation facility currently operating in Hawaii to treat sweetpotatoes to be moved interstate from Hawaii.

Because this capacity will vary according to the number of individual shipments treated in the facility and the number of pallets of sweetpotatoes per shipment, we cannot provide a definite answer. Extensive data on the volume of sweetpotatoes treated at the Hawaiian facility are not yet available to us and will only be generated as the operation of the facility continues.

Regarding the two points discussed above, one commenter was confused as to whether the limitations on Hawaii's production capacity relate to the fact that if the capacity of the irradiation facility currently operating in Hawaii is not enough to treat all the sweetpotatoes producers and shippers wish to move interstate, sweetpotatoes may be shipped to mainland irradiation facilities for treatment.

These two capacities are independent. If sweetpotatoes cannot be irradiated at the irradiation facility currently operating in Hawaii, they must be irradiated on the mainland or fumigated with methyl bromide in order to be eligible to move interstate.

One commenter asked whether production of Hawaiian sweetpotatoes is seasonal.

Hawaiian sweetpotatoes are produced and moved interstate throughout the year, but there is some seasonal variation in volume, according to industry representatives; production during the high season can be about three times the production during the low season. We have added this information to the economic analysis in this affirmation of the interim rule.

One commenter noted that, under some circumstances, fumigation with methyl bromide could be less expensive than irradiation treatment for sweetpotatoes moved interstate from Hawaii. The commenter asked how we could know that Hawaiian sweetpotato producers and shippers would use irradiation treatment and what percentage of the Hawaiian sweetpotato crop we would expect to be irradiated.

The interim rule provided Hawaiian sweetpotato producers and shippers with an additional option for treating their product prior to moving it interstate; these producers and shippers are free to choose the alternative they prefer. As stated in the economic analysis, the fumigation of larger volumes of sweetpotatoes may, at some volumes, be performed at a lower per-unit cost than irradiation. However, irradiation can be performed at a more convenient location for some producers and eliminates the costs associated with transport between islands and overtime costs for APHIS monitoring of the fumigation process. It is also possible that the economic attractiveness of the irradiation option might increase in the future, since the supply of methyl bromide will diminish in the future due to the requirements of the Montreal Protocol, and the cost of fumigation is expected to increase accordingly. As discussed above, however, extensive data on the volume of sweetpotatoes treated at the Hawaiian facility are not yet available to us and will only be generated as the operation of the facility continues.

One commenter asked why Hawaii could not simply consume its own sweetpotato production, rather than moving sweetpotatoes interstate to the mainland United States.

APHIS has no authority over the movement of goods in interstate commerce except when such movement poses a plant or animal health risk. Hawaiian sweetpotato producers and shippers wish to move their sweetpotatoes interstate, and the interim rule provided an alternate treatment that gave those producers and shippers more options for interstate movement.

For one commenter, the interim rule appeared to be a deliberate attempt to benefit Hawaiian sweetpotato growers at the expense of mainland sweetpotato growers. The commenter cited in particular the statement in the economic analysis of the interim rule that providing the alternative irradiation treatment “may lead to increased production of sweetpotatoes in Hawaii if the lower cost of treatment makes sweetpotato a more profitable crop to produce and ship.” The commenter took from this statement an implication that Hawaiian sweetpotato was already profitable and that APHIS was seeking to make it more profitable, and was concerned that a rule designed to make one production area more profitable than others within the United States would be unfair.

APHIS establishes regulations to address animal and plant health risks. Of all the States, only sweetpotatoes grown in Hawaii, Puerto Rico, and the U.S. Virgin Islands are required to be treated prior to interstate movement. Allowing irradiation to be used as an alternative to methyl bromide for treatment of sweetpotatoes moved interstate from Hawaii was not intended to favor producers in Hawaii over producers in other States, but rather to provide Hawaiian producers with another means of complying with the interstate movement restrictions they face.

One commenter asked whether the economic benefits gained by the irradiation treatment facility currently operating in Hawaii were our motivation for allowing irradiation to be used to treat sweetpotatoes moving interstate from Hawaii.

We stated our motivation for allowing irradiation as an alternate treatment in the interim rule under the heading “Immediate Action.” Immediate action was warranted to alleviate the negative economic effects that Hawaiian growers and shippers faced as a result of our previous regulations, which required fumigation as the only acceptable treatment for Hawaiian sweetpotatoes moved interstate. Fumigation facilities are unavailable on some islands in Hawaii on which sweetpotatoes are grown, and producers of sweetpotatoes on those islands must pay additional transportation costs for treatment before moving their sweetpotatoes interstate. Because a more accessible irradiation facility that provides the desired phytosanitary security was available to these producers, the requirement that sweetpotatoes must be fumigated to be moved interstate imposed an unnecessary economic hardship on these producers. The interim rule made irradiation treatment available to those producers.

One commenter supplied us with more current data on the operations of the irradiation treatment facility currently operating in Hawaii:

• We stated in the interim rule's economic analysis that the irradiation facility is used to treat bell peppers, eggplants, mangoes, papayas, pineapples (other than smooth Cayenne), Italian squash, and tomatoes. Although the regulations allow irradiation to be used as a treatment for bell peppers, eggplants, pineapples, Italian squash, and tomatoes to be moved interstate from Hawaii, the irradiation facility is currently not being used to treat these commodities. However, the facility is treating atemoya, carambola, litchi, longan, and rambutan.

• We also stated in the interim rule's economic analysis that some Hawaiian fruits and vegetables are sometimes shipped to irradiation facilities in the mainland United States for treatment. The commenter stated that all the produce for which irradiation is an approved treatment is currently treated in Hawaii before it is moved interstate.

We have updated the economic analysis accordingly.

Therefore, for the reasons given in the interim rule and in this document, we are adopting the interim rule as a final rule without change.

This action also affirms the information contained in the interim rule concerning Executive Orders 12866, 12372, and 12988 and the Paperwork Reduction Act.

Further, for this action, the Office of Management and Budget has waived its review under Executive Order 12866.

This rule affirms an interim rule that amended the regulations to provide for the use of irradiation as a treatment for sweetpotatoes to be moved interstate from Hawaii. The interim rule also provided that the sweetpotatoes have to meet certain additional requirements, including inspection and packaging requirements. The interim rule provided for the use of irradiation as an alternative to methyl bromide for the treatment of sweetpotatoes moving interstate from Hawaii.

The following analysis addresses the economic effect of this rule on small entities, as required by the Regulatory Flexibility Act.

Commercial sweetpotato production in Hawaii occurs on the islands of Hawaii, Kauai, Maui, and Oahu. There were 53 sweetpotato farms in Hawaii in 1997. 3 In 2001, the production of sweetpotatoes in Hawaii amounted to 1.8 million pounds, and the value of sales of these sweetpotatoes was $900,000 (table 1). The sweetpotatoes intended for interstate movement are of a special purple flesh variety known as the Okinawan sweetpotato. The crop is in year-round production in Hawaii.

In the continental United States, sweetpotato is grown commercially in Alabama, California, Georgia, Louisiana, Mississippi, New Jersey, North Carolina, South Carolina, Texas, and Virginia. 4 North Carolina, Louisiana, Mississippi, and California account for the major proportion of production area by State (table 2). In total, the United States produced 1.36 billion pounds of sweetpotatoes from 93,500 acres in 2003 (table 3).

The crop is grown on 1,770 farms, which represents a decrease of 44 percent since 1987. 5 Production of sweetpotatoes peaked in 1932 when 48 million cwt was generated, followed by a long-term downward trend in production. However, sweetpotato production trended higher again after 1988, and increased by 15 percent between 1989-1991 and 1999-2001. Farm cash receipts averaged $214 million over the period 1999-2001. Few imports of sweetpotatoes enter the continental United States, with 97 percent of the import volume moving directly from the Dominican Republic into Puerto Rico. The Hawaiian sweetpotato production of 1.8 million pounds thus comprises a fairly minor proportion of the total production of 1.36 billion pounds in the United States.

More than three-quarters of the annual U.S. sweetpotato crop is sold as human food, and around two-thirds of the total sales are for the fresh market. About a quarter of the sweetpotatoes sold for food are processed into frozen products, and 2 to 3 percent are chipped or dehydrated. U.S. sweetpotato utilization averaged 1.1 billion pounds during 1999-2001, accounting for almost 3.9 pounds per capita.

Methyl bromide fumigation is currently conducted on the Island of Oahu. The product has to be moved by barge from the port of Hilo on the Island of Hawaii to the port of Honolulu on Oahu. The charge for such transportation is between 2 to 3 cents per pound. A pallet of sweetpotatoes weighs 1,500 pounds (50 30-pound boxes), so the charge is approximately $35 per pallet for a non-chilled shipment. Trucking and handling charges to move the sweetpotatoes from the pier on Oahu to the fumigation site and, after fumigation, back to the pier or to the airport are estimated at $34 per pallet.

The per-unit cost of methyl bromide fumigation is influenced by the number of pallets treated. Costs are $610 for 1 to 6 pallets, $1,026 for 7 to 9, and $1,250 for 10 to 12. The minimum charge is $610. Per-unit cost thus decreases as more pallets are treated within these ranges. For example, the cost decreases from 40.6 cents per pound to 6.7 cents per pound if six pallets instead of only one pallet are treated at $610 (table 4).

APHIS monitoring of the treatment costs $368 per treatment. This is based on a minimum of 2 hours required to set up for the fumigation, a minimum of 2 hours for necessary after-treatment labor such as certification, and 2 hours minimum travel time each way to monitor the fumigation. The total 8 hours at $46 per hour amounts to $368. Due to the time delays involved in inter-island movements of sweetpotatoes, all fumigations are conducted after 4 p.m. or on weekends, which means that APHIS treatment monitors are paid “time-and-a-half” wages. If the sweetpotatoes being treated belong to more than one shipper, the APHIS costs are evenly divided between the shippers, regardless of the relative quantities treated for each shipper. For example, if two shippers are involved, each would pay $184, even if one shipper's sweetpotatoes comprised more than half of the total treated. APHIS monitoring costs for fumigation do not vary with the number of sweetpotatoes treated.

Various time delays are involved in the inter-island movement of the sweetpotatoes for fumigation, meaning that this transportation is sometimes problematic. Shipments from the main island, Hawaii, generally leave Hilo on Monday, with the barge arriving at Oahu on Wednesday. These shipments are treated on Wednesday or Thursday and arrive by Friday on the mainland U.S. west coast if transported by air. The barge that leaves Hilo on Thursday arrives at Oahu on Saturday. Weekend fumigation is conducted at significantly higher costs and Sunday pickup at the pier is not allowed. Thus, shipping sweetpotatoes on the Thursday barge is generally avoided. 7

There are also concerns regarding the future cost and availability of methyl bromide given the continuing reductions in the use of methyl bromide mandated by the Montreal Protocol, which governs the use of substances that deplete stratospheric ozone; in 2005, all uses of methyl bromide in developed countries other than quarantine and pre-shipment applications and critical or emergency uses will be prohibited. The price of methyl bromide has increased significantly as worldwide production of methyl bromide has decreased from its 1991 baseline. According to the U.S. Environmental Protection Agency, U.S. west coast end-user prices of methyl bromide have increased from $1.25 per pound to $4.50 per pound over the period 1995 to 2001. This represents an increase of 366 percent. Further price increases are deemed likely as the 2005 phase-out date approaches.

The cost of irradiation is estimated at 15 cents per pound. 8 Lot sizes will be as requested by shippers. Irradiation treatment generally occurs between 8 a.m. and 4 p.m. At these times, an APHIS inspector would already be onsite at the irradiation facility to monitor the treatment under the terms of the compliance agreement irradiation facilities must operate under in order to treat fruits and vegetables from Hawaii for interstate movement. Therefore, there would generally be no additional APHIS charges associated with irradiation treatment. Shippers could choose to have their sweetpotatoes treated outside of normal hours and thus incur APHIS charges for overtime labor, but such scheduling would be optional; as noted above, all fumigation treatments currently must be conducted during overtime hours.

The irradiation will occur mostly at an existing facility in Hawaii, prior to the shipment of the sweetpotatoes to the mainland United States. The X-ray irradiation facility in Hawaii commenced its commercial operation on August 1, 2000. At first, only papayas were treated. Five hundred to 1,000 boxes of papayas are treated per day, 4 times a week. The facility is currently also used to treat other Hawaiian fruits and vegetables for which irradiation is an approved treatment. At present, all of the fruits and vegetables produced in Hawaii for which irradiation is an approved treatment are irradiated in Hawaii before they are moved interstate.

The Hawaiian sweetpotatoes intended for the U.S. mainland markets are of a special purple flesh variety. The crop therefore comprises a specialty product intended for niche markets. The sweetpotatoes are in year-round production in Hawaii, but some seasonal variation in volume is expected. Out-shipment of the sweetpotatoes has been estimated at 50,000 to 60,000 pounds per week, and an estimated 30,000 to 40,000 pounds per week has been shipped since the interim rule was published. However, these weekly shipments occurred during the low season, and industry representatives expect the shipments to increase. New plantings of the crop have also commenced since the irradiation treatment became available.

The approval of irradiation as an alternative treatment for sweetpotatoes moved interstate from Hawaii will benefit various stakeholders. At 15 cents per pound, irradiation can be conducted at a lower cost than fumigation of one to two pallets (20.3 to 40.6 cents per pound) (table 4). Though larger quantities of sweetpotatoes, which fill more pallets, can be fumigated at lower per-unit costs (6.7 to 13.5 cents per pound), irradiation eliminates the transport costs associated with fumigation for producers on the island of Hawaii. These transport costs include moving the crop from the island of Hawaii to Oahu (2 to 3 cents per pound) and trucking and handling costs of moving the crop between the harbor or airport and the fumigation site on Oahu ($34 per pallet, about 2.3 cents per pound). Irradiation also eliminates the cost of $368 per treatment attributable to APHIS monitoring of fumigation, which is currently conducted outside standard business hours, for all producers.

Growers and shippers on the main island of Hawaii will benefit from lower transportation costs, since shipment of the crop from Hawaii to Oahu for fumigation will no longer be necessary. The availability of treatment at a more convenient location will also remove various logistical complications. This will reduce the total expense and time delay in moving the product and will enable sweetpotatoes to be treated and shipped at a lower cost than is currently possible with fumigation. The importance of alternative treatments is especially highlighted in view of the mandated global reductions in the use of methyl bromide under the Montreal Protocol. Irradiation also tends to affect quality less negatively than fumigation and may extend the shelf life of the tubers.

The irradiation facility in Hawaii will benefit from having more crops available to treat. The treatment available at this facility has enabled many producers in Hawaii to move their products to the mainland, thus providing them with access to markets that were not previously available. For several years, the State of Hawaii has encouraged farmers to diversify agricultural production, given the significant decline in the production of sugarcane as a major crop. The approval of irradiation as a treatment for sweetpotatoes moved interstate from Hawaii will help to provide steady throughput for this facility. The facility currently treats seasonal crops whose volume is more variable than that of sweetpotatoes and is thus sometimes underutilized. A steady source of revenues from treatment, such as revenues from treating sweetpotatoes to be moved interstate, would help assure this facility's continued operation and availability for all the producers in Hawaii who can use it.

U.S. mainland consumers will benefit by an increased supply of sweetpotatoes, and particularly the increased availability of the specialty purple sweetpotatoes Hawaii produces. Hawaiian sweetpotato production amounts to 1.8 million pounds, which comprises a small proportion of the total production of 1.36 billion pounds in the United States (tables 1, 2 and 3).

Thus, as long as phytosanitary protection is maintained by treating sweetpotatoes from Hawaii prior to interstate movement, sweetpotato shipments from Hawaii are unlikely to affect mainland producers negatively, even if the availability of the irradiation treatment leads to further increases in the production of Hawaiian sweetpotatoes. Furthermore, the purple sweetpotatoes Hawaii produces are intended for niche markets in the mainland United States. However, to the extent that this interim rule makes moving sweetpotatoes from Hawaii interstate more convenient and less costly, the rule provides the Hawaiian sweetpotato industry with opportunities to expand the mainland markets for its specialty product.

The Regulatory Flexibility Act requires that agencies specifically consider the economic impact of their regulations on small entities. The Small Business Administration (SBA) has established size criteria using the North American Industry Classification System (NAICS) to determine which economic entities meet the definition of a small firm.

The irradiation facility in Hawaii is expected to be the primary facility to treat Hawaiian sweetpotatoes before they are moved interstate. However, the sweetpotatoes may also be sent to one of the three other facilities on the mainland United States. These include facilities in Libertyville and Morton Grove in Illinois, and a facility in Whippany, New Jersey. The facility in Hawaii can be classified under NAICS category 115114, “Postharvest Crop Activities (except Cotton Ginning).” According to the SBA's criteria, this facility is classified as a small entity, since its annual sales are less than $6 million. A single firm owns the two facilities in Illinois and the facility in New Jersey. Its primary service is to provide irradiation treatment for the sanitation of medical devices on contract. This firm is classified under NAICS category 325612, “Polish and Other Sanitation Good Manufacturing.” However, since it is part of a larger corporation with 500 or more employees, that firm is not considered a small entity under the SBA's criteria.

Sweet potato farming is classified under NAICS 111219, “Other Vegetables (except Potato) and Melon Farming.” According to the SBA's criteria, an entity involved in crop production is considered small if it has average annual receipts of less than $750,000. Since the 53 sweetpotato farms in Hawaii accounted for sales of $900,000 in 2001, we believe it is safe to assume that all of these farms would be classified as small entities. We expect that the economic effects of this rule will be positive for those producers, to the extent that this rule makes moving sweetpotatoes from Hawaii interstate more convenient and less costly.

As discussed above, new sweetpotato plantings in Hawaii have commenced since the interim rule became effective. Nevertheless, even if sweetpotato production increases in Hawaii, the relative volume of production (1.8 million pounds) remains minimal in comparison to the volume of U.S. mainland production (1.36 billion pounds). The purple-fleshed Hawaiian sweetpotatoes furthermore are a specialty product intended for niche markets. Thus, as long as phytosanitary protection is maintained by treating sweetpotatoes from Hawaii prior to interstate movement, sweetpotato shipments from Hawaii are unlikely to affect mainland producers negatively.

Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action will not have a significant economic impact on a substantial number of small entities.

Discussion What Events Have Caused This AD?

We have received several reports that a condition exists in some of the electrical control modules in the airplane electrical system.

FAA analysis indicates that there is inadequate clearance and inadequate electrical isolation between the load terminal and metal case. The modules load terminal is cutting through the rubber insulating grommet and contacting the module's metal case. This causes the electrical short circuit and electrical arcing.

The following electrical system components are potentially affected by this condition: engine start; strobe light; left/right taxi light; liquid crystal display (LCD) dimming; dual flasher (recognition light); left/right pitot heat; avionics dimming (Bezel buttons for radios); prop heat; left/right fuel pump; position light landing light; instrument panel light dimming; ice light; vent defog (vent blower); hi/low blower; stall heat; and dimmer switch lighting (overhead switch panel switches).

If not corrected, short circuit failure and electrical arcing of the electronic control modules could result in loss of the electrical systems components or burning of wiring insulation and cause smoke in the cockpit. This condition could lead to the inability to properly control the airplane.

We issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to certain Piper Model PA-46-500TP airplanes. This proposal was published in the Federal Register as a notice of proposed rulemaking (NPRM) on October 9, 2003 (68 FR 58289). The NPRM proposed to require you to replace all electronic control modules in the airplane electrical system with newly designed modules.

We provided the public the opportunity to participate in developing this AD. The following presents the comment received on the proposal and FAA's response to the comment:

The manufacturer recommends revising the costs of compliance based on the following, updated information:

—There are 152 airplanes affected by this AD instead of 130 as stated in the proposed AD;

—Although all affected airplanes will have the parts modified under warranty, 108 of the affected airplanes will get warranty credit for the labor costs to have the parts removed, replaced, and tested after reinstallation;

—The workhours for labor are 12 instead of 22 as stated in the proposed AD.

—The total cost on U.S. operators will be $34,320 instead of $185,900 as stated in the proposed AD based on 44 affected airplanes not covered under warranty for the labor costs, which are recalculated using 12 workhours.

We agree that the new cost data provided by the manufacturer be used in the AD.

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 minor editorial corrections. We have determined that these minor corrections:

—are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

—do not add any additional burden upon the public than was already proposed in the NPRM.

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 152 airplanes in the U.S. registry.

We estimate the following costs to accomplish the modification:

There are 108 of the affected airplanes that are also covered under warranty for the labor costs to have the parts removed, replaced, and tested after reinstallation.

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 ADDRESSES. Include “AD Docket No. 2003-CE-32-AD” in your request.

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 727, 727-100C, 727-200F, and 727C series airplanes was published in the Federal Register on November 18, 2003 (68 FR 64998). That action proposed to require repetitive open-hole high frequency eddy current inspections for cracks in the fuselage skin, strap (bearstrap), and doubler at the forward and aft hinge fittings for the main deck cargo door, and repair of any cracks found.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comment received.

The commenter, the manufacturer, requests that paragraph (b) of the proposed AD be revised to alternatively allow DERs to approve alternative methods of compliance (AMOC) for the actions specified in paragraph (a) of the proposed AD.

The FAA agrees. The option to allow DER approval of AMOCs was inadvertently omitted from paragraph (b) of the proposed AD. Therefore, we have revised paragraph (b) of this final rule to include that provision.

After careful review of the available data, including the comment noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the change previously described. The FAA has determined that this change will neither increase the economic burden on any operator nor increase the scope of the AD.

We consider this AD to be interim action. If final action is later identified, we may consider further rulemaking then.

There are approximately 195 airplanes of the affected design in the worldwide fleet. We estimate that 133 airplanes of U.S. registry will be affected by this AD. We provide the following cost estimates to comply with this AD, per inspection cycle:

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 all Boeing Model 727, 727C, 727-100, and 727-100C series airplanes was published in the Federal Register on November 18, 2003 (68 FR 64994). That action proposed to require repetitive detailed and special detailed inspections for cracks in the web, inner chord, and outer chord of the forward and aft frames of the aft cargo door opening; and repair of any crack found.

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.

The FAA has determined that the option to alternatively allow Boeing Company Designated Engineering Representatives to approve alternative methods of compliance for the actions specified in paragraph (a) of the proposed AD was inadvertently omitted from paragraph (b) of the proposed AD. Therefore, we have revised paragraph (b) of this final rule to include that provision.

After careful review of the available data, the FAA has determined that air safety and the public interest require the adoption of the rule with the change previously described. The FAA has determined that this change will neither increase the economic burden on any operator nor increase the scope of the AD.

We consider this AD to be interim action. The manufacturer is currently developing a modification that will address the unsafe condition identified in this AD. Once this modification is developed, approved, and available, we may consider additional rulemaking.

There are approximately 193 airplanes of the affected design in the worldwide fleet. We estimate that 129 airplanes of U.S. registry will be affected by this AD. We provide the following cost estimates for the required inspections, per inspection cycle:

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

For the reasons discussed above, I certify that this action (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

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 737-100, -200, -200C, -300, -400, and -500 series airplanes was published in the Federal Register on September 18, 2003 (68 FR 54684). That action proposed to require replacing the existing screw, nut, and washers that attach the latch cable assembly to the latch block assembly of the door mounted escape slides, with the new, improved screw, nut, and washers.

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 generally agree with this proposed AD and have no additional comments.

Three commenters request that the proposed compliance time for the replacement be extended from 18 months to 36 months. The commenters state that the extended compliance time would allow for the replacement to be accomplished concurrently with the modification of the escape slide compartment hinge assembly required by AD 2004-02-08, amendment 39-13443 (69 FR 4452, January 30, 2004). In addition, a compliance time of 36 months will allow operators to perform the replacement during the typical overhaul period for escape slides.

The FAA agrees with the commenters' request to extend the compliance time for the replacement. Extending the compliance time by 18 months will not adversely affect safety and will allow the replacement to be performed during regularly scheduled maintenance visits. Paragraph (a) of the AD has been revised to specify a compliance time of 36 months.

Four commenters request that paragraph (b) of the proposed AD be revised to state specifically that the nut, part number (P/N) BACN10R10L, and screw, P/N NAS623-3-8, cannot be installed in the latch assembly. The commenters state that the intent of the proposed AD is to identify nuts, P/N BACN10R10L, and screws, P/N NAS623-3-8, that are not to be installed on the latch assembly. These parts are used elsewhere throughout the airplane and are not exclusive to the latch assembly.

We agree with the commenters that the intent of the proposed AD is to prevent nuts, P/N BACN10R10L, and screws, P/N NAS623-3-8, from being installed on the latch assembly. We have revised paragraph (b) of the AD to limit the use of nuts, P/N BACN10R10L, and screws, P/N NAS623-3-8, on the latch block assembly. In addition, we removed the phrase “that was removed from any airplane” to clarify that any nut, P/N BACN10R10L, may not be installed on the latch block assembly of any airplane.

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.

There are approximately 2,919 airplanes of the affected design in the worldwide fleet. The FAA estimates that 1,129 airplanes of U.S. registry will be affected by this AD. The FAA estimates that it will take approximately 2 work hours for each airplane specified as Group 1 in the referenced service bulletin, and approximately 1 work hour for each airplane specified as Group 2 in the referenced service bulletin, to accomplish the required actions; the average labor rate is estimated to be $65 per work hour. Parts and materials are standard and are to be supplied by the operator. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $130 per Group 1 airplane, and $65 per Group 2 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 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 ADDRESSES.

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 Raytheon Model Beech 400A and 400T series airplanes was published in the Federal Register on November 4, 2003 (68 FR 62415). That action proposed to require an inspection to determine the part number of the A194 roll trim printed circuit board (PCB), and replacement of certain PCBs with improved parts.

We provided the public the opportunity to participate in the development of this AD. No comments have been submitted on the proposed AD or on the determination of the cost to the public.

We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed.

There are approximately 467 airplanes of the affected design in the worldwide fleet. The FAA estimates that 430 airplanes of U.S. registry will be affected by this AD, that it will take approximately 1 work hour per airplane to accomplish the required actions, 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 $27,950, 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.

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

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

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 Dornier Model 328-100 series airplanes was published in the Federal Register on December 5, 2003 (68 FR 67980). That action proposed to require a one-time inspection of certain engine control cables to determine the batch number on the end fitting, and replacement of affected cables with new cables.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received from one commenter.

The commenter requests that the service information be revised to include Dornier Service Bulletin SB-328-76-409, Revision 2, dated October 7, 2002, as an additional source of service information for the accomplishment of the actions required by the proposed AD. (The proposed AD references Dornier Service Bulletin SB-328-76-409, Revision 1, dated May 17, 2002, as the appropriate source of service information.) Revision 2 changes the “Note” on page 1 of the service bulletin from “Other Engine Control Cables with different batch No's are not affected” to “Other Engine Control Cables with different or without batch No's are not affected.” The commenter states that the revision to the “Note” is important to ensure affected operators do not waste resources by replacing engine control cables that do not need replacing.

The FAA agrees with the commenter's request. We reviewed Revision 2 of the service bulletin and find that the actions are otherwise essentially identical to Revision 1. We have revised paragraph (a) of this final to require accomplishment of the actions in accordance with either Revision 1 or Revision 2 of Dornier Service Bulletin SB-328-76-409.

The commenter also requests that the wording in paragraph (a)(2) of the proposed AD be changed. The commenter states that the text in paragraphs (a)(1) and (a)(2) is contradictory and misleading. Paragraph (a)(1) states, “if no engine control cable has a P/N and an MBN specified in paragraph (a) of this AD, no further action is required by this paragraph.” Paragraph (a)(2) states, “if any engine control cable having the P/N or an MBN specified in paragraph (a) of this AD is found, before further flight, replace the cable in accordance with the Accomplishment Instructions of the service bulletin.” The commenter states that paragraph (a)(2) is essentially telling operators that if the engine control cable inspected in paragraph (a) has part number (P/N) 001A761A1130-016, it must be replaced before further flight. The commenter states that the intent of the service bulletin is that an engine control cable be replaced only if the cable has P/N 001A761A1130-016 and is engraved with manufacturing batch number (MBN) 1000125850 or 1000144210.

We agree with the commenter's request to change the wording of paragraph (a)(2) in this final rule. As written, it is not clear that only engine control cables having a certain P/N that is engraved with a certain MBN must be replaced. We have changed the wording in paragraph (a)(2) of this final rule to “if any engine control cable has a P/N and an MBN specified in paragraph (a) of this AD, before further flight, replace the cable in accordance with the Accomplishment Instructions of the service bulletin.”

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 described previously. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

We estimate that 53 airplanes of U.S. registry will be affected by this AD, that it will take approximately 1 work hour per airplane to accomplish the required actions, 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 $3,445, or $65 per airplane.

Replacement of an engine control cable, if required, would take approximately 8 work hours, at an average labor rate of $65 per work hour. Parts would be provided at no cost to operators. Based on these figures, the cost impact of the replacement of an engine control cable is $520 per cable.

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

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

On January 23, 2004, the FAA issued emergency AD 2004-02-51, which is applicable to all EMBRAER Model EMB-135 and -145 series airplanes.

The FAA has received a report that the flightcrew of an EMBRAER Model EMB-135 series airplane experienced rudder control difficulties during takeoff. The airplane made an emergency landing; no injuries were reported. Investigation revealed that the upper and lower control rods for the aft rudder section had failed. (The rudder is composed of a forward and an aft section.) The National Transportation Safety Board is currently investigating the cause of the control rod failure. The airplane on which the incident occurred had accumulated 6,804 total flight hours and 6,371 total flight cycles. Although the effect is unknown at this time, the airplane was operating without Access Panel 312AR, as allowed by the Configuration Deviation List (CDL). Failure of these control rods, if not corrected, could result in loss of rudder control, or a possible rudder jam. Also, an unrestrained aft rudder could enter a flutter mode, which could result in loss of control of the airplane.

The rudder control rods on all EMBRAER Model EMB-135 and -145 series airplanes are identical to those on the affected Model EMB-135 airplane. Therefore, all of these airplanes may be subject to the same unsafe condition.

EMBRAER has issued Alert Service Bulletin 145-27-A105, dated January 23, 2004, which describes procedures for:

• A one-time visual inspection, including measurement, of the aft rudder control rods to determine if they are assembled correctly and to detect signs of structural damage, cracks, pitting, or deformation.

• If any discrepancy is found, replacement of the control rods with new rods, accomplishment of a backlash test to determine the condition of the rudder bearings, and accomplishment of any related applicable corrective action.

The service bulletin also recommends that any airplane without Access Panel 312AR installed should have the panel reinstalled.

The Departmento de Aviacao Civil (DAC), which is the airworthiness authority for Brazil, classified this service bulletin as mandatory and issued Brazilian emergency airworthiness directive 2004-01-07, dated January 23, 2004, to ensure the continued airworthiness of these airplanes in Brazil.

These airplane models are manufactured in Brazil and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the DAC has kept the FAA informed of the situation described above. The FAA has examined the findings of the DAC, 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 the unsafe condition described is likely to exist or develop on other airplanes of the same type design registered in the United States, the FAA issued emergency AD 2004-02-51 to detect and correct failure of the control rods for the aft rudder, which could result in loss of control of the airplane. The AD requires accomplishment of the following actions per the service bulletin described previously (except as discussed below under the heading “Difference Between This AD and the Service Bulletin”):

• A one-time general visual inspection of the aft rudder control rods to detect any discrepancy (including, but not limited to, incorrect installation, corrosion pitting, cracking, looseness, deformity, or structural damage).

• If any discrepancy is found, replacement of the affected aft rudder control rod with a new or serviceable control rod, accomplishment of a backlash test (to detect worn rudder bearings) and any applicable corrective action, and submission of the inspection results to the FAA.

This AD also requires the following actions, which are also specified by the parallel Brazilian emergency airworthiness directive:

• A general visual inspection to determine if Access Panel 312AR is installed, and re-installing the panel.

• A revision to the CDL to remove reference to Access Panel 312AR (thus prohibiting operation without that access panel installed).

Since it was found that immediate corrective action was required, notice and opportunity for prior public comment thereon were impracticable and contrary to the public interest, and good cause existed to make the AD effective immediately by individual notices issued on January 23, 2004, to all known U.S. owners and operators of EMBRAER Model EMB-135 and -145 series airplanes. These conditions still exist, and the AD is hereby published in the Federal Register as an amendment to section 39.13 of the Federal Aviation Regulations (14 CFR 39.13) to make it effective as to all persons.

Although the service bulletin recommends that all inspection results, whether positive or negative, be reported to the manufacturer, this AD requires operators to submit a report to us only if a discrepancy is found.

The Brazilian emergency airworthiness directive specifies that, if any discrepancy is found, both control rods must be replaced. However, this AD requires that only discrepant control rods must be replaced before further flight. We find that replacement of only discrepant control rods will adequately address the unsafe condition.

Also, the Brazilian airworthiness directive specifies that, if Access Panel 312AR is missing, this panel must be installed before the next flight. However, this AD requires that this panel must be installed within 10 flight cycles after the inspection. In developing an appropriate compliance time for this installation, we considered the degree of urgency associated with the subject unsafe condition, the average utilization of the affected fleet, and the availability of necessary parts. In light of all of these factors, we find that a 10-flight-cycle compliance time represents an appropriate interval of time for affected airplanes to continue to operate without compromising safety.

We have coordinated these differences with the DAC, and they concur.

This is considered to be interim action. The inspection report that is required by this AD will enable us, the DAC, and the manufacturer to obtain better insight into the unsafe condition, and eventually to develop further action to address the unsafe condition, if necessary. If further action is identified, we may consider further rulemaking.

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. As amended, part 39 provides for the FAA to add special requirements for operating an airplane to a repair facility to do the work required by an airworthiness directive. For the purposes of this AD, we have determined that a special flight permit would be permitted, but with certain limitations.

In emergency AD 2004-02-51, the definition of a general visual inspection was incorrectly numbered as Note 2. It is actually Note 1. We have revised the number in this document.

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 ADDRESSES . All communications received on or before the closing date for comments will be considered, and this rule may be amended in light of the comments received. Factual information that supports the commenter's ideas and suggestions is extremely helpful in evaluating the effectiveness of the AD action and determining whether additional rulemaking action would be needed.

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

Commenters wishing the FAA to acknowledge receipt of this 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 2004-NM-14-AD.” The postcard will be date stamped and returned to the commenter.

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

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

—

Has FAA taken any action to this point? Reports of fuel leaking from certain engine-driven pumps on Pilatus Models PC-7, PC-12, and PC-12/45 airplanes caused FAA to issue AD 2002-01-09, Amendment 39-12600 (67 FR 2323, January 17, 2002). AD 2002-01-09 currently requires the following on all Pilatus Models PC-7, PC-12, and PC-12/45 airplanes:

—Inspecting the joints between the engine-driven pump housing, the relief valve housing, and the relief valve cover for signs of fuel leakage and extruding gasket material;

—Replacing any engine-driven pump with signs of fuel leakage or extruding gasket material; and

—Ensuring that the relief valve attachment screws are adequately torqued and re-torqued as necessary.

What has happened since AD 2002-01-09 to initiate this action? The Federal Office for Civil Aviation (FOCA), which is the airworthiness authority for Switzerland, recently notified FAA of the need to change AD 2002-01-09. The FOCA reports that problems are occurring on other engine-driven pumps that could be installed on the affected airplanes, and that the affected airplanes should have a certain engine-driven pump installed to ensure this unsafe condition does not reoccur.

What is the potential impact if FAA took no action? Gasket material extruding from the engine-driven pump housing and relief valve attachment screws with inadequate torque, if not detected and corrected, could lead to fuel leakage and result in a fire in the engine compartment.

Has FAA taken any action to this point? We issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to all Pilatus Models PC-7, PC-12, and PC-12/45 airplanes that incorporate a certain engine-driven pump. This proposal was published in the Federal Register as a notice of proposed rulemaking (NPRM) on December 5, 2003 (68 FR 67988). The NPRM proposed to supersede AD 2002-01-09 with a new AD that would:

—Retain the actions from AD 2002-01-09;

—Add certain engine-driven pumps to the applicability; and

—Require eventual replacement of the pump with an improved design pump to assure that the unsafe condition does not reoccur.

Was the public invited to comment? We provided the public the opportunity to participate in developing this AD. We received no comments on the proposal or on the determination of the cost to the public.

What is FAA's final determination on this issue? We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for minor editorial corrections. We have determined that these minor corrections:

—Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

—Do not add any additional burden upon the public than was already proposed in the NPRM.

How does the revision to 14 CFR part 39 affect this AD? 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.

How many airplanes does this AD impact? We estimate that this AD affects 278 airplanes in the U.S. registry.

What is the cost impact of this AD on owners/operators of the affected airplanes?

We estimate the following costs to accomplish the inspections and re-torque:

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 Saab Model SAAB 2000 series airplanes was published in the Federal Register on September 19, 2003 (68 FR 54862). That action proposed to require replacing the dual shuttle valve in the number 2 hydraulic system with a new, improved valve; and, for certain airplanes, modifying the hydraulic system.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the single comment received.

One commenter, the airplane manufacturer, requests that the FAA revise the proposed AD to limit the applicability of the proposed AD to airplanes on which Saab Modification 5952 (Saab Service Bulletin 2000-29-010) has been accomplished. The commenter notes that Swedish airworthiness directive 1-164, dated August 17, 2001, which is the parallel airworthiness directive for the FAA's proposed AD, was issued to require replacement of the dual shuttle valve introduced by Saab Modification 5952. Airplanes on which Saab Modification 5952 (or Saab Service Bulletin 2000-29-010) has not been accomplished should not be subject to the requirements of the proposed AD. Thus, the commenter requests that we revise the applicability statement of the proposed AD; and remove, from the proposed AD, paragraph (b), the section “Differences Between the Proposed Rule, Swedish Airworthiness Directive, and Service Bulletins,” and the paragraph in the Cost Impact section that addresses costs associated with accomplishing Saab Service Bulletin 2000-29-010.

We concur. Based on the information provided by the commenter, it is clear that the requirements of this AD apply only to airplanes on which Saab Modification 5952 (Saab Service Bulletin 2000-29-010) has been installed. Accordingly, we have revised the applicability statement, paragraph (a), and the Cost Impact section of this final rule. We have also removed references to accomplishment of the actions in Saab Service Bulletin 2000-29-010 throughout the final rule. Paragraphs affected by the removal of paragraph (b) from the body of this final rule have been re-identified accordingly. (The “Differences” section is not restated in the final rule, so no change is possible in this regard.)

After careful review of the available data, including the comment noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes described previously. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

We estimate that 3 airplanes of U.S. registry will be affected by this AD, that the required replacement will take approximately 4 work hours per airplane, and that the average labor rate is $65 per work hour. Parts will be provided to the operator at no charge. Based on these figures, the cost impact of the required replacement on U.S. operators is estimated to be $780, or $260 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 ADDRESSES .

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 2000-10-21, amendment 39-11745 (65 FR 34063, May 26, 2000), which is applicable to certain Boeing Model 737 series airplanes, was published in the Federal Register on December 5, 2003 (68 FR 67975). The action proposed to continue to require a one-time general visual inspection of the seat locks and seat tracks of the flightcrew seats to ensure that the seats lock in position and to verify that lock nuts and bolts of adequate length are installed on the rear track lock bracket, and corrective action, if necessary. The action also proposed to revise the applicability of the existing AD by adding airplanes.

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.

The FAA has determined that air safety and the public interest require the adoption of the rule as proposed.

There are approximately 1,385 airplanes of the affected design in the worldwide fleet. The FAA estimates that 282 airplanes of U.S. registry will be affected by this AD.

For Group 1 airplanes listed in Boeing Alert Service Bulletin 737-25A1363, Revision 1: The actions that are currently required by AD 2000-10-21 take approximately 3 work hours per airplane to accomplish, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the currently required actions on U.S. operators is estimated to be $195 per airplane.

For Group 2 airplanes listed in Boeing Alert Service Bulletin 737-25A1363, Revision 1: The new actions that are required by this AD will take approximately 3 work hours per airplane to accomplish, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the new requirements of this AD on U.S. operators is estimated to be $195 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 regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

Paperwork Reduction Act

The collection of information contained in these final regulations has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-1729. Responses to this collection of information are required to obtain the benefit of providing payee statements electronically.

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

The estimated annual burden per respondent or recordkeeper varies depending on individual circumstances, with an estimated average of 6 minutes.

Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be sent to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:SP Washington, DC 20224, and to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503.

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

On February 14, 2001, the IRS published a notice of proposed rulemaking (by cross reference to temporary regulations) and a notice of public hearing, (REG-107186-00) (66 FR 10247). The regulations proposed to permit the voluntary electronic furnishing of (1) statements on Form W-2 under sections 6041 and 6051, (2) “Tuition Statements” (Form 1098-T) under section 6050S, and (3) “Student Loan Interest Statements” (Form 1098-E) under section 6050S. These proposed amendments were intended (1) to increase electronic filing consistent with section 2001 of the Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105-206 (July 22, 1998); and (2) to facilitate the use of electronic communication and record keeping consistent with the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) Public Law No. 106-229, 114 Stat. 464 (2000), 15 U.S.C. sections 7001 through 7006 (2000). The IRS received written comments on the proposed regulations. A public hearing was held on July 25, 2001. After consideration of all the comments, the proposed regulations are adopted as revised by this Treasury Decision. The temporary regulations under sections 6041, 6050S, 6051, and 6724 are removed.

On December 18, 2002, final regulations were issued under section 6050S (TD 9029), addressing information reporting for qualified tuition payments and reimbursements; TD 9029 also renumbered the regulations under section 6050S.

Five commentators recommended that the regulations be expanded to allow the electronic furnishing of additional statements and reports, including Forms 5498 and 1099-R. After the IRS issued the proposed regulations, Congress enacted the Job Creation and Worker Assistance Act of 2002 (JCWAA), Public Law 107-147 (March 9, 2002). Section 401 of JCWAA permits the electronic furnishing of any statement required under subpart B of part III of subchapter A of chapter 61 of Title 26 (sections 6041 through 6050T). Section 401 of JCWAA specifically eliminated the first-class-mailing requirement that prevented electronic furnishing of statements under sections 6042(c), 6044(e), and 6049(c)(2). In addition, Congress expressed its support for electronic furnishing of all statements required by the Code. See Joint Committee on Taxation Staff, Technical Explanation of the “Job Creation and Worker Assistance Act of 2002,” 107th Cong., 2d Sess. (2002) at page 27.

Section 401 of JCWAA permits the electronic furnishing of all statements required under sections 6041 through 6050T, if the recipient consents to receive the statement in a manner similar to the one permitted by regulations under section 6051 or in such other manner as provided by the Secretary. Because section 401 of JCWAA authorizes the electronic furnishing of all statements required under sections 6041 through 6050T, final regulations are not necessary to allow the voluntary electronic furnishing of statements required under sections 6041 through 6050T, as long as the recipient consents to receive the statement in a manner similar to the one permitted under these final regulations. In addition, Notice 2004-10 permits electronic furnishing of the Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA, Insurance Contracts, Form 1099-MSA, Distributions From an Archer MSA or Medicare+Choice MSA, Form 1099-Q, Payments from Qualified Education Programs (Under Section 529 or 530), Form 5498, Individual Retirement Arrangement Contribution Information, Form 5498-ESA, Coverdell ESA Contribution Information, and Form 5498-MSA, Archer MSA or Medicare+Choice MSA Information, payee statements.

The only method of electronic furnishing specifically authorized by the proposed regulations required posting on Web sites. Two commentators recommended that the regulations allow taxpayers to send statements as attachments to e-mail. One commentator stated that some organizations might not wish to provide tax statements by e-mail because of security and privacy concerns.

The final regulations do not restrict furnishers solely to the use of Web site technology. Treasury and the IRS believe that Web site technology currently provides the most secure method of furnishing statements electronically but do not intend to limit the technology to be used in furnishing statements electronically. Accordingly, under the final regulations, taxpayers are permitted to furnish statements through any electronic means to which the recipient consents, including by e-mail.

One commentator recommended that the IRS adopt security requirements that require simply a sign-on and a password. Two commentators recommended against adoption of specific standards. The final regulations do not adopt specific security standards to ensure the confidentiality of recipient information. Rather, the final regulations leave room for security methodologies to evolve through advances in technology.

The proposed regulations adopted notice and consent requirements consistent with the E-SIGN Act. Three commentators stated that the notice and consent requirements of the regulation should not apply to the electronic transmission of statements between employers and employees. One commentator observed that the notice and consent requirement will require the employer to modify existing databases and/or create a separate data base to distinguish between employees who have consented to receive statements electronically and those who will receive a paper statement. The commentator asserted that the cost of these database changes would offset any savings from electronic furnishing. Two commentators stated that credit unions could not efficiently provide statements to their employees electronically, if the credit unions were subject to the regulation's (E-SIGN Act's) notice and consent requirements.

The final regulations retain the notice and consent requirements. The notice and consent requirements are justified on tax administration grounds; it is important that taxpayers be able to demonstrate the ability to receive the tax statements electronically and then actually receive them. Moreover, the IRS and Treasury continue to believe that electronic furnishing should be voluntary for recipients as well as furnishers to accommodate recipients who prefer to receive their statements by traditional paper delivery for perceived security and privacy reasons. Section 401 of JCWAA, which adopted the notice and consent requirements in the temporary regulations, suggests that Congress also believes that electronic furnishing should be voluntary.

Two commentators stated that, since the recipient chooses whether to receive information electronically, the recipient should be responsible for having the hardware and software necessary to receive the information electronically. The commentators pointed out that electronic mail systems are not standardized and some systems do not provide verification of delivery.

The regulations were not changed to reflect these comments. Both the furnisher and the recipient must voluntarily participate in the electronic delivery system. Both parties are responsible for ensuring that the system complies with the requirements of the regulations.

One commentator recommended clarification of the example provided in the regulations regarding consent from the recipient. The commentator noted that a recipient's being able to receive and send e-mail does not necessarily prove that the recipient can access a Web site and download the statement. The commentator recommended an example describing alternatives to consent by e-mail.

The rule for consent requires that the recipient demonstrate the ability to access statements, which is done in the regulation's example by opening the attachment. However, the IRS agrees with the commentator's observation and has added two examples of alternative methods of providing consent in the final regulation.

Two commentators recommended that the regulations expressly permit furnishers to post all their statements to a Web site and to send each recipient his/her statement as an e-mail attachment, even if the recipient has not consented to electronic furnishing. The furnisher could then provide paper copies of the statements to recipients who did not consent to electronic furnishing. The commentators cited the ease and economy of total versus piecemeal posting.

The final regulations do not expressly adopt the recommendation. However, the regulations do not prohibit a furnisher from storing all statements on the Web server. Whether the furnisher stores all statements or only those statements for which consents are received is a business decision for the furnisher.

Three commentators noted that providing the contact information for a specific individual to whom withdrawal of consent should be furnished may cause confusion, because in many large companies no single individual can accommodate communications from a potentially large number of recipients. The commentators suggest that the regulations provide that the recipients may be provided the name, address, phone number and e-mail address of an individual or department, such as a Human Resources Department, or Payroll Department on the disclosure statement. The regulations have been amended to provide that either the name of an individual or of a department may be included in the disclosure statement.

Two commentators requested clarification of the term high importance in proposed §§ 1.6050S-1(a)(6)(i), 1.6050S-2(a)(6)(i), and 31.6051-1(j)(6)(i). The commentators noted that if this term refers to assigning a high priority to the e-mail, as some e-mail software allows, there must be allowances made for e-mail software that does not have that capability. The commentators suggest that in a case where the sending or receiving software does not offer or recognize levels of priority, the regulations should allow the use of a subject line stating “HIGH IMPORTANCE—IMPORTANT TAX RETURN DOCUMENT AVAILABLE.”

The final regulations do not require furnishers to assign high priority to e-mail because some software does not have this capability and the IRS and Treasury do not intend to favor any particular technology. Accordingly, furnishers will not be required to use e-mail software with the capability of assigning high priority.

One commentator expressed concern that requiring use of the language “IMPORTANT TAX RETURN DOCUMENT AVAILABLE” on the subject line of e-mail notices could be exploited to spread a computer virus through e-mails with the same subject line. The commentator suggests that each organization be permitted to create its own subject line containing the name of the issuing organization.

The regulations have not been amended to include this modification of the subject line. It is important to use standard language to identify the statement. Moreover, to prevent the spread of computer viruses, the recipient need only monitor who sent the e-mail.

One commentator suggested that when an electronic notice is returned and the furnisher notifies the recipient, the recipient may give the furnisher a corrected electronic address to receive the statement electronically. The consent rule in the final regulations allows the furnisher to obtain a new address from the recipient and resend the notice.

Two commentators recommended that if the recipient states that he or she no longer has an e-mail address or Internet access, and desires a paper statement, the furnisher should construe the recipient's statement as a withdrawal of consent. Furnishers will then be allowed a certain number of days to furnish the paper statement to the recipient. In addition, several members of the information reporting industry requested that a cut-off date be provided for withdrawing consent.

The final regulations retain the rules regarding withdrawal of consent, but allow the furnisher to treat a request for a paper statement as a withdrawal of consent. Treasury and the IRS do not think the regulations should impose a cut-off date for withdrawing consent. Furnishers may, however, provide that a withdrawal of consent takes effect either on the date it is received by the furnisher or on a subsequent date, thereby imposing their own cut-off date for withdrawing consents.

The final regulations retain the rule that a withdrawal of consent will not affect a statement that has been furnished electronically. Thus, if the withdrawal takes effect after the statement is furnished electronically, the statement will be considered timely if it was furnished electronically by the applicable due date. The final regulations also provide that if the withdrawal of consent takes effect before the statement is furnished electronically a paper statement must be furnished. In this case, a paper statement furnished after the statement due date will be considered timely if furnished within 30 days after the date the withdrawal of consent is received by the furnisher. This extension of time eliminates the need to address reasonable cause for late filing under section 6724. Therefore, the proposed amendment to the regulations under section 6724 is not adopted and temporary regulation § 301.6724-1T is removed.

Two commentators requested that the furnisher be able to post both Forms W-2c and replacement Forms W-2 on the Web site. The commentators noted that an employer may prefer to completely replace an employee's W-2, if it can be done before W-2s are filed with the Social Security Administration, thereby avoiding the W-2c process. The regulations have not been amended to allow a replacement Form W-2 if a Form W-2c is otherwise required. The purpose of the regulations is to describe the manner in which statements may be furnished electronically. The regulations are not intended to change the established procedures for correcting statements. Employers should consult IRS forms and instructions for the appropriate correction procedures.

Two commentators recommended shortening the period of time during which statements can be accessed by changing the period's end date from October 15th to April 30th (or August 15) to reduce the amount of time computer hackers will have to access the confidential information on the Web site. One commentator noted that even if a recipient intends to apply for two extensions, it is highly likely that the recipient will have accessed the Form W-2 on the Web site by April 15 to determine whether a payment was necessary by that date. One commentator suggested that furnishers have the option to maintain statements on the Web site until April 30, as long as they provide replacements through October 15 by paper or as attachments to an e-mail.

The final regulations do not change the access period. It is the responsibility of the furnisher to maintain a secure Web site. It is important to allow access to the Web site during the entire filing season (including the period of extensions) to enable taxpayers to import the information directly to their returns if they choose to file electronically.

It has been determined that these final regulations are not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. Chapter 5) does not apply to these regulations.

The collection of information contained in §§ 1.6041-2, 1.6050S-2, 1.6050S-4, and 31.6051-1 is required if a person required to furnish a taxpayer with a statement wishes to furnish the statement electronically. This information will be used to determine that the recipient has consented to receive the statement electronically. The objectives of these final regulations are to provide uniform, practicable, and administrable rules for providing information statements electronically. The types of small entities to which the regulations may apply are small eligible educational institutions (such as colleges and universities), small corporations and partnerships, and small employers.

There are no known Federal rules that duplicate, overlap, or conflict with these regulations. The regulations impose the least economic burden on small entities of all of the alternatives considered. The collection of information is required only from persons receiving the statements electronically using a method authorized by the final regulations.

The principal author of these final regulations is Michael E. Hara, of the Office of Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. However, other personnel from the IRS and Treasury Department participated in their development.

On August 27, 2003, the Commission issued PRC Order No. 1383 to establish a rulemaking docket for the purpose of considering new procedural rules applicable to Postal Service requests for baseline and functionally equivalent Negotiated Service Agreements. 1 The order included a proposal for the text of the procedural rules, and established a period, which concluded on September 29, 2003, for interested persons to comment. Seventeen parties submitted comments, arranged into twelve separate filings, expressing diverse opinions and suggesting many potential improvements to the proposed rules. 2 The order also established a period for reply comments, which concluded on October 14, 2003. Eight parties submitted reply comments, arranged into seven separate filings. 3 In addition, two parties filed supplemental comments. 4 The Commission appreciates the efforts that went into the preparation of the comments and reply comments, and has considered all views and suggestions for improving the proposed rules. 5

The comments express opinions on many issues, with most issues receiving a fair balance of comments from more than one perspective. Even with differences of opinion on specific rules, all parties appear to acknowledge the desirability of implementing rules specific to Negotiated Service Agreements. The Postal Service (the party that is directly responsible for complying with the rules) provides excellent commentary which tends to express an opinion that falls in the center of the extremes of all other commentary and is generally supportive of most provisions of the proposed rules. The comments from all parties have provided the Commission with a better appreciation of the benefits, and more importantly, the limitations of each rule proposal. As everyone gains experience with the new rules, there are sure to be suggestions for improvement that may be implemented in the future. The changes made to the proposed rules resulting from incorporating suggestions from the comments are relatively minor, and given the anticipation of future rulemakings in regard to these rules, the Commission has decided not to solicit further comments after incorporating these changes. The factors discussed above indicate that the rules as proposed are reasonable and appropriate for initial implementation. Thus, the Commission finds it appropriate to issue final rules at this time. The final rules appear following the Secretary's signature.

Several general themes run through the comments. An overview of the most frequently addressed themes will be summarized below, followed by a rule by rule examination of each significant comment.

The perceived burden that the rules impose is a common topic in most of the commentary. Some parties consider the burden imposed by the rules so great that it would inhibit mailers from pursuing Negotiated Service Agreements. There are comments indicating that it is premature to establish any detailed requirements before gaining further experience with Negotiated Service Agreements. There is support for adapting the arguably less burdensome rules for experimental classifications for use with Negotiated Service Agreements as an alternative to the proposed rules. Other parties want to add more requirements to the proposed rules. There are suggestions to add requirements to further justify a Negotiated Service Agreement classification versus a niche classification. There are suggestions to add provisions to facilitate the propagation of functionally equivalent agreements. There also are requests to add rules applicable to specific types of agreements, for example, agreements predicated on declining-block discounts. The fairly even balance of comments on burden, both pro and con, from this diverse group of mailers indicate to the Commission that it has struck the appropriate balance on burden in the proposed rules.

The requirements in regard to presenting a financial analysis of the Negotiated Service Agreement received many comments. There is limited disagreement over whether the financial analysis should be preformed over the duration of the agreement as proposed. There is considerable discussion of potential problems with obtaining mailer-specific information, and the ability to make projections into the future. Some comments indicate that the Commission is requesting too much information, with suggestions that the Postal Service should only have to show that the agreement improves its financial position. Other comments indicate the need for considerably more information. For example, there is a request to require all cost information to be presented by cost segment. There are other suggestions to require the Postal Service to show that each element of an agreement adds to contribution and that the overall agreement materially improves the financial position of the Postal Service. Again, the proposed rule appears to represent a fair compromise among the parties wanting less onerous requirements and those wanting more detailed requirements.

The Commission and the Postal Service are substantially in agreement on what a financial analysis should include for the first year of a multi-year Negotiated Service Agreement. For the potential second and third years of an agreement, the Notice of Proposed Rulemaking (NPRM) suggests a fairly mechanical approach to the analysis of the follow-on years. It requires the presentation for the second and third years to mimic the presentation of the first year. The Postal Service, alternatively, proposes to focus on factors that might cause a material change to the first year's financial analysis in presenting the financial analysis for the follow-on years. Both approaches should provide a sufficient financial analysis. Both approaches also suffer from the same problems of availability and reliability of information the further out in time that information is projected. Because there is potentially some advantage to the Postal Service's approach, the Commission will adopt the Postal Service's proposal as presented in its initial comments.

Comments in regard to the analysis of competitive effects range from full endorsement, to considering the requirement exceedingly burdensome. The requirement is written in general terms that allow the proponents to formulate a response that is appropriate under the circumstances. Other than potential difficulties with complying with the proposed rule, the comments focus on whether the proponents of an agreement or the parties challenging the agreement should have the initial burden of making a competitive effects argument. The Commission considers the proponents of the agreement to be the most knowledgeable and have the better resources available, after going through the negotiation process, to most efficiently respond to this information request. In many instances, such as worksharing arrangements, the response might be minimal. Several parties argue that it should be the responsibility of parties in opposition to the request to intervene and protect their own interests. The Commission is not persuaded that the parties concerned with the potential impacts of a request should carry the initial burden of proving adverse competitive effects. The Postal Service, as a governmental entity, has an obligation to consider the impact of its actions on the market, and to avoid causing unreasonable harm to private enterprises. It is appropriate that it make public its analysis in fulfilling this obligation. The Commission acknowledges that analyzing competitive effect issues can be complex, and will require time and thought, but it is necessary given the requirements of the Act. This requirement shall remain in the final rule as originally proposed.

There is considerable concern about the protection of sensitive information. For the Commission to fulfill its statutory duty in a way favorable to the proponents, it requires information on which to base its recommendations. This is part of the “cost” of obtaining a special arrangement with the Postal Service. Participants will be required to cooperate with the Commission and provide relevant information to justify all requests, even if this information is considered sensitive. Requesting the application of protective conditions to safeguard sensitive information from public disclosure, if appropriate, remains an option.

The Commission expressed its intent to make the actual text of proposed Negotiated Service Agreements public. This position resolves many issues such as providing transparency, curtailing claims of secret dealings and discrimination, being able to openly review the terms and conditions of the agreement, and making sufficient information available so that similarly situated mailers can seek the opportunity to benefit from a functionally equivalent agreement. Theoretically, the imposition of protective conditions remains available even for the text of an actual agreement, but this procedural step likely would make the review process more cumbersome and, especially as to monopoly products, commentators failed to describe circumstances where such a step would seem justified.

There is considerable discussion on the procedures to be followed when information required by the rules is either not available and cannot be made available without undue burden, or is not required in light of the characteristics of the request. Comments represent both ends of the spectrum, from making all filing requirements mandatory, to requiring only a certification. The Commission will require the Postal Service to request waivers early in the process in the interest of resolving issues quickly in keeping with the goal of issuing recommendations in an expeditious manner.

Finally, there are suggestions that the Commission establish a 150-day procedural schedule for reviewing requests predicated on baseline Negotiated Service Agreements. The Commission has decided to not establish an artificial deadline for issuing a recommended decision at this time, but may revisit this issue in the future.

The Commission recognizes that the rules apply in an area where it has only the experience of one Postal Service request, and anticipates future rulemakings to fine tune the rules as future experience might warrant. However, the Commission finds it is important to issue these rules at this time to gather real experience with their implementation, and to provide guidance for future Postal Service requests predicated on Negotiated Service Agreements. The Secretary shall arrange for the publication of this Order Establishing Rules Applicable to Requests for Baseline and Functionally Equivalent Negotiated Service Agreements in the Federal Register .

The following is a rule by rule discussion of the comments received by the Commission in regard to this rulemaking.

The proposed definition for “Negotiated Service Agreement” is stated in § 3001.5(r) as follows: “ Negotiated Service Agreement means a written contract, to be in effect for a defined period of time, between the Postal Service and a mailer, that provides for customer-specific rates or fees and/or postal services in accordance with the terms and conditions of the contract.”

The Postal Service contends that although it would not be inaccurate in all instances, the term “postal services” might be too restrictive. It suggests that the definition focus on the Commission's statutory function, and proposes changing the term “postal services” to “classification changes.” It argues that “classification changes” encompasses both distinct levels of service, as well as less expansive changes to the Domestic Mail Classification Schedule. The definition proposed by the Postal Service states: “ Negotiated Service Agreement means a written contract, to be in effect for a defined period of time, between the Postal Service and a mailer, that provides for customer-specific rates or fees and/or classification changes in accordance with the terms and conditions of the contract.” Postal Service Reply at 2-3, Attachment at 1.

The Commission finds that in most instances either “postal services” or “classifications” would be appropriate for use in the definition. 6 However, based on the Postal Service's contention that “postal services” might be too restrictive, 7 the Commission explored alternative terminology which could provide the Postal Service with the greatest flexibility and place the least restrictions on what it can propose when negotiating a Negotiated Service Agreement. The Commission decided upon the general terminology “terms of service” in place of either “postal services” or “classifications” for use in the final rule. “Terms of service” is very broad, but still refers to a functional or “service” element of an agreement. The definition appearing in the final rule shall state: “ Negotiated Service Agreement means a written contract, to be in effect for a defined period of time, between the Postal Service and a mailer, that provides for customer-specific rates or fees and/or terms of service in accordance with the terms and conditions of the contract.”

Section 3001.51, which is currently in effect, governs the applicability of rules for requests to change rates or fees. The rulemaking proposes to add a sentence to § 3001.51 which specifies that a request based on a Negotiated Service Agreement, which otherwise would be considered pursuant to the rules applicable to requests for changes in rates or fees, shall instead be considered pursuant to the rules applicable to Negotiated Service Agreements. The proposed sentence states: “For requests of the Postal Service based on Negotiated Service Agreements, the rules applicable to Negotiated Service Agreements, Subpart L, supersede the otherwise applicable rules of this subpart.”

The Postal Service contends that the reference to “this subpart” is somewhat ambiguous, and should be changed to specifically identify the referenced subpart as “subpart B.” Postal Service at 26-27.

Although the Postal Service's suggestion may add clarity to the proposed rule, it does not conform to the existing drafting conventions for material that will be published in the Code of Federal Regulations. The final rule shall reference “this subpart” as originally proposed.

Section 3001.61, which is currently in effect, governs the applicability of rules for requests to change the mail classification schedule. The rulemaking proposes to add a sentence to § 3001.61 which specifies that a request based on a Negotiated Service Agreement, which otherwise would be considered pursuant to the rules applicable to requests for establishing or changing the mail classification schedule, shall instead be considered pursuant to the rules applicable to Negotiated Service Agreements. The proposed sentence states: “For requests of the Postal Service based on Negotiated Service Agreements, the rules applicable to Negotiated Service Agreements, Subpart L, supersede the otherwise applicable rules of this subpart.”

The Postal Service contends that the reference to “this subpart” is somewhat ambiguous, and should be changed to specifically identify the referenced subpart as “subpart C.” Ibid.

Although the Postal Service's suggestion may add clarity to the proposed rule, it does not conform to the existing drafting conventions for material that will be published in the Code of Federal Regulations. The final rule shall reference “this subpart” as originally proposed.

Subsection (a) establishes that the rules proposed under subpart L are applicable to Postal Service requests based on Negotiated Service Agreements. The last sentence of proposed subsection (a) states: “The requirements and procedures specified in these sections apply exclusively to requests predicated on Negotiated Service Agreements, and except where specifically noted, do not supersede any other rules applicable to Postal Service requests for recommendation of changes in rates or mail classifications.”

OCA suggests a stylistic change, which proposes to separate the last sentence into two separate sentences as follows: “The requirements and procedures specified in these sections apply exclusively to requests predicated on Negotiated Service Agreements. Except where specifically noted, this subpart does not supersede any other rules applicable to Postal Service requests for recommendation of changes in rates or mail classifications.” OCA at 6.

OCA's suggestion is an acceptable alternative, and may improve clarity. The Commission also has become aware that the proposed sentence references “changes in rates or mail classifications,” but omits any reference to “fees.” Correction of this oversight, along with the OCA's proposed modification, shall appear in the final rule. The last sentence of subsection (a) will state: “The requirements and procedures specified in these sections apply exclusively to requests predicated on Negotiated Service Agreements. Except where specifically noted, this subpart does not supersede any other rules applicable to Postal Service requests for recommendation of changes in rates, fees, or mail classifications.”

Subsection (b) states in part that “it shall be the policy of the Commission to recommend Negotiated Service Agreements that are consistent with statutory criteria, and benefit the Postal Service, without causing unreasonable harm to the marketplace.”

OCA proposes to expand these policy considerations by requiring: “It shall be the policy of the Commission to recommend Negotiated Service Agreements each of whose elements are consistent with statutory criteria, unambiguously benefit the Postal Service, and do not cause unreasonable harm to the marketplace.” OCA wants to ensure that a proposed Negotiated Service Agreement, “in whole and in part, materially improves the financial condition of the Postal Service.” Id. at 6-10. The OCA asserts that the requirement for each element to unambiguously benefit the Postal Service will help overcome any uncertainty in Postal Service estimates and any transaction costs associated with implementing the agreement. 8

The Postal Service contends that the benefits of a Negotiated Service Agreement need to be considered as a whole. It objects to the OCA's proposal because requiring each element to benefit the Postal Service would bar Negotiated Service Agreements that are on balance beneficial to the Postal Service just because one element in isolation is not beneficial. Postal Service Reply at 4-6.

The Commission anticipates that negotiating a multi-element Negotiated Service Agreement will involve some give and take for the parties to reach agreement. Requiring each element to benefit the Postal Service could hinder this give and take process, and eliminate many possible arrangements from consideration. The Commission will review each element of an agreement, and integrate each element into a review of the agreement as a whole. The overall agreement must benefit the Postal Service. An individual element that does not benefit the Postal Service or that represents a high risk may receive added attention, and potentially could prevent a positive Commission recommendation. However, the OCA's policy proposal to require at the outset every element to benefit the Postal Service, without looking at the element's relationship to the overall agreement, is too restrictive. It will not be incorporated into the final rule.

OCA proposes an additional policy requirement related to declining-block rates which states: “It shall be the policy of the Commission to require declining-block rates to be supported by a company-specific demand analysis justifying each volume threshold and corresponding rate.” OCA at 6.

The Postal Service objects to the addition of this requirement because it would amount to a bar on declining-block arrangements. The Postal Service asserts that it is unlikely that a company-specific demand analysis would be available, and if it were available it is unclear how it would be used to justify the thresholds and rates. Postal Service Reply at 7.

The Commission has proposed general rules designed to be applicable to a broad variety of potential Negotiated Service Agreements. It chooses not to include rules specific to only one type of agreement at this point in time. The Commission's preference is to allow the Postal Service flexibility in fashioning each request to provide, within general guidelines, the appropriate information under the circumstances. The Postal Service's requests will be litigated, and precedent will be developed to guide future requests. Participants are always free to challenge any aspect of the Postal Service's request during the proceeding, and ask for additional information. 9 The Commission will not adopt the declining-block rate policy proposal at this time.

Subsection (b) also states: “Except in extraordinary circumstances and for good cause shown, the Commission shall not recommend Negotiated Service Agreements of more than three years duration; * * * .”

NNA proposes an additional restriction which specifies that the Commission will not recommend a Negotiated Service Agreement if a general or niche classification change will achieve substantially similar effects upon the Postal Service's revenues or costs. NNA's concern is with the competitive effects that a Negotiated Service Agreement could have on the smaller competitors of the proponent receiving the benefits of a Negotiated Service Agreement. It contends that including a presumption in favor of a less restrictive classification, such as a niche classification, is one possible protection that might be offered. NNA would modify the last sentence of subsection (b) to state: “Except in extraordinary circumstances and for good cause shown, the Commission shall not recommend Negotiated Service Agreements of more than three years duration or if a general or niche classification change will achieve substantially similar effects upon the Postal Service's revenues or costs; * * * .” NNA at 4-6 (emphasis omitted).

Valpak, NAA, and UPS support the NNA position on general or niche classifications. Valpak Reply at 8; NAA Reply at 6-7; UPS Reply at 7. NAA also offers a suggestion that the Commission adopt a presumption that if a baseline Negotiated Service Agreement is premised on worksharing, then a niche classification is preferable.

The Postal Service is opposed to the NNA proposal, which essentially requires it to prove that a niche classification would not be an equally reasonable approach. Postal Service Reply at 7-8. The Postal Service contends that the Commission has already rejected this approach. See PRC Op. MC2002-2 at 33-34.

The Commission supports the basic premise that, all other things being equal, more inclusive mail classifications are preferable to more restrictive alternatives, and has maintained a consistent policy of entertaining and acting upon claims that new mail classifications should be available on more inclusive terms than were originally proposed. However, the Commission's preference for more inclusive mail classifications does not reach the level of a presumption that must be overcome by the proponents of single mailer agreements.

The rules as proposed already require the Postal Service to provide a written justification for requesting a Negotiated Service Agreement classification as opposed to a more generally applicable form of classification, § 3001.195(a). This requires the Postal Service to explain why a Negotiated Service Agreement is the preferable classification. It does not require the Postal Service to prove (what amounts to a negative) that a more inclusive classification could not be implemented, or is otherwise not appropriate. Recognizing foremost that the Postal Service is burdened with demonstrating that the proposed Negotiated Service Agreement complies with the requirements of the Act, it is not reasonable to impose this additional burden on the Postal Service. If the Postal Service provides a persuasive justification pursuant to § 3001.195(a), the Commission may find that the Postal Service has selected the appropriate classification. Participants are free to challenge this issue during the course of the proceeding.

NNA also suggests that each docket contain a procedural opportunity for participants to petition the Commission to use the Commission's statutory authority, when appropriate, to initiate a separate niche classification. NNA at 4-6.

The Commission will not incorporate an explicit procedural mechanism for participants to petition the Commission requesting that the Commission employ its statutory authority to initiate a separate niche classification. Participants are free to petition the Commission at any time on this matter. Participants should keep in mind that where rates or fees are involved, the Commission typically is limited to recommending a shell classification. To progress beyond a shell classification, participants would require the support of the Postal Service.

No substantive comments in opposition to proposed § 3001.191 have been received. Section 3001.191 shall be included in the final rule as originally proposed.

No substantive comments in opposition to proposed § 3001.192 have been received. Section 3001.192 shall be included in the final rule as originally proposed.

Subsection (a)—General requirements. Subsection (a) in part establishes the requirement to request a waiver if information required to be submitted pursuant to § 3001.193 is (1) not available and cannot be made available without undue burden, or (2) is not required in light of the characteristics of the request. The request for waiver would be in the form of a motion.

DMA et al. propose that the Commission only require a satisfactory explanation, and not a waiver. The satisfactory explanation would end the inquiry into the necessity to provide the information, unless another party challenges the issue. If challenged, the burden of going forward would shift to the challenging party as is done under the experimental rules. DMA et al. argue that this would be less burdensome and still protect the rights of the challenging party. DMA et al. at 9-10.

Pitney Bowes contends that the requirement to request a waiver will further dissuade mailers from pursuing Negotiated Service Agreements because there is no meaningful ability to determine whether or not a waiver will be granted when first negotiating and preparing a Negotiated Service Agreement. It suggests that where information is not needed in light of the nature of the request, § 3001.193(a)(3) should only require a certification stating this fact. Presumably, the inquiry into whether the information must be provided would end at this point, unless challenged. Pitney Bowes at 5-6.

UPS argues that only requiring a certification would effectively eliminate the Commission as a meaningful participant in the decision-making process. Thus, it is opposed to Pitney Bowes' proposal. UPS Reply at 2.

OCA contends that Negotiated Service Agreements are extraordinary arrangements requiring extraordinary justification. It asserts that all § 3001.193 filing requirements should be mandatory. OCA suggests deleting the special provisions on waivers, and alternatively relying on the general waiver provisions of § 3001.22. If these suggestions are not adopted, OCA requests clarification as to whether it is necessary to reserve one's right to challenge the potential absence of information when answering the request for waiver. It also requests clarification as to when a potential challenge would be permitted. OCA at 10-15.

The Postal Service is generally not opposed to the procedures in regard to unavailable or not required information. It is opposed to relying solely on the general waiver provisions of § 3001.22 as proposed by OCA, and it is specifically opposed to requiring a waiver where information is unavailable and unduly burdensome to produce. The Postal Service contends that requiring a waiver in this instance might amount to a daunting entry barrier, which may dissuade potential partners from negotiating. It might invite opposition to granting the waiver. It also might require a factual examination as to whether the information is unavailable and whether the burden of producing the information is undue. The Postal Service also notes that this requirement is not consistent with other seemingly parallel sections of the Commission's rules. For example, §§ 3001.54(a)(2) and 3001.64(a)(2) both require “a statement explaining with particularity,” and not “a request for waiver.” Accordingly, the Postal Service proposes that “a request for waiver” be replaced with “a statement explaining with particularity,” which would make this requirement consistent with other provisions of the Commission's rules.

The Postal Service is not opposed to a request for waiver where information is not required in light of the characteristics of the request. It argues that determining such relevance issues early in the proceeding is useful and will aid in the development of the record. Furthermore, the Postal Service does not oppose the burden shifting provisions of § 3001.193(a)(4), which similarly appear in other Commission rules. Postal Service Reply at 7-11.

The Commission included the requirement to request a waiver in §§ 3001.193(a)(2) and (a)(3) because of the emphasis placed on the desire for the Commission to expeditiously issue recommendations on requests predicated on Negotiated Service Agreements. Requiring waivers assures immediate focus on informational issues, and necessitates prompt resolution of any concerns early in the proceeding.

Section 3001.193(a)(2) concerns information that is not available and cannot be made available without undue burden. It applies to information presumed to be relevant to the proceeding. Requiring only “a statement explaining with particularity” does not expedite resolving issues that could be central to a Commission recommendation. It would necessitate additional motions practice and result in delay. 10 The Commission will retain the requirement to request a waiver in this instance.

Section 3001.193(a)(3) concerns information that is not required in light of the proceeding. This category of information is information that is presumed not relevant to the proceeding. The request for waiver in most instances should be straightforward. It is not anticipated that this process would cause unnecessary delay to the procedural schedule. In instances where the relevance of the information is challenged, it will benefit the schedule by resolving the issue early in the proceeding. Requiring a request for a waiver versus a mere “certification” also stresses the importance of promptly resolving issues given a goal of expeditiously issuing a recommendation. The Commission also will retain the requirement to request a waiver in this instance.

Parties are not required to reserve an objection to a Postal Service request for a waiver under §§ 3001.193(a)(2) or (3). If it is apparent that granting a waiver is not warranted, the Commission expects the party opposed to the waiver to file in opposition at the time the request for waiver is pending. In the instance where it only later becomes apparent that there is an issue involving information for which a waiver has been granted, § 3001.193(a)(4) sets the standard for contending that providing the information was in fact necessary. This contention must be raised by motion before the close of the record so that all parties have an opportunity to respond to the issue.

Pitney Bowes requests a clarification of whether available information, which is unduly burdensome to produce, should be considered unavailable for the purposes of § 3001.193(a)(2). Pitney Bowes at 5-6. The Commission would entertain the argument that available but burdensome to produce information is effectively unavailable. However, because this category of information is presumed relevant to the proceeding, a successful argument where the information is available would likely focus on limiting the scope of the information provided, or on providing a substitute form of the information.

The Postal Service proposes the elimination of §§ 3001.193(2)(iii) and (v) in regard to a request for a waiver where information is not available and cannot be made available without undue burden. These sections require a request for waiver to include discussion of “[t]he steps or actions which would be needed to make each such item of information available, together with an estimate of the time and expense required therefore” and “[w]hether sufficiently reliable estimates are available to mitigate the need for such information, and if so, the specifics of such estimates.” The Postal Service contends that these requirements invite unnecessary litigation directed at the sufficiency of the response, which could prolong the proceeding. Discover supports the Postal Service's position. Discover Reply at 2-3.

The implication in § 3001.193(2) is that the required information is “relevant” to the proceeding. Because it is relevant to the proceeding, if the information cannot be produced the Commission requires certain information to weigh its relevance, to determine whether the information could be produced in the future, and if not, to determine whether a suitable substitute can be provided. If the Commission finds the unavailable information highly relevant with little hope of future production and without a reasonable substitute, the unavailability of the information could be important in the Commission's review of the Postal Service's request. Therefore, it is reasonable for the Commission to inquire about the time, and effort, involved in making the information available, and about the possibility of substitute information in order to avoid a negative outcome. Once identified, a potential filing deficiency in regard to presumed relevant information should be resolved as promptly as possible because it could have a direct effect on the outcome of the proceeding. Sections 3001.193(2)(iii) and (v) provide important information for resolving this issue, and thus, shall remain in the final rule.

The Postal Service suggests an editorial change to replace the word “schedule” in § 3001.193(a)(1) with “schedule(s)” to reflect the fact that the DMCS is made up of more than one schedule. The Commission shall incorporate this suggestion into the final rule.

Subsection (b) requires the Postal Service to include a copy of the Negotiated Service Agreement with its request. Comments were directed at the Commission's position that an unsigned text copy of the agreement will meet this filing requirement, the Commission's role in reviewing the agreement, public disclosure of the agreement, and the broader issue of potential public disclosure of sensitive information.

PostCom proposes that the Commission require the Postal Service to file a signed copy of the Negotiated Service Agreement with the request. PostCom argues that a signed agreement is required to avoid the expenditure of energy on an approval process where the parties are free to walk away during the approval process because they are not bound by an executed agreement. PostCom at 4-5.

As the Postal Service correctly interprets the Commission's intention, the Commission expects that requests will be based on executed Negotiated Service Agreements. Postal Service Reply at 5-6, fn. 4. The proponents would be at the greatest risk of expending energy if they choose not to proceed with the agreement. This alone should act as a deterrent to filing a request with no intent of carrying out the terms and conditions of an agreement. The Postal Service also properly points out that not requiring a signature is partially based on the requirements of the Commission's electronic filing system and the inconvenience of creating pdf files containing signatures. The Commission is not persuaded that the filing of a signed copy of the agreement is required, or that requiring a signature will or should act as a deterrent to a party's decision not to proceed once the review process begins.

The Commission reasoned that filing an unsigned text file copy of the agreement is sufficient because: “the agreement does not go into effect until after the Commission submits its opinion and recommended decision, and the Governors of the United States Postal Service provide its approval.” PRC Order No. 1383 (August 27, 2003) at 9. The Postal Service is correct in pointing out that the Commission is speaking to the provisions of the agreement that are under review by the Commission. The agreement might include other provisions, which become binding upon the signature of the parties to the agreement. Postal Service Reply at 5-6, fn. 4.

NAA contends that the copy of the agreement filed with the request should be signed, but only to assure that the version of the contract being filed is in fact the correct version, and not an earlier draft. NAA Reply at 4.

Under the Commission's rules, the filing party has the obligation to assure that the proper documents are filed. See § 3001.11(e). The Commission is not persuaded that requiring the copy of the Negotiated Service Agreement to be signed would offer anything more than a minimal improvement to assure that the correct version of a document is filed.

PostCom contends that requiring the filing of a signed contract would bring the Commission's proceeding closer to an “after the fact” review as suggested by the President's Commission. PostCom at 4-5; see also, Embracing the Future: Making the Tough Choices to Preserve Universal Mail Service, Report of the President's Commission on the United States Postal Service, July 31, 2003 at 88-89, 174.

Current law requires a more pro-active role for the Commission that goes beyond an “after the fact review.” The Commission's role is to protect the public interest by bringing to light potential problems “before” the Postal Service proceeds with a new rate, fee, or classification. The Commission's statutory responsibility is foremost to review Postal Service requests for compliance with the requirements of the Act, and to issue a recommended decision on its findings. Through the Commission's recommendations, the Commission also provides the Governors of the United States Postal Service with an independent review of proposals put forth by the Postal Service. This independent review, which may incorporate additional views solicited from interested participants either through written comment or the hearing process, is used to inform the Governors in their decision-making process. Mailers in general further benefit because the transparency provided through the overall process adds to a better understanding of the Postal Service. The Commission's role in reviewing Postal Service requests is much broader than implied by PostCom.

Discover suggests that the final rules state that the Commission will not redraw the contract or rebalance the benefits and risks of the agreement. It further contends that the Commission's review should not include ensuring that the Postal Service has reached the best deal possible in the manner most appropriate. Discover at 5.

PostCom views the Commission's role as limited to ensuring the agreement is in compliance with the Act, and providing approval in the shortest time possible. PostCom's comments otherwise generally parallel the comments of Discover. PostCom at 4-5.

The Commission has no intent of acting as a bargaining party, or is its interest in renegotiating the terms and conditions of a Negotiated Service Agreement. However, the Commission's role is not so limited as to only providing either a positive or negative recommendation. For example, if the initial request does not support an agreement that complies with the requirements of the Act, the Commission might, if possible, recommend modifications to the agreement to bring it into compliance. Another example is in the area of data collection. The Commission frequently recommends changes such that the Commission will have access to information for performing future statutory functions.

Nor does the Commission view its role as ensuring that the Postal Service has made the best possible deal. However, the Commission will express its views and suggest (as opposed to recommend) potential changes such that the Postal Service is informed of the Commission's opinion when entering into future agreements. These same views and suggestions are also meant to independently inform the Governors in their decision-making process when considering the current agreement.

Final positive Commission recommendations are frequently conditioned on implementation of the Commission's recommended modifications. It would cause considerably more delay and waste of resources if the Commission were restricted to recommending either a positive or negative recommendation. A negative recommendation then would require the Postal Service to file a new request and start anew. After the Commission issues its final recommendations, the proponents are free to accept the Commission's recommendations, or abandon the agreement. The Postal Service has exhibited sufficient proficiency in drafting its agreements to allow parties to opt out of the agreement if they choose not to accept the Commission's recommended modifications.

First Data is concerned about the Commission's indication that the actual text of the agreement will be made publicly available, and that the Commission will impose a high burden before granting a request for protective conditions on the contract itself. It contends that a Negotiated Service Agreement which involves changes in a mailer's operating practices is likely to require understandings on sensitive operational details. This could raise issues of the information being competitively sensitive, and of concerns about the physical security of the mail and the employees who handle it. First Data proposes that the Commission adopt a rule specifying that contractual terms specifying operational arrangements whose disclosure could jeopardize the safety of persons or property be redacted from public disclosure, and subject to protective conditions. In general, First Data suggests that the Commission not adopt a presumption in favor of general disclosure, and resolve these issues on a case-by-case basis. First Data at 5-7. Pitney Bowes expresses similar concerns that the proposed rules may not sufficiently protect the confidentiality of certain contract information. Pitney Bowes at 7.

NAA argues in favor of public disclosure of the text of the contract. It contends that this will facilitate evaluation of the agreement, and will help mailers determine whether they might be eligible for a functionally equivalent agreement. NAA is concerned over the negative connotations of keeping an agreement secret. NAA Reply at 4-5.

The Postal Service contends that the Commission's indication of a higher burden may be required to justify confidential treatment of the actual contract is not well advised and may be unnecessary. It asserts that other agencies have been able to come up with the proper balance as discussed in First Data's comments at 5-7. 11 Postal Service Reply at 13-15.

The Commission's intent is to make the actual contract publicly available on the Commission's web site in accordance with the general policy for documents filed at the Commission. The Commission has alerted the parties to the contract that any request for protective conditions placed on the contract itself will have to meet a high burden before being granted. See PRC Order No. 1383 (August 27, 2003) at 9.

The general rule at the Commission has been and remains that requests for protective conditions must meet a high burden. 12 Reminding participants of the general rule serves several purposes. Drafting an agreement in a fashion that does not require protective conditions is procedurally expedient. It does not require the additional step of requesting protective conditions, interested parties do not have to apply to view the material, and the overall proceeding is facilitated by being able to openly discuss, reference, and write about the subject material. Public disclosure also provides transparency, which helps curtail arguments of discrimination and secret dealings. Public disclosure also provides mailers with the information necessary to decide whether they wish to seek similar agreements with the Postal Service. The Commission will adhere to its preference, and presumption, that the contents of the actual contract shall be made publicly available. The application of protective conditions remains an option, but the negative effects of applying protective conditions must be recognized.

Several comments broaden the discussion of public disclosure of the terms and conditions of the contract to a discussion of the general disclosure of sensitive and confidential business data used to support the request during the course of the proceeding. Discover contends that private-sector firms must not be expected to reveal confidential business information in order to participate. Discover at 2, 6-7. It foresees that the more the Commission delves into mailer-specific data, the more likely the Commission will be faced with litigants whose main purpose is to uncover or gain access to a competitor's propriety information. Discover Reply at 4. Discover urges the Commission not to create the situation where a mailer seeking a functionally equivalent agreement must disclose confidential information, even if its competitor disclosed the same information in a baseline proceeding. In a related matter, Discover suggests the information collected through data collection plans also could raise competitive concerns. Id. at 6-7. MMA urges the Commission to assure mailers that they will not be required to disclose highly confidential business information because this possibility might dissuade mailers from seeking Negotiated Service Agreements. MMA at 6.

The Postal Service contends that the issue of confidentiality of mailer-specific information potentially presents a serious problem. It argues that the lack of procedural guarantees may become an impediment to exploring and developing beneficial Negotiated Service Agreements in the future. The Postal Service notes that the Commission was faced with similar problems in formulating rules for international services. It suggests that this issue be revisited in a subsequent rulemaking that could focus on specific solutions. Postal Service Reply at 13-15.

The Commission has well-established policies for protecting sensitive information, and has not been persuaded that reviewing Negotiated Service Agreements require any changes to those policies. Protective conditions, where appropriate, remain an option to prevent public disclosure of sensitive information. At the same time, the Commission has a statutory role to fulfill in reviewing Postal Service requests predicated on Negotiated Service Agreements. If sensitive co-proponent information is relevant to the Commission's review of a specific request, then the co-proponent should anticipate that this information will have to be disclosed in some form for the Commission to execute its review. The cooperation of the proponents of an agreement is expected, and it is required for the Commission to effectively carry out its statutory duties. 13 Negotiated Service Agreements are optional voluntary agreements that can mutually benefit mailers and the Postal Service by capitalizing on mailer-specific characteristics. There is no right or guarantee that any mailer will obtain a mailer-specific Negotiated Service Agreement. The standard rates, fees, and classifications remain available for universal application. Thus, part of the “cost” of obtaining the special benefits associated with a Negotiated Service Agreement is participation in the review process, and the potential to have to disclose information relevant to the proceeding.

Proposed subsection (c) requires in part that the Postal Service provide a statement describing and explaining the proposed changes to the Domestic Mail Classification Schedule and any associated rate schedule. The Postal Service alerts the Commission to the fact that there are fee schedules in addition to the referenced rate schedules. Postal Service at 28. The Commission will correct this omission in the final rule by changing the words “rate schedule” to “rate or fee schedule.” Section 3001.193(c) shall be modified to state: “Every formal request shall include a description of the proposed rates, fees, and/or classification changes, including proposed changes, in legislative format, to the text of the Domestic Mail Classification Schedule and any associated rate or fee schedule.”

No substantive comments in opposition to proposed § 3001.193(d) have been received. Section 3001.193(d) shall be included in the final rule as originally proposed.

Subsection (e) requires every formal request to include an analysis of the effects of the Negotiated Service Agreement on Postal Service volumes, costs and revenues. Comments are fairly balanced between parties considering the specific requirements too onerous, and parties arguing in support of the proposed rule. The Postal Service contends that the rule generally solicits information necessary to explain and justify the financial components of a Negotiated Service Agreement, but has concerns over the rule's structure. Several parties also provide detailed suggestions for improving particular requirements of subsection (e).

Capital One foresees several problems in complying with the proposed rule. It contends that in general mailer specific costs are not known. It questions the reliability of mailer-specific elasticities and their projection over a three-year period. It argues that obtaining mailer-specific volumes over the possible three years of an agreement is just wishful thinking. Furthermore, it foresees frequent use of waivers claiming that information is unavailable and cannot be produced without undue burden. Alternatively, Capital One favors adapting the rules for experimental requests for use with requests predicated on Negotiated Service Agreements. It argues that there is no reason to believe that future Negotiated Service Agreements will have any greater impact or be more complex than the typical experimental case. Capital One at 3-7.

DMA et al . contend that the proposed rules “are so burdensome and broad that * * * they would deter most from seeking NSAs and substantially increase the costs of obtaining NSAs to those who might be willing to go forward.” It suggests, as a procedural alternative, that the Postal Service only be required to prove that a Negotiated Service Agreement improves the Postal Service's financial position, and require sufficient data to prove this point. It further argues for the adoption of rules analogous to the rules governing experimental classifications. DMA et al . are particularly troubled over the requirements to analyze costs, revenues and volumes over the life of the agreement versus just a test year, the use of mailer-specific costs, volumes, and elasticities, and certain aspects of providing a response in regard to contribution. DMA et al . further discuss the difficulty of developing estimates and the difficulty of defending estimates without disclosing a significant amount of proprietary information. DMA et al . at 6-8.

Discover considers the DMA et al. comments as instructive, and believes that even the Postal Service's proposals (discussed below) are too rigid. It suggests that the level of detail specifying evidentiary support should not be written into stone at this time. Discover proposes the rule should just require that “'[e]very formal request shall include a sufficient analysis of the effects of the Negotiated Service Agreement on Postal Service volumes, costs and revenues * * *.’ ” It argues that the details of each Negotiated Service Agreement could then dictate the type and level of financial analysis required. Discover Reply at 5.

First Data interprets the rule as establishing a rebuttable presumption which requires the presentation of data quantifying the additional mail volume potentially generated by the Negotiated Service Agreement, and the associated elasticity factors. It contends that volume and elasticity studies of this kind are time consuming and costly to generate. It argues that such data may be appropriate for some Negotiated Service Agreements (such as the Capital One agreement), but may not be appropriate for others. First Data further requests clarification “that detailed volume and elasticity studies will not be required for proposed volume discounts that equal a uniform percentage of anticipated cost savings per piece.” 14 First Data at 2-3.

MMA's concern is with the requirements for mailer-specific information. It requests clarification that the Commission is interested in the costs incurred by the Postal Service for handling the specific mailer's mail, and not the costs incurred by the mailer to prepare the mail (for example, the mailer's cost of preparing workshare type mail). It also requests clarification that a mailer is not required to provide mailer-specific information or develop mailer-specific elasticity factors unless such information is relevant to the Commission's review. MMA at 5-6.

Pitney Bowes also interprets § 3001.193(e) as creating a presumption that mailer-specific cost, volume, revenue, and elasticity information will be required, notwithstanding that such data and information may not be important for every agreement. It requests clarification that there is no presumption for extensive mailer-specific information for every request predicated on a Negotiated Service Agreement. It also requests an express provision in the rules stating that data is not required where the proponents present a plausible explanation that the effects to be measured by the information would be de minimis. Pitney Bowes at 4-5.

PostCom interprets § 3001.193(e) as contemplating that a Negotiated Service Agreement cannot be approved in the absence of mailer-specific information. It contends that this would be an unacceptable standard. It argues that few, if any, mailers collect, or retain, mailer-specific information at the level of detail that the Postal Service does on a system-wide basis. PostCom proposes changes to § 3001.193(e)(5) to stress that the focus is on the costs to the Postal Service. It further uses the terminology “to the extent practical” presumably to allow for the use of proxies for mailer-specific information when it is unavailable. PostCom's proposal states:

The Postal Service supports PostCom's proposal to modify §§ 3001.193(e)(5)-(8), and has incorporated the essence of PostCom's proposal into its revised proposal. The Postal Service contends that these modifications streamline the structure of the rule and remove certain redundancies. Postal Service Reply at 15-16.

Valpak contends that the rules in regard to requiring mailer-specific cost information are reasonable and necessary. It asserts the relevant issue is the necessity to obtain reliable cost estimates on which the Commission can base its rate recommendations. It dismisses some commentary provided by other parties as arguing it is impractical to require the Postal Service to meet virtually any burden to obtain a desired change in rates. Valpak's comments provide examples discussing the importance of good proxies and mailer-specific costs.

In regard to PostCom's proposal to focus on Postal Service costs, Valpak does not object to the rewording of § 3001.193(e)(5). However, it contends that PostCom's implication that the proposed rule requires anything other than Postal Service costs is rather stretched. Valpak also objects to the addition of the phrase “to the extent practical.” It argues that this could vitiate the rule, potentially acting as a permanent waiver. Valpak Reply at 1-5.

NAA contends that since the Postal Service does not have residual claimants to answer to if it enters into unwise deals, it is more important, not less, to understand the costs of what it is committing to. It is dismissive of other comments paying “lip service” to the concept that mailer-specific data is desirable, but that actually obtaining such data generally would be too difficult. It remains unconvinced of the Postal Service's position, which it summarizes as mailer-specific costs are unknowable, but average costs should usually suffice. NAA contends that private regulated carriers routinely engage in such cost analysis. NAA Reply at 5-7. NAA also supports requiring the financial analysis to be considered over the life of the agreement stating: “If the Postal Service truly cannot arrive at a reasonably realistic assessment, taking into account all pertinent considerations, whether a particular deal would raise or lower contribution, it should not enter the agreement.” Id. at 7-8.

UPS views the gathering of mailer-specific information as the cost of offering mailer-specific rates, the absence of which draws into question the very concept of Negotiated Service Agreements. It asserts that “large” mailers are urging the Commission to abandon attempts to obtain mailer-specific costs and other information, but they do not contend that such information is not relevant to the proceeding. Generally, UPS supports the mailer-specific information requirements. UPS Reply at 3-4. UPS also supports the multi-year financial analysis proposed by the rules. Id. at 4-7.

The Commission assumes that the negotiators and the decision-makers involved with entering into Negotiated Service Agreements require a certain level of information in order to exercise appropriate business judgement. Where information is unavailable that is necessary to exercise this judgement, the Commission expects the expenditure of some level of effort to gather the required information. In most instances, the information sought by the Commission is the minimum information that should be under consideration during the negotiation and decision-making process. The Commission requires this information in order to carry out its statutory functions. Thus, the Commission is not persuaded by arguments that the rules impose too high of a burden, or that it is unreasonable to ask proponents to gather information required to justify any one particular request.

Requests predicated on Negotiated Service Agreements are not requests for experimental classifications. The purpose of an experimental classification is for the Postal Service to learn something. Experimental rules anticipate that certain information might not be available because a purpose of the experiment might be to gather that information. The existence of these rules does not prevent the Postal Service from filing requests for experimental authority to test potentially beneficial arrangements.

Nor are requests predicated on Negotiated Service Agreements the same as a request in an omnibus rate case. The rules for an omnibus rate case allow for a wide spectrum of material with its associated levels of uncertainty that potentially could effect postal services for an unknown period of time. Because of these and other characteristics, a test year approach is appropriate for an omnibus rate case. In contrast, Negotiated Service Agreements are limited in both scope and duration. The Postal Service should not be entering into a Negotiated Service Agreement unless it has good reason to believe the agreement benefits the Postal Service. Because of limited scope and duration, and the requirement to benefit the Postal Service, it appears reasonable to assume that the proponents of an agreement should and could have a high level of understanding as to the bases of that agreement. Without this understanding, it might be unwise to continue considering such an agreement. Because of the characteristics of Negotiated Service Agreements, compared with the characteristics of experimental and omnibus rate cases, the Commission believes that the financial analysis rule is appropriate under the circumstances, and is not unduly burdensome.

The Commission is not persuaded by the argument that because a Negotiated Service Agreement typically might not have a substantial effect on the finances of the Postal Service, the less burdensome rules for experimental classifications might be more appropriate. While it might be true that any one Negotiated Service Agreement may have little effect on overall Postal Service finances, there has been an indication that many parties are interested in pursuing Negotiated Service Agreements. Assuming that multiple Negotiated Service Agreements are approved, the Commission has concern that the cumulative effects of multiple agreements could have an appreciable effect on Postal Service finances, and will have a further effect on the analysis of any future omnibus rate case. This makes it important to appropriately review every request predicated on a Negotiated Service Agreement.

There does not appear to be any suggestion that the information that the rules require is not relevant. Most of the commentary is on the burden imposed with gathering information, the difficulties in obtaining mailer-specific information, or in making projections into the future. The Commission requires information relevant to analyzing a request over the proposed duration of the agreement. If information is unavailable over the duration of the agreement, this analysis cannot be accomplished, and the agreement cannot be reviewed for compliance with the requirements of the Act. Proponents have the option of requesting shorter duration agreements, if that is all that can be justified given the available information.

The clarifications suggested by MMA are appropriate. For example, where discussion focuses on “mailer-specific costs,” the concern is with costs incurred by the Postal Service to handle the mail of the specific mailer. Furthermore, if an element of analysis, such as mailer-specific elasticity factors, is not relevant to the Commission's review of a specific request, it need not be developed.

The financial analysis rule as proposed provides the Postal Service with considerable latitude to appropriately formulate its response to the characteristics of the particular request. Because of this inherent flexibility, the Commission will apply the rule of reason in interpreting compliance with the rule. The Postal Service is sufficiently sophisticated to know generally what information is relevant, and must be submitted, and what is not relevant and need not be submitted. Thus, the Commission is not persuaded that the rules will result in the submission of substantial amounts of information not relevant to the analysis of the request.

The Commission requires certain information in order to carry out its statutory duties. It is not persuaded that it is imposing an unfair burden on any proponent by requiring that this information be provided. Negotiated Service Agreements provide participating mailers with benefits that are not available to other mailers in general. The requirement to substantiate a request for a Negotiated Service Agreement is part of the cost of receiving those benefits. The Commission believes that the rules strike the right balance to provide the Commission with the information necessary to review the request, without unduly burdening the proponents of the agreement.

The Postal Service supports § 3002.193(e) in that the requirements “appear to be intended to elicit a workable set of materials that should be sufficient to explain and justify the financial components of a proposed NSA.” Nevertheless, the Postal Service has concerns over the structure of the requirement, and over a few of its provisions. Postal Service at 6-14.

The Postal Service does not oppose (even though it is not convinced that it is the preferred approach) a multi-year financial analysis versus a test year financial analysis to analyze the financial effects of a Negotiated Service Agreement. It argues that the scope and reliability of estimates might not be consistent when going from the first year of an agreement to the subsequent years. From its Capital One experience, it asserts it found difficulty in obtaining a one-year forecast. Thus, it contends that projecting a forecast over multiple years would present serious challenges.

To cope with these challenges, the Postal Service proposes a restructuring of subsection (e). 15 Subsection (e) would be subdivided into two subdivisions. The first subdivision would focus on the first year of the agreement and essentially provide the same information as proposed in the Commission's rule. The second subdivision would continue to require a yearly financial analysis for the subsequent years. However, the focus in the subsequent years would shift to analyzing identifiable changes from the first year, rather than to build a separate analysis for each subsequent year from the ground up. The Postal Service would first identify factors that “might” cause the relevant elements of the analysis to differ materially from the corresponding elements in the first year. The potential effects of each factor would then be examined and quantified. Finally, the projected effects of all such factors would be aggregated into a restated financial analysis for each component of the agreement. The intent of the Postal Service's proposal is to better align the rule with what it views as the reality of the significant limitation on the amount and quality of information available past the first year of the agreement.

The Postal Service also has concerns in regard to the mailer-specific cost provisions of the rule. It reiterates its past position that determining “mailer-specific costs in all but the most extraordinary circumstances would be nigh impossible.” It asserts that generally speaking it cannot hope to trace any particular customer's mail through the postal system. Given these concerns, however, the Postal Service believes that subsection (e) as proposed will provide it with the necessary latitude to structure its financial analysis, without the necessity to resort to routine requests for waivers. It acknowledges the importance of using the most accurate costs available, and does not intend to use, for example, subclass averages where it does not believe that will do a good job of estimating true costs. Finally, the Postal Service recognizes that special studies may be appropriate in some instances.

The Commission compliments the Postal Service for its well-reasoned commentary, analysis and proposals in regard to the proposed financial analysis rule. The Commission shares many of the Postal Service's observations and concerns in drafting rules applicable to a basically uncharted territory. Either the Commission's approach or the Postal Service's alternative approach could form the basis of a rule to analyze the financial consequences of a multi-year Negotiated Service Agreement. The two approaches substantially coincide for the first year of any agreement. For the potential second and third years of an agreement, the differences appear more philosophical than substantive.

The Postal Service's approach potentially has one time savings advantage. It should present, up-front, potential changes to the financial analysis that might occur beyond the first year without requiring the Commission or interested parties to discover this information on their own. This could reduce the time necessary for analyzing a Postal Service request. The risk is that the Postal Service could apply a loose standard to interpreting what factors “might” cause the relevant elements of the analysis to differ “materially” from the corresponding elements in the first year, which would negate any benefit.

The Commission shall adopt the Postal Service's approach as proposed in its initial comments. This decision is substantially based on the slight advantage inherent in the Postal Service's approach. Both the Commission's approach and the Postal Service's approach, if properly applied, have the potential to provide the Commission with the information necessary to make an informed recommendation. If the Postal Service's approach proves inadequate, the Commission has the option of revisiting these provisions at a later time.

The Commission recognizes as valid many of the concerns raised by the Postal Service, and other intervenors. The rule requires the estimation of future events. It is a valid and acceptable argument that the farther out in time an estimation is made, the less certain the reliability of that estimation. The end effect will be that at a certain point in the future, the information becomes so unreliable that it is no longer of any use to justify a request. This might act to limit the duration of any proposed agreement. The Commission also accepts the Postal Service argument that it might not know every aspect of a mailer's costs. However, the Commission expects the Postal Service to know and understand mailer-specific costs where they have a bearing on a request. This is all part of analyzing the financial aspects of any proposed agreement.

Subsection (e)(3) requires the financial analysis to: “Be prepared in sufficient detail to allow independent replication, including citation to all referenced material.” OCA proposes to include a reference in subsection (e)(3) to the § 3001.193(h)(4) workpaper rules to make clear that the citation requirements of subsection (e)(3) are as stringent as the requirements for workpapers. OCA at 15. The Postal Service is opposed to this proposal because the requirement already requires the analysis to “be prepared in sufficient detail to allow independent replication.” Postal Service Reply at 16.

The Commission finds subsection (e)(3) acceptable as proposed, and is not persuaded that the OCA proposal suggests a necessary or desirable change.

Subsection (e)(4) requires the financial analysis to: “Include an analysis, which sets forth the estimated mailer-specific costs, volumes, and revenues of the Postal Service for each year that the Negotiated Service Agreement is to be in effect assuming the then effective postal rates and fees absent the implementation of the Negotiated Service Agreement.” Subsection (e)(5) requires the financial analysis to: “Include an analysis which sets forth actual and estimated mailer-specific costs, volumes, and revenues of the Postal Service which result from implementation of the Negotiated Service Agreement.”

PostCom and OCA note that subsection (e)(4) requires “estimated” mailer-specific costs, volumes, and revenues, whereas subsection (e)(5) requires “actual and estimated” mailer-specific costs, volumes, and revenues. PostCom suggests deleting the requirement for “actual” information from subsection (e)(5) because much more commonly, the costs and volume data will be estimates. PostCom at 5. OCA proposes to make subsection (e)(4) and (e)(5) symmetrical by adding “actual” to subsection (e)(4). OCA at 15-16. The Postal Service endorses the approach taken by PostCom by noting that the “availability of actual financial information for a future period seems equally unlikely in either scenario.” Postal Service Reply at 15-16.

The Commission shall delete “actual” from subsection (e)(5). Both subsections (e)(4) and (e)(5) require the Postal Service to perform a prospective analysis of future events. The mailer-specific costs, volumes, and revenues might be known in the past, or at the present, but they would only be estimates in the future. 16

Subsection (e)(6) requires the analysis to: “Include a discussion of the effects of the Negotiated Service Agreement on contribution to the Postal Service (including consideration of the effect on contribution from mailers whom [sic] are not parties to the agreement).” OCA proposes to require an “analysis” rather than a “discussion.” 17 OCA at 16. The Postal Service does not support changing the terminology to “analysis.” It questions whether anything useful is gained by making the substitution, and contends that the term “analysis” might be misconstrued. Postal Service Reply at 16-17.

The Commission interprets OCA's concern as with the level of detail required to comply with this rule. Parties on their own should be able to determine the first order effects on contribution from the cost, volume, and revenue requirements of subsections (e)(4) and (e)(5). However, subsection (e)(6) is meant to emphasize the importance of the consideration of contribution to the overall recommendation, and alert the Postal Service that this issue warrants separate treatment. Subsection (e)(6) requires a quantitative as well as qualitative response. Because the word “analysis” may be interpreted as more inclusive, the Commission will accept the OCA proposal and change the word “discussion” to “analysis” in the final rule.

NNA proposes the addition of a requirement for all costs to be presented by cost segment in regard to worksharing type Negotiated Service Agreements. It argues that the purpose of this requirement is to allow small competitors and the Commission to better identify potential functionally equivalent arrangements. NNA at 6-7. In addition, NNA proposes to add a requirement to § 3001.193(e)(6) for the Postal Service to provide a plan demonstrating how it will make the individual features of a Negotiated Service Agreement available to mailers not party to the agreement. Id. at 7-8.

The Postal Service is opposed to the NNA proposal requiring estimated costs to be presented by cost segment. Given the purported purpose of enabling smaller mailers to identify potentially functionally equivalent arrangements, and the ability of the uninitiated to understand and utilize arcane cost segment data, the Postal Service cannot conceive how this information could benefit a small mailer. Thus, the Postal Service contends that the proposed requirement is unnecessary and burdensome. Postal Service Reply at 17-18.

In instances outside of omnibus rate cases, the Commission does not always require cost estimates to be presented by cost segment. 18 If this information becomes necessary to analyze a specific request, a participant or the Commission can request it separately. The Commission interprets NNA's goal as requiring the Postal Service to provide detailed information for examining the potential for developing new or functionally equivalent Negotiated Service Agreements, and not for analyzing the instant request. The inference is that picking and choosing desirable functional elements from a proposed multi-element Negotiated Service Agreement could be used to develop new Negotiated Service Agreements. While the Commission considers it a requirement that similarly situated mailers have the opportunity to obtain functionally equivalent Negotiated Service Agreements, dissecting an agreement for the purpose of developing and promoting future agreements is beyond what the Commission requires. It also is beyond what is necessary to evaluate the merits of any one Postal Service request.

OCA proposes the addition of a ninth requirement to subsection (e) which states: [the analysis shall] “demonstrate that the impact of the Negotiated Service Agreement on the net present values of the Postal Service is significant and positive.” The OCA asserts that this would insure that the time value of money is accounted for in estimating the effect of a Negotiated Service Agreement on Postal Service finances. OCA at 16. The Postal Service opposes the addition of this requirement as it adds far more needless complication than real substance. Postal Service Reply at 17.

The Commission concurs with the Postal Service. OCA fails to provide any persuasive explanation of how analyzing an effect on net present value, in light of all of the other informational requirements, would add further insight to the Commission's recommendations.

Subsection (f) requires the Postal Service to include an estimate of the impact of the Negotiated Service Agreement on: competitors of the parties to the Negotiated Service Agreement other than the Postal Service; competitors of the Postal Service; and mail users.

First Data contends that the requirements of subsection (f) are burdensome and suggests that the subsection be deleted. First Data at 3-5. MMA asserts that subsection (f) is burdensome, of questionable value, and also suggests that it should be deleted. MMA at 6. DMA et al. contend that subsection (f) is burdensome, and that the requirement is vague. DMA et al. at 11. Capital One objects to subsection (f) in general, and (f)(2) specifically. It contends that complying with the requirement would be an onerous task, and that the “Panzar” effects that this subsection arguably responds to are too remote for consideration. It also asserts that the Commission's obligation is to ensure that proposals promote rather than harm competition, and not to assess the benefit or harm to any particular competitor as Capital One argues is required by subsection (f)(2). Capital One at 6-7.

NAA emphatically supports analyzing the competitive effects of Negotiated Service Agreements. NAA Reply at 8-11. UPS argues that subsection (f) is supported by the factors of the Act and urges the rejection of proposals to eliminate this requirement from the rule. UPS Reply at 4. Valpak supports a broad analysis on the consequences that Negotiated Service Agreements have on third parties. Valpak at 8-11; Valpak Reply at 10-11. OCA opposes elimination of subsection (f). It argues that because the Commission must find that each Negotiated Service Agreement serves the public interest, it should insist that the Postal Service's filing contain what is essentially a social cost-benefit analysis. OCA Reply at 8-9.

The Postal Service's concern is with the potential burden imposed by subsection (f), and it questions whether the information required to comply with the requirement will even be available. It suggests that the Postal Service could first provide some analysis, but then the burden should shift to the competitors to raise competitive issues. The Postal Service implies that it should really just be reacting to third-party claims of competitive harm brought up in the proceeding. The Postal Service states that it “would be willing to provide information with its filing concerning the competitive context in which the NSA takes place, and otherwise qualitatively demonstrate that it has considered such competitive effects prior to filing the NSA request.” Postal Service at 15-19; Postal Service Reply at 18-20.

The Commission anticipates that the burden of complying with subsection (f) will vary considerably depending on the specifics of the Negotiated Service Agreement and the parties involved. The subsection is written using general language to allow the Postal Service the flexibility to formulate a response appropriate under the circumstances. The commentary on the rule fairly equally argues in support of and in opposition to the proposed rule. The rule addresses a difficult subject area. However, the information it requires is necessary for the Commission to analyze the request in relation to the requirements of the Act. It is particularly important for Negotiated Service Agreements involving mail subject to the Postal Service monopoly. The Commission will retain this rule in the final rules, but will be willing to entertain suggestions for future improvements after gaining further experience.

Several comments discuss whether it is appropriate for the Postal Service to have the initial burden of presenting competitive issues or whether third party competitors should be required to protect their own interest by intervening in the proceeding. First Data argues that the Commission should rely on the normal adversarial process for third parties to protect their interests. First Data at 3-5. MMA contends that the Commission should rely on intervention by third-party competitors to protect their own interests, and intervention by the OCA to represent the interests of the general public. MMA at 6. OCA supports the adversarial approach assuming that all adversely affected parties are of similar size and financial resources to the proponents of the Negotiated Service Agreement. However, OCA contends that if a large number of small firms were adversely affected, no single small firm would find it worthwhile to incur the costs of litigation, even if the aggregate negative effects of the Negotiated Service Agreement were large. OCA Reply at 8-9.

The Commission believes that the adversarial process, in most instances, is the preferred methodology of resolving issues before the Commission. This methodology is most efficient where adversaries possess comparable resources and knowledge. In this situation, parties can be presumed to have the responsibility to intervene in a proceeding if their interests are at stake.

However, requests predicated on Negotiated Service Agreements present a different situation to the Commission. Competitors of the proponent requesting a Negotiated Service Agreement cannot be presumed to have comparable resources and knowledge to intervene for the purpose of protecting their own interests. For example, the Capital One NSA experience showed very few competitors approaching Capital One's resources and knowledge. It is unreasonable to expect small businesses to be constantly aware of the potential impact of Negotiated Service Agreements filed with the Commission, and to be prepared to raise their concerns in the limited time frames established by these rules. This could leave multiple, similar small competitors not represented and unprotected when considering the aggregate effect of a Negotiated Service Agreement, especially since these cases are expected to proceed with expedited timetables. Thus, the Commission is not persuaded that total reliance on the adversarial system is consistent with its statutory obligations, or is in the best interest of all mailers or the postal system. Subsection (f) is intended to complement the adversarial process. Requiring the proponents of a Negotiated Service Agreement to initially analyze competitive issues and provide analysis to the Commission is a modest step in the direction of assuring an adequate record on this important issue.

The Commission considers it fair and equitable to place the initial burden on the Postal Service and its co-proponents. The Postal Service is likely to have greater access to information about mail markets and be better able to evaluate potential impacts than the vast majority of mailers who may be concerned about the possible impacts of a Negotiated Service Agreement. Its co-proponents are assumed to be in the industry that would be affected by the Negotiated Service Agreement, and should be knowledgeable about competitive issues within their own industry, and competitive relationships within the industry. Both the Postal Service and its co-proponents presumably have recently undertaken the negotiation process where many of these issues may have been considered. Thus, the Postal Service and its co-proponents are in a superior position to efficiently address this topic.

Providing information on the competitive issues of a Negotiated Service Agreement with the request also facilitates issuing a prompt decision. Expediting the proceeding has been stressed in many of the comments. The Commission found it necessary to sponsor a witness to address certain issues when it evaluated the Capital One Negotiated Service Agreement. This was time consuming both from the aspect of providing time for the witness to develop the required testimony, and of providing time for interested parties to respond to the testimony. Assuring the availability of an analysis of impact on competition up front, with the request, appears to be a more efficient way to proceed.

Discover and Pitney Bowes suggest textual changes that could make compliance with the requirement less onerous. Discover proposes that the word “discussion” be used in place of the words “analysis” and “estimate” in subsection (f). It argues that most Negotiated Service Agreements only have limited impact on competition, providing there is rapid approval of functionally equivalent agreements. Thus, anything more than requiring a simple statement will only increase the transaction costs of the review process. Discover Reply at 5-6. Discover also suggests that the Commission distinguish between different types of Negotiated Service Agreements in setting requirements for analyzing the impact of a Negotiated Service Agreement. Id. at 7-8. Pitney Bowes suggests that subsection (f) only require the parties to “consider” competitive effects. It also suggests that extensive data or information is not necessary if competitors do not appear to oppose the Negotiated Service Agreement. 19 Pitney Bowes at 6-7.

The Commission shall not adopt suggestions only to require that proponents “consider” or “discuss” the effect of a Negotiated Service Agreement. The Commission considers the effects of a Negotiated Service Agreement to be an important issue requiring more than the implied limited discussion or consideration. A simple statement that the effects of the Negotiated Service Agreement have been considered, or a broad statement about competition in general will not suffice in providing the Commission with the information necessary to evaluate the effects of a Negotiated Service Agreement.

The Postal Service proposes to change the term “estimate” to “analysis” in subsection (f). Postal Service at 15-19.

The Commission interprets the Postal Service's intent as to require more of a qualitative than a quantitative response. The Commission expects an analysis to provide both quantitative and qualitative information, and thus will change the final rule to refer to an “analysis.” This could be revisited in a future rulemaking after the Commission and the Postal Service come to a better understanding, through experience, of what information might reasonably be presented.

Subsection (f) is written with inherent flexibility. The Commission tasks the Postal Service with using this flexibility to its advantage, and through the rule of reason, provide a response that is appropriate under the circumstances.

Subsection (g) requires Postal Service requests to provide a proposal for a data collection plan. The Postal Service alerts the Commission to a typographical error in a reference to a subsection. Postal Service at 27-28. The Commission shall correct the typographical error by referencing the correct sections of renumbered § 3001.193(e) in the final rule.

OCA suggests an amendment to § 3001.193 to make clear that a proposed data collection plan is subject to change by the Commission. The OCA proposes to specifically state: “The proposed data collection plan will be subject to amendment by the Commission in its recommended decision.” OCA at 16.

The Commission has the right to task proponents with collecting data and performing analyses appropriate under the specific circumstances of any request. The data collection plan proposed in a request predicated on a Negotiated Service Agreement serves a different purpose, and is anticipated to be less burdensome, than a data collection plan appropriate for an experiment. See PRC Order No. 1383 (August 27, 2003) at 13. The data gathered and analysis performed is anticipated to be that which would be done anyway in the normal course of business to quantify the benefit to the Postal Service. The Commission does not find it necessary to adopt OCA's suggestion in the final rule.

No substantive comments in opposition to proposed § 3001.193(h) have been received. Section 3001.193(h) shall be included in the final rule as originally proposed.

No substantive comments in opposition to proposed § 3001.193(i) have been received. Section 3001.193(i) shall be included in the final rule as originally proposed.

Subsection (j) provides that the Commission may reject any Postal Service request which patently fails to substantially comply with any requirements of the subpart (subpart L). Subsection (j) is modeled after identical language appearing in §§ 3001.54(s) and 3001.64(i).

The Postal Service reiterates its position expressed in rulemaking Docket No. RM80-1 in regard to rules 3001.54 and 3001.64 that rejection by the Commission of a Postal Service request made under §§ 3622 and 3623 falls outside the bounds of the Commission's lawful authority. 20 Further, the Postal Service preemptively rejects any argument that a rejection of a Postal Service request would affect the Postal Service's authority to impose temporary rate and classification changes under § 3641, and specifically requests that the provisions of § 3641 be cited in § 3001.195. Postal Service at 19-21, Attachment at 5.

The legal authority of the Commission to reject a Postal Service request that patently fails to substantially comply with filing requirements was litigated in Docket No. RM80-1, and comprehensively explained in PRC Order No. 354. The finding of legal authority was based on the holdings presented in Municipal Light Boards of Reading and Wakefield Massachusetts v. Federal Power Commission, 450 F.2d 1341 (D.C. Cir. 1971), which is still current law. The Postal Service has not produced any new argument that would persuade the Commission to alter its position. Therefore, subsection (j) shall remain as part of the final rule. 21

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to:

• Crop production (NAICS 111)

• Animal production (NAICS 112)

• Food manufacturing (NAICS 311)

• Pesticide manufacturing (NAICS 32532)

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 FOR FURTHER INFORMATION CONTACT .

1. Docket . EPA has established an official public docket for this action under docket identification (ID) number OPP-2003-0389. The official public docket consists of the documents specifically referenced in this action, any public comments received, and other information related to this action. Although a part of the official docket, the public docket does not include Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. The official public docket is the collection of materials that is available for public viewing at the Public Information and Records Integrity Branch (PIRIB), Rm. 119, Crystal Mall #2, 1921 Jefferson Davis Hwy., Arlington, VA. This docket facility is open from 8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays. The docket telephone number is (703) 305-5805.

2. Electronic access . You may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/ . A frequently updated electronic version of 40 CFR part 180 is available at http://www.access.gpo.gov/nara/cfr/cfrhtml_00/Title_40/40cfr180_00.html/ , a beta site currently under development. To access the OPPTS Harmonized Guidelines referenced in this document, go directly to the guidelines at http://www.epa.gov/opptsfrs/home/guidelin.htm /.

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 http://www.epa.gov/edocket/ to submit or view public comments, access the index listing of the contents of the official public docket, and to access those documents in the public docket that are available electronically. Although not all docket materials may be available electronically, you may still access any of the publicly available docket materials through the docket facility identified in Unit I.B.1. Once in the system, select “search,” then key in the appropriate docket ID number.

In the Federal Register of November 13, 2003 (68 FR 64343) (FRL-7333-6), EPA issued a notice pursuant to section 408 of FFDCA, 21 U.S.C. 346a, as amended by FQPA (Public Law 104-170), announcing the filing of a pesticide petition (PP 6F4632, transferred from Abbott Laboratories) by Valent BioSciences Corporation, 870 Technology Way, Libertyville, IL 60048. That notice included a summary of the petition prepared by Valent BioSciences Corporation, the registrant. There were no comments received in response to the notice of filing.

In the Federal Register of November 19, 2003 (68 FR 65281) (FRL-7334-3), EPA issued a notice pursuant to section 408 of FFDCA, 21 U.S.C. 346a, as amended by FQPA (Public Law 104-170), announcing the filing of a pesticide petition (PP 3F6772) by Valent BioSciences Corporation, 870 Technology Way, Libertyville, IL 60048. That notice included a summary of the petition prepared by Valent BioSciences Corporation, the registrant. There were no comments received in response to the notice of filing.

The petitions requested that 40 CFR 180.502 be amended by establishing permanent tolerances for residues of the biochemical pesticide aminoethoxyvinylglycine hydrochloride (aviglycine HCl), formerly designated as aminoethoxyvinylglycine (AVG), in or on apple and pear at 0.08 parts per million (ppm) (PP 6F4632), and in or on the stone fruits crop group 12, excepting cherries, at 0.170 ppm (PP 3F6772). Data submitted and summarized by Valent BioSciences Corporation in these petitions include: Domestically and internationally generated residue data; another acute inhalation toxicity study; and subchronic toxicity (rat, mouse and dog), and metabolism (rat and comparative mouse and rat) studies, as well as a Tier III biochemical pesticide toxicity study (rat carcinogenicity), and additional studies (rabbit developmental toxicity and rat chronic toxicity) to refine assessments of subpopulation sensitivities and carcinogenic potential.

Previously, in support of both time-limited and temporary tolerances issued by EPA for residues of aviglycine HCl in or on apple, pear, and the stone fruits crop group 12 (May, 7, 1997, 62 FR 24835, FRL-5713-3, corrected on October 29, 1997, 62 FR 56089, FRL-5751-5; June 10, 1999, 64 FR 31124, FRL-6080-4; July 12, 2001, 66 FR 36477, FRL-6788-7; and July 12, 2001, 66 FR 36481, FRL-6790-7), residue studies and toxicity data consistent with the Tier I biochemical pesticide toxicity data requirements, as described in 40 CFR 158.690(c), were submitted. That data included acute oral, dermal and inhalation toxicity studies; eye and skin irritation studies; dermal sensitization and one genotoxicity study (Ames test); and subchronic (immunotoxicity) and developmental toxicity studies in the rat. Several additional toxicity studies, although not required for biochemical pesticides, also were submitted previously, including two mammalian mutagenicity studies (Tier II rat micronuclei and mouse lymphoma) and subchronic studies (including 21-day dermal toxicity) in the rat. In addition, a conditionally required 2-generation rat reproduction study was submitted previously to reduce the uncertainties associated with the assessment of susceptibility of infants and children to potential hazards from aviglycine HCl exposure. All of this toxicity data on aviglycine HCl, both the new data submitted with the new petitions considered in this final rule and the data previously submitted and mentioned above has been considered and factored into the action taken in this final rule.

Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue . . . .”

EPA performs a number of analyses to determine the risks from aggregate exposure to pesticide residues. For further discussion of the regulatory requirements of section 408 of FFDCA and a complete description of the risk assessment process, see the final rule on Bifenthrin Pesticide Tolerances (62 FR 62961, November 26, 1997) (FRL-5754-7).

Consistent with section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure, consistent with section 408(b)(2) of FFDCA, for tolerances for residues of aviglycine HCl on apple and pear at 0.08 ppm, and on the stone fruits crop group 12, excepting cherries, at 0.170 ppm. EPA's assessment of exposures and risks associated with establishing these tolerances follows.

EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. The nature of the toxic effects caused by aviglycine HCl are discussed in Table 1 of this unit as well as the no observed adverse effect level (NOAEL) and the lowest observed adverse effect level (LOAEL) from the toxicity studies reviewed.

The acute toxicity studies indicated low toxicity for technical aviglycine HCl, placing it into Toxicity Category III for dermal toxicity, and Toxicity Category IV for oral toxicity and eye and skin irritation. A new acute inhalation toxicity study considered as part of this action changed the technical grade material's classification from Toxicity Category III to Toxicity Category IV. Dermal sensitization studies also indicated that aviglycine HCl is a non-sensitizer. Finally, in order to comply with the statutory requirements under FIFRA section 6(a)(2) and EPA's data requirements (40 CFR section 158.690(c)), any incident of hypersensitivity associated with use of aviglycine HCl must be reported to the Agency.

The dose at which no adverse effects are observed (the NOAEL) from the toxicology study identified as appropriate for use in risk assessment is used to estimate the toxicological level of concern (LOC). However, the lowest dose at which adverse effects of concern are identified (the LOAEL) is sometimes used for risk assessment if no NOAEL was achieved in the toxicology study selected. An uncertainty factor (UF) is applied to reflect uncertainties inherent in the extrapolation from laboratory animal data to humans and in the variations in sensitivity among members of the human population as well as other unknowns. An UF of 100 is routinely used, 10X to account for interspecies differences and 10X for intraspecies differences.

Three other types of safety or uncertainty factors may be used: “Traditional uncertainty factors;” the “special FQPA safety factor;” and the “default FQPA safety factor.” By the term “traditional uncertainty factor,” EPA is referring to those additional uncertainty factors used prior to FQPA passage to account for database deficiencies. These traditional uncertainty factors have been incorporated by the FQPA into the additional safety factor for the protection of infants and children. The term “special FQPA safety factor” refers to those safety factors that are deemed necessary for the protection of infants and children primarily as a result of the FQPA. The “default FQPA safety factor” is the additional 10X safety factor that is mandated by the statute unless it is decided that there are reliable data to choose a different additional factor (potentially a traditional uncertainty factor or a special FQPA safety factor).

For dietary risk assessment (other than cancer) the Agency uses the UF to calculate an acute or chronic reference dose (acute RfD or chronic RfD) where the RfD is equal to the NOAEL divided by an UF of 100 to account for interspecies and intraspecies differences and any traditional uncertainty factors deemed appropriate (RfD = NOAEL/UF). Where a special FQPA safety factor or the default FQPA safety factor is used, this additional factor is applied to the RfD by dividing the RfD by such additional factor. The acute or chronic Population Adjusted Dose (aPAD or cPAD) is a modification of the RfD to accommodate this type of safety factor.

For non-dietary risk assessments (other than cancer) the UF is used to determine the LOC. For example, when 100 is the appropriate UF (10X to account for interspecies differences and 10X for intraspecies differences) the LOC is 100. To estimate risk, a ratio of the NOAEL to exposures (margin of exposure (MOE) = NOAEL/exposure) is calculated and compared to the LOC.

The linear default risk methodology (Q*) is the primary method currently used by the Agency to quantify carcinogenic risk. The Q* approach assumes that any amount of exposure will lead to some degree of cancer risk. A Q* is calculated and used to estimate risk which represents a probability of occurrence of additional cancer cases (e.g., risk). An example of how such a probability risk is expressed would be to describe the risk as one in one hundred thousand (1 X 10 - 5 ), one in a million (1 X 10 - 6 ), or one in ten million (1 X 10 - 7 ). Under certain specific circumstances, MOE calculations will be used for the carcinogenic risk assessment. In this non-linear approach, a “point of departure” is identified below which carcinogenic effects are not expected. The point of departure is typically a NOAEL based on an endpoint related to cancer effects though it may be a different value derived from the dose response curve. To estimate risk, a ratio of the point of departure to exposure (MOE cancer = point of departure/exposures) is calculated.

A summary of the toxicological endpoints for aviglycine HCl used for human risk assessment is shown in Table 2 of this unit:

1. Dietary exposure from food and feed uses . Tolerances have been established (40 CFR 180.502) for the residues of aviglycine HCl, in or on a variety of raw agricultural commodities. Time-limited tolerances for apple and pear, and a temporary tolerance for the stone fruits crop group 12 (all expired on December 21, 2003), were established previously (July 12, 2001, 66 FR 36481, FRL-6790-7 (apple and pear) and July 12, 2001, 66 FR 36477, FRL-6788-7 (stone fruits crop group12)). In response to Valent BioSciences Corporation's petitions for permanent tolerances, an updated risk assessment was conducted by EPA to assess dietary exposures from aviglycine HCl in food as follows:

i. Acute exposure . Acute dietary risk assessments are performed for a food-use pesticide, if a toxicological study has indicated the possibility of an effect of concern occurring as a result of a 1-day or single exposure.

In conducting the acute dietary risk assessment EPA used the Dietary Exposure Evaluation Model software with the Food Commodity Intake Database (DEEM-FCID TM ), which incorporates food consumption data as reported by respondents in the USDA 1994-1996 and 1998 Nationwide Continuing Surveys of Food Intake by Individuals (CSFII), and accumulated exposure to the chemical for each commodity. The following assumptions were made for the acute exposure assessments: The residue of concern for the acute analysis is aviglycine HCl. The assessment assumed 100% of the proposed crops were treated, and that all treated crops had residues of concern at the requested tolerance levels. Anticipated residues were not used. Acute dietary risks for the 95th percentile of females 13-49 years old and the general U.S. population were minimal and did not exceed EPA's LOC. Acute dietary risks for children 1-2 years old technically exceeded EPA's LOC by a small margin. These risks represented a worst case scenario using toxicologic endpoints that only occurred in utero . Therefore, the calculated risks were illustrative at best. See footnote 2 of Table 2 for further explanation of acute endpoint utilized by EPA.

ii. Chronic exposure . In conducting the chronic dietary risk assessment EPA used the DEEM-FCID TM , which incorporates food consumption data as reported by respondents in the USDA 1994-1996 and 1998 Nationwide CSFII, and accumulated exposure to the chemical for each commodity. The following assumptions were made for the chronic exposure assessments: The residue of concern for the chronic analysis is aviglycine HCl. Conservative chronic dietary assessments utilized tolerance-level concentrations for crops (i.e., 0.08 ppm for apple and pear and 0.170 ppm for stone fruits crop group 12, excepting cherries). Chronic dietary risk for the U.S. population, and children 1-2 years old did not exceed 1.6%, and 10.5%, respectively, of the chronic Population Adjusted Dose (cPAD, 0.008 mg/kg/day). Therefore, chronic dietary risks were minimal and did not exceed EPA's LOC.

iii. Carcinogenicity . Conflicting evidence for carcinogenicity has been reported for aviglycine HCl. Mutatgenicity, immunotoxicology, endocrine, subchronic, and chronic feeding studies strongly suggest that aviglycine HCl does not induce cancer. Effects observed in the carcinogenicity study, such as a threshold-response and reduction in the number of animals with tumors, with benign tumors, and with malignant tumors also support non-carcinogenic conclusions. In contrast, increased incidence of benign testicular interstitial cell adenomas, benign adrenal pheochromocytoma, and adrenal medullary cell hyperplasia suggest that aviglycine HCl may induce cancer. These effects, however, were seen only at an excessively toxic dose and may have been mediated indirectly through generic toxic mechanisms such as glutathione depletion and resultant oxygen radical-induced cell damage, rather than by aviglycine HCl. Dosing with excessive aviglycine HCl, therefore, weakened support for carcinogenic activity.

In the end, weight-of-evidence suggests that aviglycine HCl is non-carcinogenic. However, definitive statements of carcinogenicity can not be made at the current time, because information meeting rigorous criteria for defining it as non-carcinogenic (such as a second cancer study in a different species and strong non-conflicting evidence) is absent. These studies are not typically required in the testing of biochemical pesticides. To account for this, an additional database uncertainty factor of 10X was integrated with other UFs (100X) (increasing the overall uncertainty factor to 1,000) and the NOAEL established in the carcinogenesis study (0.7 mg/kg/day) to conservatively account for this deficiency (RfD = 0.0007 mg/kg/day).

Carcinogenic dietary risks for the U.S. population did not exceed 18.3% of the cancer RfD. The cancer risks from chronic exposure to aviglycine HCl in food and surface or ground water, therefore, were not unreasonable.

2. Dietary exposure from drinking water . The Agency lacks sufficient monitoring exposure data to complete a comprehensive dietary exposure analysis and risk assessment for aviglycine HCl in drinking water. Because the Agency does not have comprehensive monitoring data, drinking water concentration estimates are made by reliance on simulation or modeling taking into account data on the physical characteristics of aviglycine HCl.

The Agency uses the Generic Estimated Environmental Concentration (GENEEC) or the Pesticide Root Zone Model/Exposure Analysis Modeling System (PRZM/EXAMS) to estimate pesticide concentrations in surface water and screening concentration in ground water (SCI-GROW), which predicts pesticide concentrations in ground water. In general, EPA will use GENEEC (a Tier I model) before using PRZM/EXAMS (a Tier II model) for a screening-level assessment for surface water. The GENEEC model is a subset of the PRZM/EXAMS model that uses a specific high-end runoff scenario for pesticides. GENEEC incorporates a farm pond scenario, while PRZM/EXAMS incorporate an index reservoir environment in place of the previous pond scenario. The PRZM/EXAMS model includes a percent crop area factor as an adjustment to account for the maximum percent crop coverage within a watershed or drainage basin.

None of these models include consideration of the impact processing (mixing, dilution, or treatment) of raw water for distribution as drinking water would likely have on the removal of pesticides from the source water. The primary use of these models by the Agency at this stage is to provide a screen for sorting out pesticides for which it is unlikely that drinking water concentrations would exceed human health LOC.

Since the models used are considered to be screening tools in the risk assessment process, the Agency does not use estimated environmental concentrations (EECs), which are the model estimates of a pesticide's concentration in water. EECs derived from these models are used to quantify drinking water exposure and risk as a %RfD or %PAD. Instead drinking water levels of comparison (DWLOCs) are calculated and used as a point of comparison against the model estimates of a pesticide's concentration in water. DWLOCs are theoretical upper limits on a pesticide's concentration in drinking water in light of total aggregate exposure to a pesticide in food, and from residential uses. Since DWLOCs address total aggregate exposure to aviglycine HCl they are further discussed in the aggregate risk sections in Unit E.

Based on the GENEEC and SCI-GROW models, the EECs of aviglycine HCl acute peak exposures are estimated to be 0.582 parts per billion (ppb) for surface water and 0.00028 ppb for ground water. The EECs for chronic 90 day exposures are estimated to be 0.0194 ppb for surface water and 0.00028 ppb for ground water. Acute EECs did not exceed DWLOCs for the subpopulation females 13-49 years of age (49.05 ppb) or for the general U.S. population (47.32 ppb). Acute DWLOCs were not calculated for other subpopulations because of a lack of relevance to the sensitive developmental endpoint. EECs also did not exceed DWLOCs for any population considered in chronic (Table 4) or cancer estimates (Table 5). Aggregate cancer risks and the risks from aggregate acute or chronic exposure to aviglycine HCl in food and surface or ground water, therefore, are not unreasonable.

3. From non-dietary exposure . The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure (e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Aviglycine HCl is not registered for use on any sites that would result in residential exposure.

4. Cumulative effects from substances with a common mechanism of toxicity . Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.”

EPA does not have, at this time, available data to determine whether aviglycine HCl has a common mechanism of toxicity with other substances. Unlike other pesticides for which EPA has followed a cumulative risk approach based on a common mechanism of toxicity, EPA has not made a common mechanism of toxicity finding as to aviglycine HCl and any other substances and aviglycine HCl does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has not assumed that aviglycine HCl has a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see the policy statements released by EPA's OPP concerning common mechanism determinations and procedures for cumulating effects from substances found to have a common mechanism on EPA's web site at http://www.epa.gov/pesticides/cumulative/ .

1. In general . Section 408 of FFDCA provides that EPA shall apply an additional tenfold margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. Margins of safety are incorporated into EPA risk assessments either directly through use of a MOE analysis or through using uncertainty (safety) factors in calculating a dose level that poses no appreciable risk to humans. In applying this provision, EPA either retains the default value of 10X when reliable data do not support the choice of a different factor, or, if reliable data are available, EPA uses a different additional safety factor value based on the use of traditional uncertainty factors and/or special FQPA safety factors, as appropriate.

2. Prenatal and postnatal sensitivity . EPA initially had concern for aviglycine HCl-induced prenatal and postnatal toxicity. This concern arose from 5 incidents of fetal toxicity (developmental malformations) that occurred at doses lower than that which induced maternal toxicity in rabbits (LOAEL = 0.4 mg/kg/day versus 0.7 mg/kg/day) and from an apparent increase in the severity of effects in rat offspring when compared to similarly dosed adults. A Degree of Concern Analysis was initiated to further investigate these issues and determine if an additional FQPA safety factor should be applied to risk equations to account for differential prenatal or postnatal sensitivities.

After investigation, the degree of concern was determined to be low for prenatal and postnatal aviglycine HCl-induced toxicity. This determination was justified for prenatal effects by:

i. The observation that the same number of similar fetal malformations in rabbits (5) also occurred at maternally toxic doses (0.7 mg/kg/day);

ii. The conclusion that 0.4 and 0.7 mg/kg/day dose differences in the rabbit study were more-than-likely without biological significance; and

iii. The utilization of the developmental endpoint (i.e., females aged 13-49), an endpoint relevant to prenatal toxicity, as a means for risk comparison. This determination also was justified for postnatal effects by:

a. The observation that toxic doses for adult rats were ultimately less than that for offspring (LOAEL = 2.5 versus 4.0 mg/kg/day);

b. The observation that increased severity of effects noticed in rat offspring may have been due to an inexplicable total loss of three litters;

c. The observation that offspring LOAELs were partially influenced by body weight decrements in parents; and

d. The observation that increased prenatal or postnatal sensitivities were not evident in rat developmental studies.

In summary, adequate characterization of prenatal and postnatal effects and the choice of a sensitive developmental endpoint for comparison to exposure data satisfied our concerns related to prenatal and postnatal effects.

3. Conclusion . There is a complete toxicity database for aviglycine HCl and exposure data are complete or are estimated based on data that reasonably accounts for potential prenatal and postnatal exposures to offspring and parents. A developmental NOAEL of 0.2 mg/kg/day was established in a rabbit study based on fetal effects at a dose of 0.4 mg/kg/day which was below the maternal LOAEL of 0.7 mg/kg/day. The maternal and developmental LOAELs were the same in the rat developmental study indicating no differences in susceptibility to aviglycine HCl toxicity. The multigeneration reproduction study also showed no differences in susceptibility of parents and their offspring (LOAEL = 2.5 mg/kg/day). All of these studies indicate that the special FQPA safety factor can be reduced to 1X for purposes of the current assessment.

To estimate total aggregate exposure to a pesticide from food, drinking water, and residential uses, the Agency calculates DWLOCs which are used as a point of comparison against EECs. DWLOC values are not regulatory standards for drinking water. DWLOCs are theoretical upper limits on a pesticide's concentration in drinking water in light of total aggregate exposure to a pesticide in food and residential uses. In calculating a DWLOC, the Agency determines how much of the acceptable exposure (i.e., the PAD) is available for exposure through drinking water (e.g., allowable water exposure (mg/kg/day) = PAD - (average food + residential exposure)). This allowable exposure through drinking water is used to calculate a DWLOC.

A DWLOC will vary depending on the toxic endpoint, drinking water consumption, and body weights. Default body weights and consumption values as used by the EPA's Office of Water are used to calculate DWLOCs: 2 liter (L)/70 kg (adult male), 2L/60 kg (adult female), and 1L/10 kg (child). Default body weights and drinking water consumption values vary on an individual basis. This variation will be taken into account in more refined screening-level and quantitative drinking water exposure assessments. Different populations will have different DWLOCs. Generally, a DWLOC is calculated for each type of risk assessment used: Acute, short-term, intermediate-term, chronic, and cancer.

When EECs for surface water and ground water are less than the calculated DWLOCs, EPA concludes with reasonable certainty that exposures to the pesticide in drinking water (when considered along with other sources of exposure for which EPA has reliable data) would not result in unacceptable levels of aggregate human health risk at this time. Because EPA considers the aggregate risk resulting from multiple exposure pathways associated with a pesticide's uses, levels of comparison in drinking water may vary as those uses change. If new uses are added in the future, EPA will reassess the potential impacts of residues of the pesticide in drinking water as a part of the aggregate risk assessment process.

1. Acute risk . Using the exposure assumptions discussed in this unit for acute exposure, the acute dietary exposure from food to aviglycine HCl will occupy18.25 % of the aPAD for females 13-49 years old. As a worst case estimate, dietary risks for the general U.S. population and population subgroups were also estimated using the acute developmental endpoint (0.002 mg/kg/day). Exposures to aviglycine HCl were marginally above EPA's LOC for children 1-2 years old (163%), but below for the general U.S. population (32.4%). The risks posed to children 1-2 years old represented a worst case scenario using toxicologic endpoints that only occurred in utero . Therefore, the calculated risks were demonstrative at best. In addition, there is potential for acute dietary exposure to aviglycine HCl in drinking water. After calculating DWLOCs and comparing them to the EECs for surface water and ground water, EPA does not expect the aggregate exposure to exceed 100% of the aPAD, as shown in Table 3 of this unit. The risks from acute aggregate exposure to aviglycine HCl in food and surface or ground water, therefore, are not unreasonable.

2. Chronic risk . Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that exposure to aviglycine HCl from food will utilize 1.6% of the cPAD for the U.S. population, 10.1% of the cPAD for all infants ( < 1 year old), and 10.5% of the cPAD for children 1-2 years old, as shown in Table 4 of this unit. There are no uses for aviglycine HCl that result in chronic residential exposure to aviglycine HCl. There is potential for chronic dietary exposure to aviglycine HCl in drinking water. After calculating DWLOCs and comparing them to the EECs for surface and ground water, EPA does not expect the aggregate exposure to exceed 100% of the cPAD, as shown in Table 4 of this unit. The risks from chronic aggregate exposure to aviglycine HCl in food and surface or ground water, therefore, are not unreasonable.

3. Short-term risk . Short-term aggregate exposure takes into account residential exposure plus chronic exposure to food and water (considered to be a background exposure level).

Aviglycine HCl is not registered for use on any sites that would result in residential exposure. Therefore, the aggregate risk is the sum of the risk from food and water, which do not exceed the Agency's LOC.

4. Intermediate-term risk . Intermediate-term aggregate exposure takes into account residential exposure plus chronic exposure to food and water (considered to be a background exposure level).