The Executive Director administers the TSP, which was established by the Federal Employees' Retirement System Act of 1986 (FERSA), Pub. L. 99-335, 100 Stat. 514. The TSP provisions of FERSA have been codified, as amended, largely at 5 U.S.C. 8351 and 8401-79. The TSP is a tax-deferred retirement savings plan for Federal civilian employees and members of the uniformed services. The TSP is similar to cash or deferred arrangements established for private-sector employees under section 401(k) of the Internal Revenue Code (26 U.S.C. 401(k)).

On April 7, 2004, the Executive Director published this rule in proposed form in the Federal Register (69 FR 18294). The Executive Director requested comments on the proposed rule and received sixty-eight comments on the loan program changes. One comment came from a Federal employees' union, one came from a commercial entity, and the remaining came from TSP participants. The commercial entity asked the Board to clarify proposed sections 1655.21, 1690.12 and 1690.13; they are clarified in the final rule. One of the participants also commented favorably about the proposed changes to the court order, guardianship order, conservatorship order, and power of attorney regulations.

A Federal employees' union commented that the Federal Employees' Retirement System was designed to place more of the risk and financial burden of saving for retirement on the Federal employees and that, in exchange, those employees receive “direct access” to their retirement savings “to use them as they see fit.” By making it more difficult and expensive for participants to use their own savings, the union continued, the Board is “breaking a promise made to federal employees upon the inception of the Thrift Savings Plan.” The union concluded that the Board is attempting to dictate the financial needs of participants beyond the current reasonable loan restrictions. The union also wrote that with recent low mortgage rates, participants need TSP loans to invest in real property.

There can be no question that the money in the TSP belongs to the TSP participants; however, the TSP was created by the Federal Employees' Retirement System Act of 1986 (FERSA) and exists to provide retirement income to participants and their beneficiaries. To encourage the growth of TSP accounts, Congress exempted TSP contributions and earnings from Federal income taxation until they are withdrawn from the TSP. Just as importantly, Congress also protected TSP accounts from dissipation by restricting the ability of anyone, including the participant, to access the money in the TSP. For example, a creditor generally cannot access the money in the participant's account. With respect to participants' access, FERSA only allows in-service withdrawals in cases of financial hardship or, if the participant is still employed, on one occasion after reaching 59 1/2 . See 5 U.S.C. 8433(h).

Congress also placed restrictions on TSP loans to prevent the dissipation of retirement savings. FERSA requires the TSP to follow the Internal Revenue Code provisions that apply to private sector retirement plan loans. 5 U.S.C. 8433(g)(3). Among other things, those provisions set a maximum dollar amount for loans, require continuous loan payments, require the TSP to charge interest on TSP loans, and limit the length of time over which a loan can be repaid. Initially, FERSA limited the reasons for which a loan could be taken; Congress eliminated this “purpose” test in 1996 in favor of the current rule allowing a general purpose loan.

Therefore, it is incorrect to conclude that Congress gave participants “direct access” to the savings in their TSP accounts “to use them as they see fit.” FERSA states only that a participant “may apply to the Board for permission to borrow from [his or her] account.” 5 U.S.C. 8433(g)(1). The Executive Director, therefore, must establish the conditions under which a loan request will be granted. 5 U.S.C. 8433(g)(2). Consistent with the purpose of the TSP, these policies must promote saving for retirement.

The Executive Director has determined that the current loan program has allowed many participants to use the TSP as a source of ready cash, which can be detrimental to long-term retirement savings. The Executive Director concluded that it is appropriate to limit access to a TSP loan to reinforce the importance of borrowing from the TSP only as a last resort.

With respect to the union's comment that participants need TSP loans to invest in real estate, the Executive Director is not changing the rules applicable to TSP residential loans.

Finally, the union commented that a $50 loan fee was inappropriate because it makes the TSP loan program more expensive. The fee will not increase the expense of the loan program, except to the participant who obtains a loan. Currently, every participant pays the costs of administering the loan program, even those who have never taken a loan. However, the Executive Director has determined that the costs of the loan program should, instead, be borne by the approximately 620,000 participants who use the TSP loan program, rather than by the 2.6 million participants who do not. By way of comparison, most private sector retirement plans charge loan fees. Of those that do, more than 70 percent charge a loan fee of $50 or more.

Every comment received from a participant addressed the proposed $50 loan fee. Thirty-one participants objected to the proposed fee. Many wrote that the fee is unnecessary because they assume (incorrectly) that either the interest charged on TSP loans pays for the expenses of the loan program, that the Department of Agriculture provides recordkeeping services for the TSP free of charge, or that the Board receives an appropriation from Congress to pay the TSP's administrative expenses. Other participants oppose the fee because they assume the Board will use the extra funds to hide TSP administrative expenses or even that the Board will divert the loan fees for non-TSP purposes. As explained below, none of these assumptions is true.

Although the TSP charges each participant interest on his or her loan, the interest collected is deposited into the participant's account, it is not used to pay TSP administrative expenses. 5 CFR 1655.9(c). Furthermore, although the TSP recordkeeper is a component of a Federal agency, its Congressional appropriations do not pay the TSP's administrative expenses. Rather, the Board pays the Department of Agriculture for the cost of its services, including the costs of administering the TSP loan program. The Board does not receive an annual appropriation to pay these expenses, or any other TSP expense; rather, the Board pays all TSP expenses with funds that belong to the TSP participants. 5 U.S.C. 8437(c)(3), 8437(d), and 8439(a)(3). TSP administrative expenses cost each participant approximately .07 percent of his or her account balance each year.

Although some participants asked the Board to retain the policy of charging the loan program's expenses to all participants, as explained above, the Executive Director has determined that it is more equitable if the costs of the loan program are borne by the participants who use the program.

One participant asked if the TSP would charge the loan fee even if the loan application were rejected. The loan fee is not an application fee; it will cover the costs of processing and servicing the loan. Therefore, as explained in final § 1655.21, the TSP will deduct the loan fee from the loan proceeds only when it issues a loan. One participant also commented that the TSP should only charge the loan fee once because a participant should only pay for “underwriting” approval once. There is no underwriting approval in the TSP loan program.

In contrast, thirty-eight participants wrote that the loan fee is appropriate, primarily because it will lower the cost of administering the TSP to those who do not use the loan program. Some participants asked the Board to charge a fee greater than $50 or to base the amount of the fee on the dollar amount of the loan. The Board will not base the loan fee on the dollar amount of the loan because the fee is intended only to pay the administrative costs of a TSP loan, which do not vary with the size of the loan. Several participants also suggested that the TSP eliminate the loan program altogether. The Board will not eliminate the loan program because it is an important benefit that the TSP is required by FERSA to provide.

Some participants asked the Board to charge fees for other TSP transactions, such as interfund transfers and in-service withdrawals. The Executive Director does not plan to charge transaction fees in addition to the loan fee; however, decreasing the cost of the program for participants is an important consideration and the Executive Director does review all costs from time to time to determine whether they are appropriate.

Forty-three participants commented on the Executive Director's proposal to limit participants to a single general purpose loan; thirty-three objected to the change. Most wrote that the Board should not impose any restrictions on their ability to use their own money. As explained in the answer to the union comment, the Executive Director's proposal is consistent with the purpose of the TSP, which is to grow retirement savings.

Many commenters oppose limiting participants to a single general purpose loan because they want to borrow from their TSP accounts to pay for medical and dental expenses, home repair or improvement, car repairs, or school tuition. Other participants oppose the changes because they want to use TSP loans to pay off high interest credit cards or as capital to start a business. The loan program changes will not prevent a participant from obtaining a TSP loan to pay such expenses. Rather, the changes will limit a participant to a single general purpose loan. This purpose of this limitation is to promote the use of the TSP as a retirement savings plan and to reinforce the importance of borrowing from the TSP as a last resort. The TSP is a retirement savings plan, not a savings account that should be used to finance short-term needs, refinance consumer debt or start a business. A participant who may need money in the near future and who does not have adequate savings should consider those short-term needs carefully before deciding how much to contribute to the TSP.

Several commenters who oppose limiting participants to a single general purpose loan also wrote that the TSP is a necessary source of emergency funds in the case of financial hardship. However, TSP funds remain available if a participant can qualify for financial hardship in-service withdrawals.

Forty participants commented on the 60-day waiting period between paying off a loan and receiving another of the same type; thirty-one of them oppose the change. Those who stated a reason for opposing the change (other than those reasons discussed above) believe it unreasonably limits their ability to obtain a loan or is simply designed to discourage loans.

Before proposing the 60 day waiting period, the Executive Director undertook a study of the loan program; that study revealed that an increasing number of participants repeatedly pay off one loan and simultaneously apply for another. These participants are apparently using the TSP as an ongoing vehicle for financing their living expenses, rather than as a retirement savings plan. The waiting period is designed to correct this abusive practice.

The waiting period also solves an administrative problem. Many participants simultaneously submit a new loan application with a loan payoff check. In such a case, the TSP cannot process the new loan application until it processes and deposits the loan payoff check, waits for it to clear, posts the funds to the participant's account, and closes the loan. Given the enormous volume (900,000) of TSP loans that are in existence, it is not administratively reasonable to manually manage large numbers of pending loan applications until the outstanding loan is closed and a new loan request can be processed. A limited waiting period, clearly communicated to participants and equitably applied, provides a systematic solution to this administrative problem.

Several commenters questioned the Board's decision to advertise an implementation date for the loan program changes before receiving comments on the proposed rule. Others asked the Board to delay implementation of the new rules. The Executive Director publicly announced the loan program changes in mid-2003 for a mid-2004 implementation date; since then, he has made numerous public statements about his intent to change the loan program. In addition, the Board announced the changes on the TSP Web site, the Thriftline, and in a one-time written notice mailed to every participant with an outstanding TSP loan. Before publishing the proposed loan regulations in the Federal Register , the Executive Director discussed the changes in Congressional hearings, the January 2004 TSP Highlights (a TSP publication), the April 2004 TSP Highlights, numerous press interviews, and sought the advice of the Employee Thrift Advisory Council (ETAC). The ETAC is a 15-member body established by FERSA to advise the Board on TSP matters. ETAC members represent members of the Uniformed Services and Federal and postal employees, both active and retired, at all levels of government, from wage earners to senior executives.

The Board also welcomes the opportunity to review and respond to comments from participants who take an active interest in the TSP and wish to offer suggestions. Some participants who read the Highlights or news reports wrote letters to the Agency and the Agency fully considered their comments. Additionally, the Executive Director formally solicited comments from participants when he published the proposed loan regulations. The comment process allows the Board to address any misunderstandings about the proposed loan changes, to learn if there are unanticipated legal or policy impediments to the proposed changes, and to hear suggestions about how better to implement the proposed changes. Although the comments received did not cause the Executive Director to make any changes to the proposed loan rules, he did carefully consider all comments received.

Proposed § 1655.2(c) explains the general rule that a participant must be eligible to contribute to the TSP before he or she can apply for a TSP loan. It also explains an exception to that rule (a participant can apply for a loan if his or her TSP contributions were suspended when he or she obtained a financial hardship in-service withdrawal). However, proposed § 1655.2(c) did not explain a second exception. Specifically, a participant can apply for a loan if he or she is not eligible to make TSP contributions because the participant stopped contributing to the TSP and is not yet eligible to resume contributing. Final § 1655.2(c) explains this exception.

The Executive Director is publishing the proposed rule as a final rule with several other clarifying changes to proposed sections 1655.21, 1690.12 and 1690.13.

I certify that these regulations will not have a significant economic impact on a substantial number of small entities. They will affect only employees of the Federal Government.

I certify that these regulations do not require additional reporting under the criteria of the Paperwork Reduction Act of 1980.

Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 632, 653, 1501-1571, the effects of this regulation on State, local, and tribal governments and the private sector have been assessed. This regulation will not compel the expenditure in any one year of $100 million or more by State, local, and tribal governments, in the aggregate, or by the private sector. Therefore, a statement under § 1532 is not required.

Pursuant to 5 U.S.C. 810(a)(1)(A), the Board submitted a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States before publication of this rule in the Federal Register . This rule is not a major rule as defined at 5 U.S.C. 814(2).

This rulemaking began on April 20, 2000, with an advance notice of proposed rulemaking (ANPRM) that asked all interested parties specific questions about the funding and discount relationship between Farm Credit banks and OFIs. 1 FCA staff subsequently conducted telephone and field interviews with interested parties. On August 3, 2001, we held a public meeting in Des Moines, Iowa, where interested parties offered suggestions on how we could facilitate greater cooperation between System and non-System lenders in providing credit to agriculture and rural America. The public meeting addressed both the OFI program and other arrangements where the FCS and non-System lenders could help each other in extending credit to farmers, ranchers, and other eligible borrowers in rural America.

Many of the comments and suggestions that we received from the ANPRM, interviews, and at the public meeting were incorporated into the proposed rule to revise both our OFI and the investment in farmers' notes (Farmers' Notes) regulations. 2 Basically, the proposed OFI rule would allow OFIs to establish a funding and discount relationship with any one Farm Credit Bank (FCB) or agricultural credit bank (ACB) (collectively Farm Credit banks). The proposed rule also would strengthen the equitable treatment provisions in the existing regulations by requiring a Farm Credit bank, at the request of an OFI or OFI applicant; to: (1) Disclose how it prices funds for OFIs; and (2) justify any discrepancy in the cost of funding between OFIs and associations. Another feature of the proposed rule is that it would allow Farm Credit banks to disclose the identity of OFIs with their consent. The preamble to the proposed OFI rule clarified the FCA's position on borrower rights, and it offered suggestions for improving relationships between OFIs and the System, and the role of the FCA Ombudsman. The FCA also proposed changes to the Farmers' Notes regulation and conforming amendments to its capital regulations regarding risk weighting for OFIs and Farmers' Notes.

The FCA received 111 comment letters on the proposed rule. A total of 8 comment letters came from the System; 1 from the Farm Credit Council (FCC), 5 from Farm Credit banks, and 2 from associations. Other commenters were an agricultural credit cooperative OFI, a Community Development Financial Institution (CDFI), the Credit Union National Association (CUNA), which is a trade association for credit unions, and two individuals. Finally, 98 letters came from commercial bankers, including the Independent Community Bankers of America (ICBA) and its state-affiliated associations.

The vast majority of the commenters generally supported the proposed OFI rule, but both System and non-System commenters offered suggestions and raised concerns about particular issues. Commercial banks and their affiliated trade associations opposed the proposed Farmers' Notes rule. These commenters asked the FCA to hold a public meeting, seek additional public comment, and solicit congressional input before adopting a final Farmers' Notes rule. Several FCS and non-System commenters asked the FCA to revise or clarify certain provisions in the proposed capital risk-weighting regulations that applied to OFIs.

We are enacting a final rule on OFIs, which includes conforming amendments to the capital regulations concerning the risk weighting of System bank loans to OFIs. We are not adopting a final Farmers' Notes rule at this time because we are continuing to consider the best regulatory approach to this program.

As explained earlier, the purpose of this rule is to make it easier for OFIs to obtain funding from Farm Credit banks for their short- and intermediate-term loans to agricultural and aquatic producers, farm-related business, and rural homeowners. Improving OFI access to the funding and discount services of Farm Credit banks could make affordable credit more available to farmers, ranchers, and other eligible borrowers. Farm Credit banks fulfill their missions as a Government-sponsored enterprise by enhancing the liquidity of OFIs, thereby lowering the cost of funding agriculture.

The FCA now addresses concerns and suggestions that the commenters raised about various issues of the proposed OFI rule.

Section 1.7(b)(4)(B)(i) of the Farm Credit Act of 1971, as amended (Act) requires FCA regulations to assure that the funding and discount services of Farm Credit banks are available on a reasonable basis to any OFI that is significantly involved in lending for agricultural and aquatic purposes. Currently, § 614.4540(b)(1) states that Farm Credit banks must “fund, discount, or provide other similar financial assistance to any creditworthy OFI that * * * maintains at least 15 percent of its loan volume at a seasonal peak in loans and leases to farmers, ranchers, aquatic producers and harvesters.” Section 1.7(b) of the Act and § 614.4540 of the regulations allow OFIs that do not meet this 15-percent threshold to fund and discount their short- and intermediate-term loans at Farm Credit banks, but they are not assured access if credit becomes scarce.

During earlier phases of this rulemaking, some commercial banks and System lenders expressed the opinion that the 15-percent threshold was too onerous, and they asked the FCA to reduce or eliminate it. Some of these commenters mistakenly believed that § 614.4540(b)(1) automatically excluded non-System lenders from the OFI program if agricultural or aquatic loans did not compromise at least 15 percent of their loan portfolios. Although the current regulation assures access to creditworthy OFIs that maintain at least 15 percent of their loan volume at a seasonal peak in agricultural loans, some commenters erroneously thought that it only provided assured access to those OFIs that always maintain at least 15 percent of their loan portfolio in farm loans. The preamble to the proposed rule dispelled both of these misconceptions. 3

The FCA did not propose to change the 15-percent threshold as the factor that determines whether an OFI is assured access to funding from a Farm Credit bank. The preamble to the proposed rule explained that the standard that the FCA uses to determine whether a non-System lender is substantially involved in agricultural lending is more permissive than the 25-percent benchmark that the Federal Deposit Insurance Corporation established for nonmember banks that it insures, and is comparable to the measure used by the Board of Governors of the Federal Reserve System. 4 The FCA invited comments on alternatives that reasonably demonstrate that an OFI is significantly involved in agricultural lending because the agency is open to ideas that would make this program more attractive to OFIs.

The FCA received two comment letters about assured access. Both letters came from FCS institutions that support the 15-percent threshold as the appropriate standard for determining whether an OFI is significantly involved in agricultural lending.

The final rule retains the 15-percent threshold in existing § 614.4540(b)(1). The 15-percent threshold strikes a fair balance between the needs of small rural lenders and larger institutions. Agricultural loans usually comprise a larger percentage of the loan assets of small rural lenders. However, larger institutions may extend more overall credit, in dollar terms, to farmers, although agricultural loans are a much smaller percentage of their loan portfolios.

Non-System lenders and many Farm Credit banks have long considered place of discount restrictions as a major reason why the OFI program has not been widely used by commercial banks and other agricultural lenders. Historically, OFIs borrowed from the Farm Credit bank that serves the territory where the OFIs maintain their headquarters or makes most of their loans. As a result, OFIs have maintained a funding or discount relationship with a System bank that is owned and controlled by their competitors.

In 1998, the FCA sought to remedy this problem by adopting current § 614.4550, which established new place of discount rules for OFIs. Under this regulation, every OFI must apply first to the Farm Credit bank that serves the territory where the OFI operates. If the Farm Credit bank denies funding, or otherwise fails to approve a completed application within 60 days, the OFI may apply to any other Farm Credit bank. Additionally, the regulation allows a Farm Credit bank to consent to another System bank funding or discounting loans for an OFI.

The ANPRM, interviews, and public meeting revealed widespread dissatisfaction with the place of discount rule in § 614.4550. Except for one Farm Credit bank, all System and non-System commenters favored repealing all restrictions on place of discount so OFIs could choose their System funding bank. The one Farm Credit bank that opposed repealing § 615.4550 was concerned that FCS associations would be placed at a competitive disadvantage.

In response to these comments, the FCA proposed to revise § 615.4550 so OFIs could fund or discount loans with any FCS bank. The FCA reasoned that this approach would free Farm Credit banks from potential pressure by associations not to lend to their competitors. Another factor that supports the proposed rule is that when Farm Credit banks compete for OFI credit, the OFI may be able to obtain a more favorable funding cost, which it can then pass on to farmers and ranchers. 5

The proposed rule would require a Farm Credit bank to notify another System bank in writing within 5 business days of receiving an application from an OFI that maintains its headquarters or has more than 50 percent of its loan volume in the territory of the other Farm Credit bank. The purpose of this notice requirement is to give the bank in whose territory the OFI is located ample opportunity to contact the applicant and offer it funding and discount services. The proposed rule would not allow any OFI to borrow from two or more Farm Credit banks at the same time. The preamble to the proposed rule justified this ban on safety and soundness grounds.

The FCA received 100 comments about place of discount. Of this total, 92 came from commercial banks or their trade associations, 6 from System banks and associations, and 1 each from CUNA and the agricultural credit cooperative OFI. All commercial bank commenters and CUNA supported the FCA's position on place of discount. None of these commenters sought any revision to proposed § 614.4550. System commenters agreed that an OFI should be allowed to fund or discount short-or intermediate-term loans with the Farm Credit bank of its choice.

However, System commenters opposed the 5-day notice requirement in the proposed rule. These commenters claim that the notice requirement grants too much flexibility to OFIs while imposing unnecessary burdens on System banks. One commenter thought that the OFI should bear the burden of notifying the local Farm Credit bank that it is taking its business elsewhere. Two System commenters stated that the mere receipt of a credit application from an OFI located outside its chartered territory does not mean that the Farm Credit bank will approve funding. Since the FCS bank is unlikely to make a credit decision within 5 days, these commenters stated that it should be under no obligation to notify the Farm Credit bank that serves the territory where the OFI is located.

System commenters and the agricultural credit cooperative OFI opposed the ban on two or more Farm Credit banks simultaneously funding the same OFI. Many of these commenters stated that our safety and soundness rationale was unpersuasive. These commenters note that many OFIs already have multiple sources of funding, and that multilender financing of commercial borrowers is commonplace today in credit markets. All of these commenters suggest that intercreditor agreements among different Farm Credit banks will adequately resolve the FCA's safety and soundness concerns about disputes over collateral if the OFI fails.

The FCA adopts final § 614.4550, which enables creditworthy OFIs to seek and establish a funding and discount relationship with the Farm Credit bank of their choice. Allowing OFIs to choose their System funding bank frees them from the problems associated with obtaining credit from banks that are owned and controlled by their competitors. This approach may lower the funding costs and improve the liquidity of OFIs which could, in turn, reduce the cost of credit to farmers, ranchers, and other eligible rural residents.

In response to System commenters, the FCA does not view the 5-day notice requirement as a burden on Farm Credit banks. This notice requirement ensures that Farm Credit banks communicate with each other in providing funding and liquidity to OFIs. Additionally, this regulatory requirement enables each Farm Credit bank to consider offering funding and discount services to OFIs in its chartered territory. The 5-day notice requirement has no relationship to the credit approval process at a Farm Credit bank that receives an application from an OFI outside its territory. Written notice is required within 5 days, regardless of whether the Farm Credit bank has considered or acted upon an application received from such OFIs. Simply providing written notice to another Farm Credit bank within 5 days is neither costly nor difficult to any System bank that receives applications from OFIs outside its chartered territory.

The FCA retains the ban on two or more Farm Credit banks simultaneously funding the same OFI. Although System arguments against this ban have some merit, policy concerns justify the FCA's decision to retain it. In retail credit markets, financing by multiple lenders of the same borrower and intercreditor agreements are commonplace. However, discount banks established by Congress to fulfill a public policy mission generally do not engage in such practices. For example, two Federal Reserve Banks or two Federal Home Loan Banks do not simultaneously fund the same member bank. Generally, each FCS association receives all of its funding from one Farm Credit bank. In addition, an association cannot seek credit from another System bank unless its funding bank consents. Therefore, the ban on two or more Farm Credit banks simultaneously funding the same OFI is consistent with the FCA's policy of requiring FCS banks to treat their OFIs and System associations equitably.

The agricultural credit cooperative OFI expressed concern about how the ban on two FCS banks simultaneously funding the same OFI would affect its business. The commenter stated that its parent is an agricultural cooperative that borrows from the ACB under title III of the Act, while it is an OFI that borrows from a Farm Credit bank and sells participations in loans to FCS associations. The FCA clarifies that nothing in the proposed or final regulation prevents: (1) OFIs from participating in loans with System associations; or (2) any parent or affiliate which is an agricultural cooperative from borrowing from the ACB under title III of the Act.

Section 4.14A(a)(6)(B) of the Act expressly requires OFIs to adhere to borrower rights, “but only with respect to loans discounted or pledged under section 1.7(b)(1).” The borrower rights that apply to loans that OFIs discount or pledge with a Farm Credit bank are: (1) Effective Interest Rate (EIR) disclosures; (2) notice of adverse credit decision; (3) the right to appeal adverse credit decisions to the lender's credit review committee; (4) receiving copies of certain documents; and (5) the right to restructure distressed loans. An existing regulation, § 614.4560(d), implements section 4.14A(a)(6)(B) of the Act by requiring OFIs to comply with borrower rights on those loans that Farm Credit banks fund or discount.

During all phases of this rulemaking, System and commercial bank commenters have repeatedly advised the FCA that borrower rights are an impediment to the success of the OFI program. However, many commenters acknowledged that the Act requires OFIs to comply with borrower rights requirements. The FCA cannot repeal § 614.4560(d) because it implements statutory borrower rights requirements.

The FCA proposed a technical correction to § 614.4560(d) that would remove the reference to section 4.36 of the Act from the regulation because the plain language of the statute grants the right of first refusal only to borrowers of FCS institutions that operate under titles I or II of the Act, not OFIs. One System commenter agreed with the technical correction to § 614.4560(d), while all other commenters expressed no opinion about this matter. The final rule removes the reference to section 4.36 of the Act from § 614.4560(d) so that the regulation conforms to the statute.

The FCA recently moved all borrower rights regulations to part 617. 6 For this reason, the FCA revises all of the cross-references in final § 614.4560(d) to the borrower rights regulations to reflect this change.

Currently, § 614.4560(d) states that borrower rights apply to “all loans that an OFI funds or discounts through a Farm Credit Bank or agricultural credit bank * * *” (Emphasis added). Earlier, a Farm Credit bank pointed out that section 4.14A(a)(6)(B) of the Act requires an OFI to comply with borrower rights, “but only with respect to loans discounted or pledged under section 1.7(b)(1).” As a result, this System bank asserted that the language in § 614.4560(d) exceeds the scope of section 4.14A(a)(6) of the Act. Specifically, the Farm Credit bank interpreted section 4.14A(a)(6) of the Act to mean that borrower rights apply to OFI loans only during the time that they are actually pledged to the funding bank as collateral. Under this interpretation, most borrower rights would not apply to OFI loans because many of these rights apply before or after the time that these loans are actually pledged to the System funding bank. Examples of borrower rights that would not apply to OFI loans under this interpretation are: (1) Most EIR disclosures; (2) the right to appeal certain adverse credit decisions to an OFI's credit review committee; and (3) the right to restructure a distressed loan that the OFI has removed from collateral at its System funding bank. Under the bank's suggested interpretation of the statute, section 4.13A of the Act would be the only borrower rights provision of the Act that would always apply to OFI borrowers. This provision enables System and OFI borrowers to obtain copies of: (1) All loan documents they sign or deliver; (2) loan appraisals on their assets that the lender uses in making credit decisions; and (3) the lender's articles of incorporation and bylaws.

The proposed rule retained the provision in § 614.4560(d), which states that borrower rights apply to all loans that an OFI funds or discounts through a Farm Credit bank. The preamble to the proposed rule thoroughly examined and analyzed the text, structure, and legislative history of the borrower rights provisions of the Act, and it explained in detail why borrower rights apply to all loans that OFIs fund through a Farm Credit bank. The discussion in the preamble to the proposed rule revealed that Congress intended to grant OFI borrowers whose loans are funded by a Farm Credit bank all of these rights and protections, even at times when their loans are not actually pledged as collateral to the System funding bank.

Except for one association, which expressed no opinion on this matter, all other System commenters opposed the FCA's interpretation of the borrower rights provision of the Act. These commenters stated that this approach conflicts with the FCA's stated goal of making the OFI program more attractive to potential and existing OFIs. Some commenters stated that the FCA's position was impractical because neither the agency nor the funding bank can enforce compliance with borrower rights after an OFI has removed a distressed loan from collateral.

None of these commenters offered new information or provided any legal analysis that would cause the FCA to change its interpretation of section 4.14A(a)(6) of the Act. Accordingly, the FCA reaffirms its interpretation of section 4.14A(a)(6) that it presented in the preamble to the proposed rule. Under section 4.14A(a)(6) of the Act, borrower rights apply to all loans that an OFI funds or discounts through a Farm Credit bank. The borrower continues to be entitled to borrower rights after the OFI removes the loan from collateral. Only a statutory amendment could resolve the concerns raised by the commenters.

The ICBA and its member banks stated that depository institutions should not have to comply with borrower rights because they must comply with the Community Reinvestment Act (CRA). These commenters asked the FCA to treat compliance with the CRA as a substitute to compliance with borrower rights requirements.

The FCA responds that the Act explicitly requires OFIs to comply with borrower rights on all loans that they fund or discount through a Farm Credit bank, regardless of whether they are also subject to the CRA. The purposes, objectives, and compliance mechanism of the CRA are separate, distinct, and independent from the borrower rights requirements of the Act. The CRA does not provide farmers, ranchers, and aquatic producers and harvesters the rights and protections on agricultural loans that the Act confers on them. Neither the Act nor the CRA authorizes depository institutions to substitute CRA requirements for compliance with borrower rights. For this reason, the FCA has no authority to grant this request.

One Farm Credit bank asked the FCA to clarify that borrower rights do not apply to loans that an OFI pledges as supplemental collateral. Under § 614.4570(c), Farm Credit banks may require an OFI to pledge supplemental collateral or provide other credit enhancements that support the lending relationship. Farm Credit banks take supplemental collateral from their OFIs out of an abundance of caution. However, Farm Credit banks do not fund or discount supplemental collateral pledged by their OFIs. For this reason, borrower rights would not apply to agricultural loans that OFIs pledge to their System funding bank as supplemental collateral.

An FCA regulation, § 614.4590, requires Farm Credit banks to treat OFIs and FCS associations equitably. More specifically, § 614.4590(a) requires that Farm Credit banks apply comparable and objective loan underwriting standards and pricing requirements to both OFIs and FCS associations. Under § 614.4590(b), the total charges that a System bank assesses its OFIs must be comparable to the total charges it imposes on its affiliated associations. Section 614.4590(b) additionally requires that any variation between the overall funding costs that OFIs and FCS associations are charged by the same funding bank must result from differences in credit risk and administrative costs to the FCB or ACB.

Many respondents to the ANPRM and speakers at the public meeting told the FCA that Farm Credit banks continue to favor FCS associations over OFIs. According to these commenters, this perception of unfair treatment deters many agricultural lenders from becoming OFIs, while existing OFIs feel that FCS associations always receive preferential treatment from System funding banks.

Commercial bank commenters suggested that our regulations could rectify this problem by mandating equal, rather than equitable, treatment of OFIs and FCS associations. Because these commenters stated that this disparity of treatment was especially evident in the price of funding that Farm Credit banks charge their associations and OFIs, they asked the FCA to amend § 614.4590 so it requires Farm Credit banks to disclose to OFIs exactly how they price their loans to both OFIs and FCS associations. These commenters also stated that the FCA should require Farm Credit banks to identify the specific components that make up their cost of funds to OFIs and the amount of these components in terms of basis points. Another suggestion was that § 614.4590 should be revised so it expressly prohibits Farm Credit banks from charging OFIs fees that are not charged to FCS associations. Some commercial banks commented that the regulation should require Farm Credit banks to pay dividends or patronage to OFIs.

In response to these comments, the FCA proposed adding two new provisions to § 614.4590. Proposed § 614.4590(c) would require each FCB or ACB to provide any OFI or OFI applicant, upon request, a copy of its policies, procedures, loan underwriting standards, and pricing guidelines for OFIs. This provision would also require that the pricing guidelines must identify the specific components that make up the cost of funds for OFIs and the amount of these components in basis points. Proposed § 614.4590(d) would require each FCB or ACB to explain in writing the reasons for any variation in the overall funding costs it charges OFIs and FCS associations if such information is requested by an OFI or OFI applicant. This provision would require a Farm Credit bank to compare the costs that it charges OFIs and FCS associations as groups or, if possible, variations between groups of OFIs and FCS associations that are of a similar size. However, proposed § 614.4590(d) would expressly prohibit System funding banks from disclosing financial or confidential information about individual FCS associations.

The FCA declined requests to amend § 614.4590 so it would require equal, instead of equitable, treatment of FCS associations and OFIs. The preamble to the proposed rule listed five fundamental differences that distinguish FCS associations from OFIs. The FCA reasoned that these fundamental differences preclude § 614.4590 from mandating equal treatment for associations and OFIs. The preamble to the proposed rule also explained that these fundamental differences mean that OFIs expose Farm Credit banks to different credit risks and administrative costs than direct lender associations. As a result, some disparity in cost of funds that an FCB or ACB charges FCS associations and OFIs may be justified. The proposed rule did not require Farm Credit banks to pay dividends or patronage to their OFIs because the FCA found it inappropriate to impose, by regulation, business practices on FCS institutions in the absence of a compelling safety and soundness reason. 7

In response to the proposed rule, the FCA received comment letters on equitable treatment from the FCC, a Farm Credit bank, an agricultural credit cooperative OFI, the ICBA and several of its commercial bank members. The two System commenters believe that the new disclosure requirements in proposed § 614.4590 impose costs and burdens on FCS banks that outweigh the benefits to OFIs. The Farm Credit bank stated that the revisions to § 614.4590 “are heavily slanted in favor of the OFIs.” Both System commenters expressed concern that § 614.4590 would require Farm Credit banks to disclose “proprietary pricing procedures” and information to OFIs, which could now establish a funding or discount relationship with any System bank under § 614.4550. Although commercial bank commenters support the new disclosure requirements in § 614.4590, they continue to state that this regulation should require equal, rather than equitable, treatment of associations and OFIs.

The commercial bank commenters urged the FCA to enact a final rule that requires the equal funding costs for FCS associations and OFIs because in their view, System institutions “have easy access to all the credit they need” while OFIs must rely on several funding sources, each which is limited. Commercial banks and the agricultural credit cooperative OFI asked the FCA to require FCS banks to: (1) Earmark the capital contribution of each OFI, and (2) pay patronage and dividends to OFIs whenever FCS associations receive such payments.

After considering these comments, the FCA has decided to enact proposed § 614.4590 as a final rule without revision. The final rule appropriately balances the interests of Farm Credit banks, OFIs, and System associations.

In response to System concerns, the FCA believes that OFI program will become more transparent because final § 614.4590(c) and (d) now require Farm Credit banks to disclose pricing information to their OFIs. Transparency enables both OFIs and FCA examiners to objectively determine whether a Farm Credit bank is treating its associations and OFIs equitably. Allowing OFIs to choose their System funding bank while simultaneously requiring Farm Credit banks to disclose pricing information to OFIs achieves the FCA's objective of making this program more attractive to existing and potential OFIs. Disclosing pricing information helps OFIs make informed decisions in selecting their System funding bank. As a result, the OFI can pass these pricing advantages along to farmers, ranchers, and other eligible borrowers. Funding and discounting loans for OFIs is part of the public policy mission of System banks, which are cooperative institutions that are jointly and severally liable for FCS debt. Accordingly, the FCA is not persuaded by the commenters' arguments that the regulation gives OFIs access to “proprietary” pricing information at several different Farm Credit banks.

Commercial bank commenters offered no new information or analysis that would persuade the FCA to amend this regulation so it requires equal, rather than equitable, treatment of OFIs and FCS associations. In fact, the most recent comments from commercial banks reinforce the notion that OFIs are fundamentally different than FCS associations. Thus, OFIs pose different credit risks to System banks than associations which, in turn, could justify the differential in the cost of funding charged to the two groups of lenders.

The FCA declines the request that the final rule require FCS banks to: (1) Allocate the capital contribution of each OFI; and (2) pay patronage and dividends to OFIs when FCS associations receive similar payments. System banks distribute patronage and dividends to their shareholders in accordance with their bylaws. FCA regulations do not prescribe business practices at System institutions in the absence of compelling safety and soundness reasons. However, each System bank must factor in capital contributions as well as patronage and dividend payments when it prices credit for an OFI. The new regulatory disclosure requirements make it easier for the OFIs and other interested parties to determine whether Farm Credit banks are pricing OFI credit equitably.

Many commercial banks and their trade associations asked us in their response to the ANPRM and during the public meeting to appoint an Ombudsman to assist OFI applicants and existing OFIs in establishing and maintaining good relations with System funding banks. On February 25, 2003, the FCA Board established the Office of the Ombudsman. The public announcement, which informed the public of the creation of this office stated, “The Office of the Ombudsman will be an effective, neutral and confidential resource and liaison for the public.” One of many duties of the Ombudsman is to address the concerns of OFIs and facilitate better relationships between them and the FCS. The FCA repeated this information in the preamble to the proposed rule. 8

The FCC and a System bank stated in their comment letters that the sole task of the Ombudsman is to serve as an advocate for OFIs. Since System banks pay for the Office of the Ombudsman through assessments that the FCA levies on them, these commenters suggest that it would be appropriate for these banks to pass the cost along to their OFIs. One commenter stated that the FCA has no express statutory authority to establish the Ombudsman position.

The FCA repeats what it said in the public announcement and the preamble to the proposed regulation. The FCA emphasizes that the Office of the Ombudsman is an effective, neutral and confidential resource and liaison for the public. Addressing the concerns of OFIs is only one of the Ombudsman's duties.

Several provisions of title V of the Act grant the FCA power to establish the Office of the Ombudsman. Section 5.9 of the Act enables our Board to “provide for the performance of all the powers and duties vested in the Farm Credit Administration.” Section 5.11(b) of the Act empowers the Chairman of the FCA to “appoint such personnel as may be necessary to carry out the functions of the Farm Credit Administration.” This section of the Act also states, “The appointment by the Chairman of the heads of major administrative divisions under the Board shall be subject to the approval of the Board.” The FCA Board voted to establish this office in order to address concerns by members of the public about how the agency or the System is carrying out their responsibilities under the Act.

The FCA would oppose any attempt by System banks to encumber their OFIs with the entire cost of the Office of the Ombudsman. Such attempts would violate the requirement in § 614.4590 that Farm Credit banks treat their associations and OFIs equitably.

The ANPRM asked the public whether FCA regulations should allow Farm Credit banks to disclose the identities of the OFIs that they fund. Current FCA regulations prohibit FCS institutions from releasing information about their retail borrowers and stockholders to the public. 9 However, the FCA never interpreted these regulations as prohibiting the release of names of FCS associations that borrow from Farm Credit banks. 10 The preambles to both the ANPRM and the proposed rule explained why the FCA believes that the reasons for protecting the identity of retail borrowers do not apply to financial institutions that fund and discount loans with a Farm Credit bank. 11 As both preambles explained, retail borrowers often are individual consumers, and keeping their identities confidential shields them from unwanted marketing solicitations or publicity involving their personal financial business whereas OFIs could benefit from the disclosure of their identity because it could make prospective retail borrowers aware of other credit options.

In response to ANPRM comments and testimony in the public meeting, the FCA proposed a new regulation, § 614.4595 which would allow Farm Credit banks to disclose to the public the names, addresses, telephone numbers, and Internet Web site addresses of those OFIs that consent in writing. The proposed regulation also would require each Farm Credit bank to adopt policies and procedures for: (1) Obtaining and maintaining the consent of its OFIs; and (2) disclosing this information to the public. Financial statements of Farm Credit banks should not disclose the identity of an OFI unless it consents. The FCA believes that this regulatory approach empowers each OFI to make the decision whether disclosure of its name, address, telephone number, and Internet Web site address to the public is in its best interest.

The FCA received comments about this issue from the FCC, two Farm Credit banks, the ICBA, and CUNA. The FCC and a System bank see no need for this regulation because they believe that the regulations in subpart G of part 618, which govern the release of information about System borrowers and shareholders, already permits Farm Credit banks to disclose the identity of an OFI that consents. If the FCA adopts a final disclosure regulation for OFIs, two System banks suggest preamble clarifications and minor edits to the text of § 614.4595. The CUNA supports proposed § 614.4595 because it believes that disclosure of a credit union's identity will help inform farmers, ranchers, and other eligible borrowers about their other credit options and the benefits of credit union membership. The ICBA suggests the FCA switch from an “opt-in” to an “opt-out” approach in the final rule. Under an “opt-out” approach, each Farm Credit bank would automatically disclose an OFI's identity to the public unless the OFI instructed it, in writing, not to do so. The ICBA contends that an “opt-out” approach is consistent with the trend in the law governing disclosure of customer information by financial institutions.

The FCA adopts § 614.4595 as a final rule after slightly changing the text of the regulation in response to a comment from a System bank. The FCA disagrees with the two System commenters that this regulation is unnecessary because the regulations in subpart G of part 618 already govern releases of information about System borrowers and shareholders. As the preambles to the ANPRM and proposed rule explain, the regulations in subpart G of part 618 apply only to releasing information about retail borrowers. For this reason, a new regulation is needed to clarify the authority of System banks to disclose information about OFIs.

The FCA declines the ICBA's request to revise § 615.5495 so that the final regulation requires System banks to disclose an OFI's identity unless the OFI “opts-out.” The FCA believes that the “opt-in” approach in the proposed rule is easier for System banks to administer than the “opt-out” approach favored by the commenter. Requiring an OFI to affirmatively consent, in writing, to the disclosure of its identity avoids the misunderstandings and miscommunications that are more likely to occur if disclosure happens automatically unless or until the OFI takes action to stop it. Also, the FCA's “opt-in” approach gives OFIs more control and flexibility over the decision to allow System funding banks to publicly disclose their identity than the ICBA's “opt-out” approach. Under the approach in § 615.4595, the OFI decides whether to allow its System funding bank to disclose its identity to the public, and then it communicates its decision to the bank, which honors its decision. In contrast, disclosure occurs under the “opt-out” approach unless the OFI takes action to stop it by a certain deadline.

Under final § 614.4595, a Farm Credit Bank or agricultural credit bank may disclose to members of the public the name, address, telephone number, and Internet Web site address of any affiliated OFI only if such OFI, through a duly authorized officer, consents in writing. Each Farm Credit Bank and agricultural credit bank must adopt policies and procedures for requesting, obtaining, and maintaining the consent of its OFIs and for disclosing this information to the public.

The FCA inserted the word “requesting” into the final regulation § 614.4595 in response to a comment from a Farm Credit bank. The commenter suggested that the FCA change the word “obtaining” in the proposed regulation to “requesting.” According to the commenter, a System bank should not be accountable for “obtaining” consent from an OFI. The commenter believes that “requesting” the OFI's consent is the most the System funding bank can do. After considering this comment, the FCA amended the regulation so it requires System banks to adopt policies and procedures for “requesting, obtaining, and maintaining” the consent of its OFIs. This revision enhances the clarity and accuracy of the final regulation. A Farm Credit bank must request and obtain the OFI's written consent before it can publicly disclose the OFI's identity.

One Farm Credit bank asked the FCA for assurances that § 614.4595 does not restrict the System bank's right to file financing statements or other routine public filings that protect its security interest under applicable law. The FCA affirms that the final rule does not hinder the right or ability of any System bank to perfect its security lien in collateral pledged by its OFIs. This approach is similar to other Federal laws that protect the privacy of consumers who buy goods and services on credit. Although these laws restrict the release of confidential information by the creditor, they do not prevent the creditor from filing public documents that enable it to collect the debt in event of default.

Both System and non-System commenters suggested in their responses to the ANPRM and during testimony at the public meeting that FCS associations could serve as an effective conduit for funding OFIs. These commenters pointed out that associations often have established relationships with local OFIs and other commercial lenders. In many cases, FCS associations and existing and potential OFIs already have entered into joint financing arrangements for common borrowers.

The FCA stated in the preamble to the proposed rule that the Act allows only Farm Credit banks that operate under title I of the Act, not FCS associations, to establish funding and discount relationships with OFIs. However, the preamble to the proposed rule pointed out that section 1.5(18) of the Act allows a Farm Credit bank to delegate to associations such functions as the bank deems appropriate while section 2.2(19) allows a direct lender association to perform functions delegated to it by its funding bank. Thus, sections 1.5(18) and 2.2(19) of the Act enable FCS associations to act as point-of-contact or servicing agents for the Farm Credit bank in its lending relationship with its OFIs. 12

Allowing FCS associations to act as intermediaries between Farm Credit banks and OFIs may make this program more successful and reduce tensions between the System and OFIs. In particular, designating associations as intermediaries and servicing agents for Farm Credit banks on their OFI loans may help diminish the competitive rivalries that have historically troubled the relationship between OFIs and associations. Farmers and ranchers benefit when FCS associations and OFIs work together. Agreements between the parties can establish these arrangements and, therefore, no new regulation is necessary.

The FCA received 2 comment letters about this issue from a Farm Credit bank and association. The Farm Credit bank commenter concurred that existing statutory authorities are sufficient to support associations acting as agents of Farm Credit banks in their relationship with OFIs and, therefore, no regulation is necessary. The association fully supported allowing associations to act as intermediaries for the Farm Credit banks in establishing and servicing OFI relationships.

The FCA reaffirms that FCS associations have no authority under the Act to lend directly to OFIs, but they can act as intermediaries or servicing agents on loans from a Farm Credit bank to OFIs.

In 1998, the FCA repealed former § 614.4565, which imposed a lending limit on the amount of credit that any OFI could extend to a single credit risk with FCS funds. At the time, we acknowledged that certain OFIs would remain subject to lending limits that their primary regulator imposes under applicable Federal or state law. The preamble to the final rule stated that we expect each Farm Credit bank to prudently manage risk exposures to concentrations in OFI loan portfolios through underwriting standards and its general financing agreement (GFA) with each OFI. 13

After the FCA repealed former § 614.4565, some Farm Credit banks considered imposing a lending limit on both FCS associations and OFIs that is lower than the lending limit that: (1) § 614.4353 establishes for System direct lender associations; and (2) Federal or state laws place on depository institutions. During earlier phases of this rulemaking, two non-System commenters asked us to enact a new regulation that would forbid Farm Credit banks from imposing a lending limit on OFIs that is lower than the limit established by applicable Federal or state law. The FCA declined this request because it is inconsistent with safety and soundness. The preamble to the proposed rule stated that each Farm Credit bank may establish, by underwriting standards and the GFA, limits on its exposure to concentrations in the loan portfolios of both FCS associations and OFIs that are more stringent than lending limits imposed by statute or regulation, as long as it does not favor FCS associations over OFIs. 14

The FCA received comments on this issue from a Farm Credit bank, the ICBA, and 95 commercial banks. The Farm Credit bank supported the FCA's position. The ICBA agreed with the FCA that lending limits imposed by FCS banks on OFIs should be on the same basis as for FCS associations. The ICBA asserted that System banks should not impose “unduly restrictive” lending limits on OFIs, and they should be commensurate with limits set by the OFI's parent or primary regulator. Several commercial banks continued to urge the FCA to enact a regulation that prevents Farm Credit banks from imposing a lending limit that is more stringent than the limit established by Federal or state law.

The FCA reaffirms its earlier position that each Farm Credit bank may establish, by underwriting standards and GFAs, limits on its exposure to concentrations in the loan portfolios of FCS associations and OFIs that are more stringent than lending limits imposed by statute or regulation. However, System banks would not be treating OFIs equitably if they establish lending limits that favor FCS associations over OFIs. Additionally, any decision by a Farm Credit bank to establish a lending limit that is more stringent than the limit imposed on an OFI by applicable Federal or state law, or its corporate parent must have a safety and soundness justification. Commercial bank commenters have provided no new information or analysis that would persuade the FCA to prohibit Farm Credit banks, by regulation, from imposing a lending limit on OFIs that is more stringent than the limit established by law or the corporate parents of such OFIs. The FCA declines this request.

Currently, § 614.4570 requires a secured lending relationship between each Farm Credit bank and every OFI. Under § 614.4570(b)(2), each FCB or ACB must perfect its security interest in any and all obligations and the proceeds thereunder that the OFI pledges as collateral, in accordance with applicable state law. Additionally, § 614.4570(c) allows each FCB and ACB to require its OFIs to pledge supplemental collateral to support the lending relationship.

A comment letter from a System bank acknowledged that the Act prohibits Farm Credit banks from: (1) Advancing funds for long-term real estate mortgages to OFIs; and (2) accepting mortgages as primary collateral from OFIs. The commenter opined that the statutory ban on System banks funding and discounting agricultural mortgages for OFIs is a major impediment to expansion of this program. The commenter then asked the FCA to develop regulatory interpretations that would enable System banks to overcome this obstacle.

As acknowledged by the commenter, the Act does not authorize long-term funding for OFIs. FCA regulations, policies, or interpretations must comply with the Act. Therefore, an amendment to the Act is necessary to authorize Farm Credit banks to fund or discount agricultural mortgage loans that OFIs make to their customers.

In response to the ANPRM and during the public meeting, several System and non-System commenters offered various suggestions for improving the relationship between Farm Credit banks and prospective and existing OFIs. The commenters' suggestions are confidence-building measures that could attract more OFIs to establish funding and discount relationships with Farm Credit banks. These suggestions could help improve relations between existing OFIs and their funding banks and encourage prospective OFIs to establish funding and discount relationships with Farm Credit banks.

The FCA conveyed these ideas to Farm Credit banks by publishing the suggestions in the preamble to the proposed rule. These suggestions would require Farm Credit banks to take the initiative and reach out to existing and prospective OFIs. More specifically, the FCA encouraged Farm Credit banks to consider developing internal programs and initiatives that:

1. Establish outreach programs for contacting prospective OFIs and providing them with information about the banks' services;

2. Routinely publish updated information about their products and services for OFIs, and their underwriting standards, funding terms and conditions, and pricing guidelines for OFI loans;

3. Allow OFI representatives to observe meetings of the banks' board of directors;

4. Promote better communication through roundtable discussions, focus groups, and public discussions that bring OFIs, associations, and other interested parties together to discuss issues of mutual interest;

5. Work with OFIs to identify and remove administrative barriers that hinder OFI access;

6. Allow FCS associations to act as intermediaries and servicing agents on extensions of credit from the funding bank to OFIs, as discussed earlier; and

7. Identify best practices for OFIs.

The FCA published these suggestions in the preamble to the proposed rule because we are strongly committed to the success of the OFI program. The FCA reasoned that by adopting the internal programs and initiatives described above, Farm Credit banks can attract more OFIs which, in turn, will provide eligible farmers, ranchers, aquatic producers and harvesters, farm-related businesses, and rural homeowners with more plentiful and affordable credit, as Congress intended. Another passage in the preamble to the proposed rule advised the public that the FCA may provide additional guidance to Farm Credit banks about improving the OFI program through bookletters, informational memoranda, and the Office of the Ombudsman. The preamble to the proposed rule informed the public that new regulations may not be required to implement these suggestions for improving the OFI program. 15

The FCA received several comments about this guidance from both FCS and non-System commenters. Letters from commercial banks strongly supported the recommendations and urged the FCA to encourage Farm Credit banks to undertake all of these initiatives so: (1) Their relationships with OFIs would improve; and (2) this program would become more attractive to non-System agricultural lenders. In contrast, System commenters stated that the FCA was interfering in the internal business affairs of System banks without any safety or soundness justification. These commenters found it unusual for the preamble to encourage certain practices at System banks while acknowledging that new regulations are unnecessary.

Four System commenters objected to the suggestion that Farm Credit banks invite OFI observers to their board meetings. According to these commenters, matters discussed at bank board meetings are confidential and only board members and officers attend such meetings. One System commenter objected to the suggestion that Farm Credit banks identify best management practices for OFIs. From this commenter's perspective, OFIs are independent financial institutions that are responsible for their own operation, and Farm Credit banks should not attempt to impose their own views about best management practices on their OFIs. This commenter expressed concern that System banks could be exposed to lender liability claims if they prescribed best management practices to their OFIs.

As stated earlier, the FCA is committed to the success of the OFI program. Providing funding and liquidity to OFIs is an essential and integral part of the public policy mission of System banks to ensure that farmers and ranchers always have access to sound, adequate, and constructive credit. The FCA offered these seven suggestions in the hope that they would encourage System banks to: (1) Reach out to potential OFI applicants and existing OFIs; and (2) take the initiative in building confidence between OFIs and the System. All of these suggestions concentrated on ideas for improving communications between the System and non-System agricultural lenders that are, or may become OFIs.

From time to time, the FCA and other regulators offer guidance to institutions that they regulate. The suggestions are not mandatory, but are guidelines, which pertain to business practices instead of safety and soundness or compliance with laws and regulations. System banks may consider other approaches that foster strong and healthy relationships with OFIs in addition to, or instead of, the ideas that the FCA has suggested. If System banks invite OFI observers to their board meetings, they should consider appropriate measures that protect the confidentiality of information. The FCA emphasizes the importance of System banks reaching out to OFIs.

A CDFI urged the FCA to amend the OFI regulations so they facilitate System bank lending to CDFIs that primarily serve young, beginning, small, and low resource farmers and ranchers. The commenter made no specific regulatory recommendations to the FCA with regard to CDFIs being designated as OFIs. The commenter did suggest a regulatory change to treat CDFIs as the equivalent of Organization for Economic Cooperation and Development (OECD) banks  16 for risk-weighting purposes. We address this comment later under section III. Capital Risk Weighting of this preamble.

CDFIs are private sector financial intermediaries that offer financial services to economically distressed communities. These institutions provide economically distressed communities with credit, capital, and financial services that often are unavailable from other financial institutions. The Community Development Financial Institutions Fund (CDFI Fund), which is a wholly owned Government corporation within the United States Department of the Treasury (Treasury), certifies and oversees CDFIs.

CDFIs attract capital for their operations from both private and public sources of funding. The CDFI Fund provides financial and technical assistance in the form of grants, loans, equity investments, and deposits to competitively selected CDFIs. The private sector also provides equity investments and credit to CDFIs. Some CDFIs are depository institutions and, therefore, they obtain some funds for their operations from deposits as well as credit lines with other lenders. CDFIs work in partnership with other financial institutions to channel credit and investment into economically distressed communities.

There are six basic types of CDFIs. Specific language in section 1.7(b)(1)(B) of the Act determines whether an entity is eligible to borrow from a Farm Credit bank as an OFI and would authorize certain types of CDFIs as OFIs. Under section 1.7(b)(1)(B) of the Act and § 614.4540 of FCA regulations, two types of CDFIs, community development banks and community development credit unions, could become OFIs that fund, discount, or obtain other similar financial assistance from a Farm Credit bank in order to extend short- and intermediate-term credit to eligible borrowers for authorized purposes pursuant to sections 1.10(b) and 2.4(a) and (b) of the Act. Since the mission of CDFIs is to serve economically distressed segments of the population, those CDFIs that become OFIs may use funding, discount services, and other financial assistance from a Farm Credit bank to serve young, beginning, small, and low resource farmers and ranchers. In addition, the FCA encourages Farm Credit banks to work with eligible CDFIs that make loans or extend other similar financial assistance to agriculture and are interested in establishing an OFI relationship. Because of eligibility restrictions in the Act for OFI funding, no other amendments to the regulations are allowable.

Section 4.19(a) of the Act mandates that Farm Credit banks and associations have programs for furnishing sound and constructive credit and related services to young, beginning, and small (YBS) farmers and ranchers. According to the statute, the YBS program of each FCS direct lender association must comply with policies prescribed by the board of their funding banks. Section 4.19(a) of the Act also states, “Such programs shall assure that such credit and services are available in coordination with other units of the Farm Credit System serving the territory and with other governmental and private sources of credit .” (Emphasis added.)

A CDFI that seeks funding, discount services, and other financial assistance from a Farm Credit bank should consult with the bank about how they can work together to provide credit to YBS and low resource farmers and ranchers. When feasible, the Farm Credit bank should encourage CDFIs and local FCS associations to coordinate their efforts to serve YBS and low resource farmers and ranchers.

As discussed in the preamble to the proposed rule, we have interpreted our capital adequacy regulations as requiring Farm Credit banks to risk weight loans to OFIs at 100 percent. In contrast, existing § 615.5210(f)(2)(ii)(I) allows Farm Credit banks to risk weight loans to System associations at 20 percent. This means Farm Credit banks currently hold more capital (at a minimum) for loans to OFIs than loans to System associations, which in many cases have similar structures and financial conditions as OFIs. The preamble to the ANPRM explained, in detail, the risk-reducing features of FCS associations that justified a 20-percent risk weighting. 17

The FCA acknowledged in the preambles to the ANPRM and the proposed rule that many OFIs, particularly commercial banks or their affiliates, might pose no greater risk to their FCS funding bank than System associations. However, unregulated non-bank OFIs could expose the FCS bank to greater risk than FCS associations and regulated OFIs.

The risk-weighting categories in FCA's capital regulations are patterned after the risk-weighting categories in the 1988 Basel Accord, which apply to all depository institutions regulated by the other Federal bank regulatory agencies. As a result, many, but not all, OFIs have the same risk-reducing features as FCS associations.

The FCA proposed amendments to § 615.5210 that would permit Farm Credit banks to risk weight their loans to OFIs that are Federal- or state-regulated depository institutions, or their affiliates, at 20 percent. Under this proposal, Farm Credit banks would continue to risk weight loans to OFIs that are unregulated, or exhibit a higher risk profile at either 50 or 100 percent, depending on certain factors.

The proposed rule would establish a 20-percent risk weighting for OFIs that are either: (1) An equivalent to an OECD bank (Federal- or state-regulated depository institution); (2) subsidiaries of OECD equivalent banks or bank holding companies and carry full guarantees from such parent entities; or (3) an institution that carries one of the three highest ratings from a nationally recognized statistical rating organization (NRSRO). 18 OFIs are required by regulations to pledge full recourse on all loans they fund or discount with a Farm Credit bank.

Proposed § 615.5210 would establish a 50-percent risk weighting for OFIs that: (1) Are not OECD banks but otherwise meet similar capital and operational standards; and (2) carry an investment grade or higher NRSRO rating. The FCA proposed to retain a 100-percent risk weighting for all loans to OFIs that do not qualify for the 20-percent or 50-percent risk-weight categories.

We received 98 comments on capital risk weighting in response to our proposed rule. The comments came from 3 Farm Credit banks, a CDFI, an OFI that is affiliated with a group of farmer cooperatives, the CUNA, the ICBA, and 91 commercial banks. The majority of the commenters supported differentiating the risk weighting of loans to OFIs based on the structure and risk-mitigating characteristics of the OFIs.

The 3 Farm Credit banks generally supported the proposed capital risk-weighting rule for OFIs. However, these commenters sought clarification of two issues, and they requested two technical changes to the regulation. The CUNA supported the rule as proposed, while the ICBA and 47 bankers supported equal risk weighting for FCS associations and OFIs that are depository institutions or their affiliates. Forty-four (44) commercial bank commenters supported equal risk-weighting treatment for all OFIs and the FCS associations. The CDFI stated that the final rule should require Farm Credit banks to risk weight all CDFIs at 20 percent. The CDFI also stated that all CDFIs should be treated as equivalent to OECD banks because of the CDFIs “good standing” status with Treasury. The agricultural credit cooperative OFI expressed concern that the new regulation will increase the cost of funds to OFIs that are risk weighted at 100 percent.

A Farm Credit bank asked the FCA to clarify whether the three highest NRSRO investment ratings (for institutions that are risk weighted at 20 percent) include subset designations ( e.g. , AAA+, AA+, or A+). The FCA responds that the regulation refers to the generic rating categories, not plus or minus signs that show relative standing within each rating category. Under this regulation, for example, a rating of “AA−” would be within the second highest investment-grade ratings by an NRSRO.

Two Farm Credit banks asked the FCA whether the full recourse requirement for OFIs extended to their parents. According to these commenters, requiring both the parent and the OFI subsidiary to pledge full recourse on the OFI's loan (so the funding bank could risk weight it at 20 percent) could become a significant impediment to the growth of the OFI program. One of these commenters expressed concern that requiring the parent to pledge full recourse to the System funding bank clashes with its capital reasons for establishing an OFI subsidiary. The FCA replies that the rule requires full recourse from the OFI. Generally, the full recourse requirement would not extend to an OFI's parent, but the System funding bank could require it to provide such a guarantee as a condition for approving the OFI for credit.

A Farm Credit bank suggested that the final rule allow OFIs that are not OECD banks or their affiliates to qualify for a 20-percent risk weighting if they receive an investment grade or higher rating from a NRSRO. Under the proposed rule, such OFIs do not qualify for a 20-percent risk weighting unless a NRSRO rates them in one of the three highest investment rating categories. However, OFIs that are not OECD banks or their affiliates could qualify for a 50-percent risk weighting under the proposed rule if they receive an investment-grade rating by a NRSRO and they meet the other requirements of this regulation.

The FCA rejects the commenter's recommendation because it eliminates the distinction in the regulation between OFIs that are risk weighted at 20 percent and those that are risk weighted at 50 percent. NRSRO ratings provide Farm Credit banks with a credible, objective, and independent standard for determining risk exposure from an OFI. Each risk-weighting category in our regulation is based on the System's potential exposures to risk, as well as risk mitigation factors. A lower investment rating from a NRSRO means that an OFI (that is not an OECD bank or its affiliate) exposes its System funding bank to greater risks which, in turn, justifies a 50-percent, not a 20-percent, risk weighting. The FCA's approach is consistent with the approach taken by the other federal bank regulatory agencies and pending revisions to the Basel Accord. For this reason, the final rule will require each Farm Credit bank to risk weight OFIs that are not OECD banks or their affiliates at 20 percent only if they achieve and maintain one of the three highest investment-grade ratings from a NRSRO.

A Farm Credit bank asked the FCA to amend a provision in the proposed rule so that an OFI can qualify for a 50-percent risk weighting if its loan is guaranteed by a parent that receives an investment grade or higher rating from a NRSRO. The rule already allows an OFI to qualify for a 20-percent risk weighting if its parent: (1) Guarantees the loan; and (2) has one of the three highest NRSRO investment-grade ratings. The commenter sought this change so that the final rule applies consistent standards for risk weighting OFIs at either 20 or 50 percent. The FCA agrees with the commenter and, accordingly, the final rule includes this change.

As discussed earlier, the agricultural credit cooperative OFI expressed concern that this regulation will increase the cost of funds to OFIs that are risk weighted at 100 percent. The FCA believes that this concern has no merit. All OFIs are currently risk weighted at 100 percent. Lowering the risk weighting of some OFIs based on lower risk profiles should not result in increased costs to other OFIs. Although the regulation differentiates between OFIs on the basis of risk to the funding bank, the FCA does not expect that FCS banks should raise the cost of funding that they charge to OFIs that do not fall within the 20- or 50-percent risk-weighting categories.

In response to the ICBA and other commercial bank commenters, the FCA confirms that the final rule treats FCS associations and OECD banks the same for risk-weighting purposes. As discussed earlier, the CDFI inquired about the risk weighting of CDFIs that become OFIs. The FCA replies that CDFIs as a group are not considered the equivalent of OECD banks despite their “good standing” status with Treasury. The certification criteria imposed on CDFIs by Treasury are mission-based rather than safety- and soundness-based and, therefore, do not address risk identification and control criteria as required of the OECD banks by the federal bank regulatory agencies. Accordingly, it would be inconsistent with the agency's safety- and soundness-based regulations to automatically equate CDFIs as equivalent to the risk weighting for OECD banks. However, CDFIs that are community banks and credit unions would probably qualify as OECD banks and, therefore, a Farm Credit bank could risk weight discounted CDFI loans at 20 percent.

Forty-four (44) commercial bank commenters took the position that the risk weighting for all OFIs and FCS associations should be the same. As explained earlier, not all OFIs pose the same risks to their funding banks. Some OFIs are not OECD banks or their affiliates. In other cases, nonbank OFIs do not meet the capital, risk identification and control, and operational standards that apply to OECD banks, or they do not carry an investment-grade rating from a NRSRO. For these reasons, not all OFIs should be risk weighted at 20 percent.

The final rule establishes a 20-percent risk weighting for OFIs that are either: (1) An equivalent to an OECD bank (Federal-or state-regulated depository institution); (2) subsidiaries of OECD equivalent banks or bank holding companies and carry full guarantees from such parent entities; or (3) an institution that carries one of the three highest investment-grade ratings from a NRSRO.

Under final § 615.5210, a 50-percent risk weighting applies to OFIs that: (1) Are not OECD banks but otherwise meet similar capital, risk identification and control, and operational standards; and (2) carry an investment-grade or higher NRSRO rating, or the claim is guaranteed by a parent company with such a rating.

The final rule establishes a 100-percent risk weighting for all OFI loans that do not qualify for the 20-percent or 50-percent risk-weight categories. OFIs that are well-capitalized and well-managed expose the System to less risk. Therefore, FCS institutions need less capital to support loans to these OFIs. This approach is consistent with the direction from the pending Basel Accord revisions, which are currently under consideration.

Lowering the capital requirements for most OFI loans will lower the operating costs of the OFI program to Farm Credit banks. This, in turn, should lower the cost of funds to well-capitalized and well-managed OFIs. Lower funding costs should enable these OFIs to reduce interest rates charged to their borrowers. These results would advance the System's public policy mission to provide affordable credit on a consistent basis to agriculture and rural America. Greater flexibility for the risk weighting of OFI loans should provide the Farm Credit banks additional incentives to expand their lending to both existing and new OFIs.

Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), the FCA hereby certifies that the final rule will not have a significant economic impact on a substantial number of small entities. Each of the banks in the System, considered together with its affiliated associations, has assets and annual income in excess of the amounts that would qualify them as small entities. Therefore, System institutions are not “small entities” as defined in the Regulatory Flexibility Act.

On August 4, 2003, OSM notified the Governor of Missouri that serious problems existed that were adversely affecting the Missouri Department of Natural Resources implementation and enforcement of the Missouri surface coal mining and reclamation program. In accordance with the provisions of 30 CFR 733.12(f), we announced our decision, effective August 22, 2003, to institute direct Federal enforcement for those portions of the Missouri program that the State could not adequately implement and enforce. With the substitution of Federal enforcement authority, we outlined a process by which Missouri could regain full authority for its program.

In the April 15, 2004, Federal Register (69 FR 19927), we further clarified our position regarding the portions of the Missouri program that we directly enforce and set forth our findings regarding the status of those portions of Missouri's program for which we required remedial actions.

As published, the amendatory language in the April 15, 2004, Federal Register notice inadvertently deleted existing regulatory text. This correction will restore that regulatory text which contains important information for the State to use when it submits its proposal to regain full authority to implement its regulatory program.

The Union Pacific Railroad has requested a temporary deviation in order to remove and replace rails on the Melville Railroad Vertical Lift Bridge across the Atchafalaya River, mile 107.4, near Melville, St. Landry and Pointe Coupee Parishes, Louisiana. The repairs are necessary to ensure the safety of the bridge. This temporary deviation will allow the bridge to remain in the closed-to-navigation position from 7 a.m. until 11 a.m. and from 1 p.m. until 5 p.m. on Friday, June 11, 2004, and Saturday, June 12, 2004.

The bridge has a vertical clearance of four feet above mean high water in the closed-to-navigation position and 54 feet above mean high water in the open- to-navigation position. Navigation at the site of the bridge consists mainly of tows with barges and some recreational pleasure craft. Due to prior experience, as well as coordination with waterway users, it has been determined that this closure will not have a significant effect on these vessels. No alternate routes are available. The bridge will be able to open for emergencies.

In accordance with 33 CFR 117.35(c), this work will be performed with all due speed in order to return the bridge to normal operation as soon as possible. This deviation from the operating regulations is authorized under 33 CFR 117.35.

A purpose of this final rule is to limit the number of patent practitioners that a patent applicant, or an assignee of the patent applicant, can name in a power of attorney. If more than ten registered patent attorneys or registered patent agents are to be appointed, then the Office's Customer Number practice must be used. This change is necessary to eliminate the undue processing burden on the Office when a power of attorney naming more than ten patent practitioners is submitted in patent applications. In addition, a purpose of this final rule is to eliminate the associate power of attorney practice in patent cases. An associate power of attorney is not necessary for a patent practitioner to take most actions in a patent application. Instead of filing an associate power of attorney, a patent practitioner can file an “Authorization to Act in a Representative Capacity” (note the sample form posted on the Office's Internet Web site at: http://www.uspto.gov/web/forms/sb0084.pdf). Another purpose of this final rule is to eliminate an original assignment document from the list of documents that may be submitted for recordation. This is because the Office shall no longer be returning assignment documents after they have been scanned into the Office's electronic assignment database, and any assignee that submits the original assignment document will be unable to retrieve the document.

The Office provides for the use of a Customer Number to identify either an address for patent-related correspondence, or a set of patent attorneys and agents who may be identified with a patent application as patent practitioners of record. Customer Number practice permits the correspondence or fee address, or the list of practitioners of record to be easily changed in a large number of patent applications by filing a single request for Customer Number data change. A separate revocation of power of attorney, or appointment of a new power of attorney would not need to be filed in each patent application if a Customer Number Data Change Request (PTO/SB/124) is filed. As a result, if a patent attorney or patent agent is to begin to represent a client, or is discontinuing representation of a client, on a particular set of applications, and, if the power of attorney for that set of applications was originally to the patent practitioners associated with a Customer Number, then the list of patent practitioners associated with the Customer Number should be changed to reflect the addition or deletion. When Customer Number practice is used, a separate document does not need to be filed by applicant for each application in which the list of practitioners associated with the Customer Number is to be changed; only one Customer Number Data Change Request is required to eliminate any patent practitioners who should no longer be associated with the Customer Number. Alternatively, a new power of attorney to a list of patent practitioners or to the patent practitioners associated with a different customer number may be filed in each application in which the power of attorney should be changed.

The rules pertaining to power of attorney are revised to reflect Customer Number practice, a practice wherein an applicant or an assignee of the entire interest of the applicant in a patent application can give power of attorney to a list of registered patent practitioners associated with a Customer Number. See Manual of Patent Examining Procedure (8th ed. 2001) (Rev. 1, Feb. 2003) (MPEP), Section 403, for a description of Customer Number practice. The rules are also revised to explain the requirements of a power of attorney and to limit the number of practitioners who may be given a power of attorney without using Customer Number practice. Furthermore, the patent rules are amended to discontinue the “associate” power of attorney practice, to clarify the procedures related to revocation of power of attorney, and to clarify how a registered practitioner may sign a document in a representative capacity.

Documents affecting the title to a patent or trademark property ( e.g. , assignments, or security interests) are currently recorded in the Office's assignment database, upon submission of the document with the appropriate cover sheet and the fee required by 35 U.S.C. 41(d)(1). In addition, Government Interests are recorded, upon submission of the document, as required by Executive Order 9234 of February 18, 1944 (9 FR 1959, 3 CFR 1943-1948 Comp., p. 303). Since 1995, assignment documents have been recorded in the Office's Assignment database without stamping or otherwise marking the document that was submitted for recordation. The automated system that receives documents for recordation assigns the reel and frame number to the document and places the recordation stampings on the images that are stored in the automated system. The Office is increasing the integrity of its internal patent application record maintenance by adopting a new electronic data processing system for the storage and maintenance of all the records associated with patent applications. The new system includes the process of scanning all incoming papers to create an image file of the papers associated with patent applications. Papers that are scanned are stored, and then destroyed according to a record retention schedule. Consistent with this new practice, the Office will discontinue the practice of returning assignment documents that were mailed to the Office, and will require assignment documents to be submitted on 8 1/2 by 11-inch paper (21.6 by 27.9 cm) (“letter size”) or DIN size A4 (21.0 by 29.7 cm).

To assist applicants in identifying the application or patent to which a Notice of Recordation relates, the Notice has been revised to reflect the title of the invention and docket number stored in the Office's electronic records, if the notice of recordation is for a single property (application or patent). Any docket number included on the Assignment Cover sheet will only be used in the Office's electronic financial records for purposes of processing the recordation fee, but will not be entered into other electronic records for the patent or patent application.

The Office is amending sections of 1.1, 1.12, 1.31, 1.33, 1.34, 1.36, 1.53, 1.363, 3.1, 3.21, 3.24, 3.25, 3.27, 3.31, 3.34, 3.41, 3.81, and 5.1 of title 37 of the Code of Federal Regulations (CFR), and adding new § 1.32 to title 37 CFR.

Section 1.1: Section 1.1(a)(4)(i) is amended to add “submitted by mail” and to delete “or under § 3.81 of this chapter” to require that assignments submitted by mail contemporaneously with a request to issue a patent to an assignee be sent to Mail Stop Assignment Recordation Services instead of Mail Stop Issue Fee in order to more efficiently direct assignment documents. Section 1.1 is also amended to remove paragraph (f). The Office has determined that Mail Stop Provisional Patent Application is not useful in the routing of correspondence within the Office.

Section 1.12: Section 1.12(b) is amended to replace “has not been published under 35 U.S.C. 122(b) are not available to the public” with “is open to the public pursuant to § 1.11 or for which copies or access may be supplied pursuant to § 1.14, are available to the public” in order to clarify the assignment records that are available to the public. Section 1.12(b) is further amended to provide that copies of any such assignment records and related information that are not available to the public shall be obtainable only upon written authority of the applicant or applicant's assignee, patent attorney, or patent agent or upon a showing that the person seeking such information is a bona fide prospective or actual purchaser, mortgagee, or licensee of such application, unless it shall be necessary to the proper conduct of business before the Office or as provided in part 1.

As revised, § 1.12(b) more clearly provides, for example, for an application that is relied upon under 35 U.S.C. 120 in an application that has issued as a patent, any assignment records relating to the parent application could be considered to relate to the patent. Before the amendment to § 1.12(b), the text of the rule suggested that the assignment records for the parent application were not available to the public. This was not the intended construction, and was inconsistent with MPEP § 301.01. As revised § 1.12(b) provides that the assignment records for the parent application of a patent, or an application that has published under 35 U.S.C. 122(b), are open to public inspection.

Section 1.31: Section 1.31 is amended to revise the title to refer to “registered patent attorney or patent agent” and to introduce the term “power of attorney.” Section 1.31 is also revised to add “United States” before “Patent and Trademark Office” in the definition of “Office” to properly reflect the current name of the Office in the rule. See 35 U.S.C. 1(a).

Section 1.32: New § 1.32 sets forth definitions related to power of attorney. Section 1.32 does not apply to power of attorney in an international application (§ 1.455). The terms “power of attorney,” “principal,” “revocation,” and “Customer Number” are defined, and the requirements for a power of attorney are set forth. The term “patent practitioner” is not separately defined, but is a collective reference to a registered patent attorney or registered patent agent.

“Power of attorney” is defined in paragraph (a)(1) of § 1.32 as a written document by which a principal designates a registered patent attorney or a registered patent agent (collectively “patent practitioner”) to act on his or her behalf.

“Principal” is defined in paragraph (a)(2) of § 1.32 as either the applicant for patent (§ 1.41(b)) or the assignee of the entire interest of the applicant, and the entity who executes a power of attorney designating one or more agents to act on his or her behalf. An appointment by fewer than all of the applicants, or assignees of the entire interest of the applicants requires a petition under § 1.183 to waive the requirement of § 1.32(b)(4) that the applicant, or the assignee of the entire interest of the applicant sign the power of attorney.

The term “patentee” has not been included in this definition because use of the term “patentee” would make the rule unnecessarily complicated. Although the term “patentee” often is a reference to the assignee, the patentee could also be the inventors, or if an inventor is deceased or legally incapacitated, the inventors and the legal representative of such an inventor. An inventor who could not be reached or refused to join in the filing of a patent application would not be an applicant as set forth in § 1.41(b), but would still be a patentee, but once a patent has issued, the signature of the nonsigning inventor should still not be required on any power of attorney. Accordingly, the term “patentee” does not necessarily reference the same group of individuals as the term “applicant” and has not been used in the rules so that the applicant, not necessarily the patentee, could change the power of attorney, for example, in an application that has issued as a patent.

“Revocation” is defined in paragraph (a)(3) of § 1.32 as the cancellation by the principal of the authority previously given to a registered patent attorney or registered patent agent to act on his or her behalf.

“Customer Number” is defined in paragraph (a)(4) of § 1.32 to be a number that may be used to: (i) Designate the correspondence address of a patent application or patent such that the correspondence address for the patent application or patent would be the address associated with the Customer Number; (ii) designate the fee address (§ 1.363) of a patent by a Customer Number such that the fee address for the patent would be the address associated with the Customer Number; and (iii) specify, in a power of attorney, that each of the patent practitioners associated with a Customer Number have a power of attorney.

Section 1.32(b) sets forth the requirements for a power of attorney, other than a power of attorney in an international application ( see § 1.455 for the power of attorney in an international application and note that Customer Number practice cannot be used in an international application). To comply with § 1.32(b), the power of attorney, in an application other than an international application, must: (1) Be in writing; (2) name one or more representatives in compliance with (c) of this section; (3) give the representative power to act on behalf of the principal; and (4) be signed by the applicant for patent (§ 1.41(b)) or the assignee of the entire interest of the applicant. Furthermore, pursuant to § 1.32(c), a power of attorney may only name as representative: (1) One or more joint inventors (§ 1.45); (2) those registered patent practitioners associated with a Customer Number; or (3) ten or fewer registered patent attorneys or registered patent agents (see § 10.6 of this subchapter)(patent practitioners). Except as provided in § 1.32(c)(1) or (c)(2), the Office will not recognize more than ten patent practitioners as being of record in an application or patent. If a power of attorney names more than ten patent practitioners, such power of attorney must be accompanied by a separate paper indicating which ten patent practitioners named in the power of attorney are to be recognized by the Office as being of record in application or patent to which the power of attorney is directed.

New § 1.32(c)(3) sets a limit on the number of patent practitioners who can be given a power of attorney without using Customer Number practice because it is extremely burdensome for the Office to manually enter a long list of patent practitioners, particularly where the same list of patent practitioners is to be entered for a large number of applications, and to update that listing. Applicants desiring to appoint a large number of patent practitioners may continue to do so, but Customer Number practice will be required in order to have more than ten patent practitioners recognized by the Office as being of record and reflected in Office computer systems. See § 1.32(c)(2).

If more than ten patent practitioners have been named in a combined declaration and power of attorney ( e.g. , from an earlier filed application ( see § 1.63(d)(1)(iv))), then the Office of Initial Patent Examination will enter the practitioners indicated on the separate paper filed pursuant to § 1.32(c)(3). If more than ten patent practitioners are listed on a power of attorney, and no separate paper under § 1.32(c)(3) is filed, then no patent practitioners will be made of record. If a separate paper is not provided and a patent practitioner later attempts to sign a batch update request to request that the address associated with the Customer Number be used for the correspondence address and/or the fee address for the patent applications listed on the spreadsheet ( see Notice of Elimination of Batch Update Practice to Change Power of Attorney, 1272 Off. Gaz. Patent Office Notices 24 (July 1, 2003)), the request will be rejected because the patent practitioner is not of record. Applicant may then submit a newly executed power of attorney complying with § 1.32, or submit a copy of the previously filed power of attorney accompanied by a separate paper indicating which ten practitioners are to be made of record pursuant to § 1.32(c)(3).

Customer Number practice allows the Office to enter a single five or six digit number into the Office computer system instead of a large number of patent practitioners and is a more appropriate use of Office resources than continuing to permit applicants to give a power of attorney to an unlimited number of practitioners. See MPEP § 403.

Section 1.33: Section 1.33(a) is revised to reflect Customer Number practice. If applicant provides, in a single document, both a complete typed address and a Customer Number and requests that both be used for the correspondence address, the address associated with the Customer Number will be used. Section 1.33(a) is revised to include the following sentence: “If more than one correspondence address is specified in a single document, the Office will establish one as the correspondence address and will use the address associated with a Customer Number, if given, over a typed correspondence address.” Applicants will often specify the correspondence address in more than one paper that is filed with an application, and the address given in the different places sometimes conflicts. Where the applicant specifically directs the Office to use a correspondence address in more than one paper, priority will be accorded to the correspondence address specified in the following order: (1) Application data sheet (ADS); (2) application transmittal; (3) oath or declaration (unless power of attorney is more current); and (4) power of attorney. Accordingly, if the ADS includes a typed correspondence address, and the declaration gives a different address ( i.e. , the address associated with a Customer Number) as the correspondence address, the Office will use the typed correspondence address as included on the ADS. In the experience of the Office, the ADS is the most recently created document and tends to have the most current address. After the correspondence address has been entered according to the above procedure, it will only be changed pursuant to § 1.33(a)(1).

A Customer Number merely provided in correspondence without an instruction to use the Customer Number for the correspondence address or for any other purposes, e.g. , a Customer Number that is adjacent the heading of the paper, is not a specific direction to use the Customer Number for any purpose.

Section 1.33(b)(1) is revised to change the reference from § 1.34(b) to new § 1.32(b).

Section 1.33(b)(2) is revised to change § 1.34(a) to § 1.34 to be consistent with the revision to § 1.34.

Section 1.33(c) revised to change the cross-reference to § 1.32(b) instead of § 1.34(b) and to change the reference to § 1.34(a) to § 1.34 to be consistent with the revision to § 1.34.

Section 1.34: Section 1.34 is revised to change the title to “Acting in a Representative Capacity.” The paragraph designation for paragraph (a) and ”, pursuant to § 1.31,” are deleted. In addition, “the registered patent attorney or patent agent should specify his or her registration number with his or her signature” is changed to “the registered patent attorney or patent agent must specify his or her name and the registration number with his or her signature.” When a registered patent attorney or patent agent acts in a representative capacity, it should be clear who is signing the paper. Because signatures are not always legible and because sometimes the wrong registration number is given, it is necessary for the registered patent attorney or agent to include his or her name so that the identity of the person who is acting in a representative capacity may be identified.

Paragraph (b) of § 1.34 is deleted. With Customer Number practice, the associate power of attorney practice set forth in § 1.34(b) is no longer necessary because once power of attorney is given to the patent practitioners associated with a Customer Number, the list of patent practitioners of record may easily be changed. Additionally, for a patent practitioner to have the most information with which to represent his client, the patent practitioner needs to have access to the private Patent Application Information Retrieval (private PAIR) system on the Office's Internet Web site ( http://PAIR.uspto.gov ), and a patent practitioner can only have direct access to private PAIR if he or she is associated with the Customer Number, and if the Customer Number is used for the correspondence address of the application. Private PAIR provides patent practitioners with access to the Office's computer systems that track the patent file history, and, if the application is maintained in the Image File Wrapper (IFW) system, access to the images of the documents in the file history. Furthermore, private PAIR provides pro se applicants and patent practitioners with information about recently mailed correspondence from the Office for a particular Customer Number. Furthermore, private PAIR provides an explanation of any patent term extension or patent term adjustment calculations for the patent application. A patent practitioner who does not have access to private PAIR is disadvantaged in representing a client compared to a practitioner who has access to private PAIR. See the discussion with respect to comment 9 below.

A government entity or assignee may have multiple law firms or sets of attorneys working on their patent applications. Such an entity should consider having multiple Customer Numbers, with a separate Customer Number for each set of patent attorneys, and having at least one in-house patent practitioner listed on each listing of patent practitioners associated with a Customer Number so that the government entity or assignee has access to private PAIR for all of their patent applications.

An applicant or assignee of the entire interest of the applicant who gives a power of attorney to a limited number of patent practitioners has expressed a desire to be represented by only those patent practitioners. As § 1.34 is revised, if Customer Number practice is not used, an applicant or assignee of the entire interest of the applicant will be required to sign a new power of attorney in order for an associate practitioner to be “of record” in addition to the specifically identified principal patent practitioner. Of course, a registered patent practitioner may still act in a representative capacity pursuant to § 1.34 (by providing his or her name and a registration number with his or her signature), and the rule changes do not change this flexibility. A patent practitioner who is acting in a representative capacity pursuant to § 1.34 may conduct an interview with an examiner. See MPEP § 713.05. A patent practitioner who is acting in a representative capacity can also file amendments and other papers (§ 1.33(b)(2)). A patent practitioner who is acting in a representative capacity pursuant to § 1.34 may not, however, change the correspondence address (§ 1.33(a)(2)) (except where an executed oath or declaration has not been filed, and the patent practitioner filed the application)), expressly abandon the application without filing a continuing application (§ 1.138(b)), or sign a terminal disclaimer (§ 1.321(b)(1)(iv)). A patent practitioner who is signing on behalf of the assignee of the entire interest may ( i.e. , not signing in a representative capacity or as a patent practitioner of record), however, sign these same documents upon compliance with § 3.73(b), if the practitioner is authorized to act on behalf of the assignee.

A patent attorney or agent who has been given a power of attorney cannot change the power of attorney from the set of patent practitioners appointed by the applicant or assignee of the entire interest of the applicant to a Customer Number (or change from one Customer Number to another). To appoint a new power of attorney, the applicant or assignee of the entire interest of the applicant must be involved and must sign the power of attorney. Where a large number of patent applications of a single assignee are involved, the assignee may wish to consider giving the patent practitioners a power of attorney that is not specific to an application, similar to the General Power of Attorney used in Patent Cooperation Treaty (PCT) practice, and having one of the patent practitioners with general power of attorney take action by submitting a copy of the power of attorney and a statement in compliance with § 3.73(b). Form PTO/SB/80 is available for this purpose and is posted on the Office's Internet Web site at www.uspto.gov, under forms.

Section 1.36: Section 1.36 is revised to include new paragraphs (a) and (b) so that revocation of power of attorney and withdrawal as attorney or agent of record are addressed in separate paragraphs. In addition, “or authorization of agent” is deleted because the term “power of attorney” has been defined to include an authorization of an agent. The cross-reference to § 1.31 is changed to § 1.32(b).

Section 1.36(a) addresses revocation of a power of attorney. A registered patent attorney or patent agent is notified of any revocation with a “Notice Regarding Change in Power of Attorney.” A power of attorney to the patent practitioners associated with a Customer Number that is filed subsequent to another power of attorney will be treated as a revocation of the previously granted power of attorney. The Office can only recognize one Customer Number at a time for power of attorney purposes. When the power of attorney is to the patent practitioners associated with a Customer Number, the power of attorney is considered to be revoked when the power of attorney to the practitioners associated with the Customer Number is revoked. The revoked power of attorney may be replaced with either a new power of attorney to a new Customer Number or a power of attorney to a new list of patent practitioners. A power of attorney is not considered revoked when the list of patent practitioners associated with a Customer Number is changed (as by filing a Request for Customer Number Data Change (PTO/SB/124)). When the power of attorney is revoked, a single notice is mailed to the correspondence address in effect before the power of attorney was revoked. An associate registered patent attorney or patent agent is not separately informed of a revocation. As a result, § 1.36(a) has been revised to no longer suggest that such an associate practitioner would be separately notified of the revocation of power of attorney.

When power of attorney is given to the registered patent practitioners associated with a Customer Number, for example with PTO/SB/81, the list of patent practitioners associated with the Customer Number is changed by changing the data associated with the Customer Number (using, for example PTO/SB/124 (2 pages 124A & 124B), Request for Customer Number Data Change). No notice is given to the patent practitioners who are added or removed from the Customer Number.

Section 1.36(b) provides that when the power of attorney for an application is given to the practitioners associated with a Customer Number, all of the patent practitioners associated with the Customer Number will not be permitted to withdraw if an application with the power of attorney has an Office action to which a reply is due and insufficient time remains in the time period for reply for applicant to prepare a reply. See MPEP § 402.06.

Section 1.53: Section 1.53 is amended by removing paragraph (d)(9) and redesignating paragraph (d)(10) as paragraph (d)(9). The Office has determined that Mail Stop CPA is not useful in the routing of correspondence within the Office.

Section 1.363: Section 1.363 is amended by adding paragraph (c), which states “A fee address must be an address associated with a Customer Number.” At the time of issue fee payment, applicants may designate a fee address for maintenance fee purposes (hereafter, fee address) by submitting a “Fee Address” Indication form (PTO/SB/47) as an attachment to the Fee(s) Transmittal (PTOL-85B). If no Customer Number was previously acquired from the Office for the address being designated as the fee address, a Request for Customer Number form (PTO/SB/125) should also be attached to the Fee(s) Transmittal (PTOL-85B). If a fee address is established in an allowed application or patent, the Office will send all maintenance fee correspondence (such as maintenance fee reminder notices) to the fee address; and the Office will send all other correspondence, to the correspondence address of record. See Customer Number Required in Order to Establish a Fee Address, 1261 Off. Gaz. Pat. Office 19 (August 6, 2002).

Section 3.1: Section 3.1 is revised to identify which trademark applications are covered by 37 CFR part 3, and to delete “or a transfer of its entire right, title and interest in a” so that the definition of an assignment includes a transfer of part of the right, title and interest in a registered mark or a mark for which an application to register has been filed. Section 3.1 is also revised to add “United States” before “Patent and Trademark Office” in the definition of “Office” to properly reflect the current name of the Office in the rule. See 35 U.S.C. 1(a).

Section 3.21: Section 3.21 is revised to change “its date of execution, name of each inventor, and title of the invention” to “the name of each inventor and the title of the invention.” Section 3.21 is also revised to change “the provisional application by name of each inventor and title of the invention” to “the provisional application by the name of each inventor and the title of the invention” by adding “the” before “name” and “title.”

The phrase “its date of execution” has been deleted from § 3.21 because the date of execution of a declaration is no longer required on a declaration ( see MPEP § 602.05 and because the application could be executed on more than one date, and thus there may be no single date of execution). Accordingly, the date of execution of the application is not particularly useful in identification of the patent application and is deleted as unnecessary.

Section 3.24: Section 3.24 is revised to include two paragraphs, namely, paragraphs (a) and (b).

New paragraph (a) of § 3.24 addresses documents and cover sheets for electronic submissions ( e.g. , patent assignment documents filed via the Electronic Filing System (EFS) or the Electronic Patent Assignment System (EPAS)), and requires all documents submitted electronically to be submitted as digitized images in Tagged Image File Format (TIFF). In addition, when printed to a paper size of 8 1/2 by 11 inches (21.6 by 27.9 cm)(“letter size”) or DIN size A4 (21.0 by 29.7 cm), the document must be legible and a one-inch (2.5 cm) margin must be present on all sides.

New paragraph (b) of § 3.24 addresses documents and cover sheets for paper and facsimile submissions. Section § 3.24(b) provides that for paper submissions ( e.g. , documents that are mailed to the Office), the original document may no longer be submitted. Section 3.24(b) provides that “[e]ither a copy of the original document or an extract of the original document” must be submitted for recordation. Section 3.24(b) also explains why original documents should not be submitted for recording: “The Office will not return recorded documents, so original documents must not be submitted for recording.” The Office is moving to uniform processing of incoming papers, with incoming papers being scanned upon receipt, electronically routed within the Office, and an appropriate reply being transmitted to applicant or his representative. With this uniform procedure, the Office will not return or retain assignment documents submitted for recordation. As a result, the Office is not permitting the submission of originals of assignment documents, and instead is requiring that a copy or an extract of an original document be submitted. The term “an extract of the original document” is being added to reflect the current practice of submitting redacted copies of assignment documents, where part of an assignment document discusses matters other than assignment of interests related to a patent.

Section 3.24 is further revised to provide, in paragraph (b), that documents (copies) submitted for recording must be on sheets of paper having a size of 8 1/2 by 11 inches (21.6 by 27.9 cm)(“letter size”) or DIN size A4 (21.0 by 29.7 cm). “Legal-size” (8 1/2 by 14 inch or 21.64 by 33.1 cm) sheets of paper are no longer permissible. If the original assignment document is on “legal size” sheets of paper, the assignment document should be reduced to 8 1/2 by 11-inch or DIN size A4 paper for submission to the Office ( e.g. , by photocopying onto letter-size paper). Sheets of paper that are either 8 1/2 by 11 inches (21.6 by 27.9 cm) or DIN size A4 (21.0 by 29.7 cm) are required for scanning purposes.

Section 3.25: Section 3.25 is amended to delete paragraph (a)(1) and renumber paragraphs (a)(2) through (4) as (a)(1) through (3), respectively. Paragraph (a)(1) is deleted to prohibit applicants from submitting the original assignment document (because applicants should retain the original of the assignment document). Paragraph (a)(1) of § 3.25, as renumbered, is further revised to insert “original” before “document” in order to clarify that only a copy of an original assignment document may be submitted for recording.

Section 3.25(c) is revised to add paragraph (1) to state that electronic submissions ( e.g. , ETAS for trademark assignment documents) must be attached as a digitized image in Tagged Image File Format (TIFF), to move the existing requirements for paper submissions into paragraph (2), and to specify that the document (copy) submitted for recording must have a one-inch margin when printed on 8 1/2 by 11 inch (21.6 by 27.9 cm) or DIN size A4 (21.0 cm by 29.7 cm) paper. Legal-size paper is no longer permitted. See the discussion of this change above for patents (§ 3.24).

Section 3.27: Section 3.27 is revised to change “to be recorded” to “submitted by mail for recordation” because documents and cover sheets submitted for recording may be faxed or electronically submitted to the Office and need not be mailed. Only documents submitted by mail need to be addressed as set forth in the rule. Section 3.27 is also revised to delete “or with a request under § 3.81”. As explained with respect to § 3.81, when an applicant requests a patent to issue to an assignee, the assignment document should be separately submitted for recordation because inclusion of the assignment document with the request to issue the patent to the assignee slows down the recordation process.

Section 3.31: Section 3.31(a)(7) is revised to set forth the requirements for signature of patent and trademark cover sheets filed electronically. These requirements correspond to the requirements set forth in §§ 2.33(d) and 2.193(c)(1)(iii) of this chapter for electronically transmitted trademark filings.

Trademark assignments may be submitted electronically with the Electronic Trademark Assignment System (ETAS), which is available on the Office's Internet Web site. See http://etas.uspto.gov/ . Patent assignments may be electronically submitted using a similar tool, the Electronic Patent Assignment System (EPAS), and may also be submitted using EFS. When submitting a copy of an assignment using ETAS or EPAS, the cover sheet is completed and signed electronically. As with electronic submission of a trademark application, a signature may be applied to an assignment cover sheet by either: (1) Placing a symbol comprised of letters, numbers, and/or punctuation marks between forward slash marks in the signature block on the electronic submission ( e.g. Jane P. Doe); or (2) signing the cover sheet using some other form of electronic signature specified by the Director. See Trademark Manual of Examining Procedure (TMEP) § 804.05, Signature of Electronically Transmitted Applications (May 2003).

Section 3.31(c)(1) is revised to simplify the requirements for the cover sheet to only require identification of whether the document to be recorded relates to a governmental interest.

Paragraph (f) is added to § 3.31, and provides that a trademark cover sheet should include the citizenship of the parties conveying and receiving the interest, and that if the party receiving the interest is a partnership or joint venture, the cover sheet should set forth the names, legal entities, and national citizenship (or the state or country of organization) of all general partners or active members. This information is required for purposes of examination of the application or registration file. Providing this information when the assignment is recorded may avoid a subsequent Office action by an examiner.

Section 3.34: Section 3.34(b) is revised to delete “the originally recorded document or” to thereby provide that it is “a copy of the document originally submitted for recording” that must be submitted. As explained above, the Office is revising the procedure for handling assignment documents and will no longer be returning the document that is submitted for recording.

Section 3.41: Section 3.41(b)(2) is revised to include electronic and facsimile submission as a means in which a statement of Government interest could be submitted for recordation without incurring a fee. Section 3.41(b)(2) is also revised to change the cross-reference to § 3.27 because § 3.27 was previously revised to delete § 3.27(b).

Section 3.81: Section 3.81(a) is revised to change “name(s)” to “name” and “assignee(s)” to “assignee” because under rules of statutory and regulatory construction, the singular includes the plural unless the context indicates otherwise. Furthermore, § 3.81(a) is amended to change “should be accompanied by the assignment and either a direction to record the assignment in the Office pursuant to § 3.28, or a statement under § 3.73(b)” to “must state that the document has been filed for recordation as set forth in § 3.11.” When an assignment document is submitted for recording, the preferred submission is by facsimile to (703) 306-5995, or through an electronic filing system ( e.g. , ETAS for trademark assignment documents or EPAS or EFS for patent assignment documents), and not by mail. Accordingly, the Office has revised the rules to enable patent applicants to state that the assignment documents have been filed for recordation, rather than including the assignment documents for recordation with the request.

Paragraphs (a) and (b) of § 3.81 are revised to delete the reference to a statement under § 3.73(b). If the application has been assigned, the assignment document should be submitted for recording as set forth in § 3.11 for the patent to issue showing the name of the assignee. Although during prosecution a statement under § 3.73(b) can be relied upon to establish that an assignee is of record, pursuant to § 3.73(b)(1)(i), “the documents submitted to establish ownership may be required to be recorded pursuant to § 3.11 in the assignment records as a condition to permitting the assignee to take action.” By the time that a patent issues, any assignment should have been submitted for recording, and reliance upon § 3.73(b) should not be necessary. Furthermore, although during prosecution of an application the Office will have an opportunity to require recordation, at issuance, prosecution has come to a close and there is no other practical opportunity for the Office to require recordation before the patent is issued.

Section 3.81(b) is revised to read “[a]fter payment of the issue fee: Any request for issuance of an application in the name of the assignee submitted after the date of payment of the issue fee, and any request that a patent be corrected to state the name of the assignee, must state that the assignment was submitted for recordation as set forth in § 3.11 before issuance of the patent, and must include a request for a certificate of correction under § 1.323 of this chapter (accompanied by the fee set forth in § 1.20(a)) and the processing fee set forth in § 1.17(i) of this chapter.” This modifies the practice relating to issuance of a patent to an assignee by requiring that after payment of an issue fee, a request for a certificate of correction must be filed in order to obtain issuance of the patent to an assignee. Thus, where assignment information is submitted after payment of the issue fee, the patent document will not include the assignment information, but the assignment information will be included in a Certificate of Correction. Furthermore, the practice of allowing a patent to issue to an assignee when a § 3.73(b) statement has been filed, but an assignment has not been recorded is discontinued. See MPEP § 1481. Section 3.81(c)(1) is amended to change “assignee(s)” to “assignee” and “inventor(s)” to “inventor” because the singular includes the plural unless the context indicates otherwise. See 1 U.S.C. 1.

Section 5.1: Section 5.1(a) is revised to add Mail Stop L&R to the address so that the address reads as follows: All correspondence in connection with this part, including petitions, should be addressed to: Mail Stop L&R, Commissioner for Patents, P.O. Box 1450, Alexandria, Virginia 22313-1450. National security classified applications and other related papers may also be hand-carried to Licensing and Review, Technology Center 3600, as provided in § 5.1(c).

Response to Comments: The Office published a notice proposing changes to the rules of practice regarding power of attorney and assignment practice. See Clarification of Power of Attorney Practice, and Revisions to Assignment Rules , 68 FR 38258 (June 27, 2003), 1272 Off. Gaz. Pat. Office Notices 181 (July 29, 2003). The Office received nine written comments (from one intellectual property organization, seven patent practitioners, and one business). Comments in support of a change are not discussed. The other comments and the Office's response to those comments follow:

Comment 1: An editorial change to § 1.12(b) was recommended to change the term “such records and related information” because the use of the term was confusing.

Response: The suggestion has been adopted and “such records and related information” has been changed to “assignment records, digests, and indexes'.

Comment 2: The definition of “power of attorney” in § 1.32(a) was recommended to be revised to include designating a patent attorney or patent agent or an individual authorized to practice before the Office in patent cases. Another comment noted that the use of “agent” in § 1.32 was confusing, and recommended revision to avoid using the term “agent” to include an attorney.

Response: These suggestions have been adopted. The definition of power of attorney and the remainder of the rule have been revised accordingly. Instead of using “agent” the term “representative” or “patent practitioner” has been used. The term “an individual authorized to practice before the Office in patent cases” has not been included, however, because such a person is considered to have limited capacity to take action on behalf of a patent applicant ( see § 10.9(a) and (b)), and is not recognized by the Office as an attorney or agent of record, and is not entered into the Office's computer systems as having a power of attorney.

Comment 3: The term “principal” in § 1.32(a)(2) was suggested as being too narrowly defined, and it was suggested that the term be defined broadly enough to include an appointment by fewer than all of the inventors.

Response: This suggestion has not been adopted, but the language has been clarified in regard to appointments by fewer than all the applicants or assignees. Where all the applicants, or the assignees of the entire interest of all the applicants, do not give power of attorney to the same patent practitioners, a petition under § 1.182 is currently required before the Office will permit the split power of attorney. See MPEP § 402.10. The term “all the inventors” is specifically not used in order to provide for the situation where an inventor is deceased or where a petition under § 1.47 has been granted (the applicant would then either be fewer than all of the inventors or the party with proprietary interest pursuant to § 1.47(b)). If the term “inventors” was used, then in any application in which a petition under § 1.47 was granted, a petition under § 1.183 would also always be required to permit the power of attorney to be signed by fewer than all of the inventors, or by an assignee who is the assignee of the entire interest of the applicant, but not the assignee of the entire interest in the application (due to the lack of an assignment from the inventor, or if deceased, the legal representative of the inventor, who did not sign the declaration). With a split power of attorney, both patent practitioners are required to sign any response to an Office action, and to participate in any interviews in the patent application, which tends to delay prosecution of the patent application. Accordingly, applicants need to show good and sufficient reasons why more than one practitioner is necessary to represent applicants for the patent, and such an explanation will need to be provided in a petition under § 1.183 to waive the requirements of § 1.32(b)(4) for the applicant or the assignee of the entire interest of the applicant to sign the power of attorney.

Comment 4: One comment noted that in § 1.32(a)(3) revocation should also be defined as including the situation where the power of attorney is revoked by a new principal, and suggested that the definition be modified to address this situation. Another comment suggested that a new power of attorney act as a revocation of all prior powers of attorney.

Response: The suggestion to expand the definition of revocation to include revocation by a new or different principal has been adopted. In the definition of revocation (§ 1.32(a)(3)), “by the principal” has been deleted after “previously given”. As to the comment that a new power of attorney act as revocation of all prior powers of attorney, this suggestion has not been adopted because automatic revocation will only occur in certain situations. When an original power of attorney is filed giving power of attorney to attorneys A, B, and C, and the same principal subsequently files another power of attorney, giving power of attorney to D without revoking all prior powers of attorney, the subsequently filed power of attorney will be treated as a revocation of the original power of attorney. Similarly, if the applicant signed the original power of attorney, and an assignee of the entire interest of the applicant later takes action and files a new power of attorney, the original power of attorney is revoked and replaced by the power of attorney filed by the assignee. In addition, if a power of attorney is given to the practitioners associated with a Customer Number, and a (second) power of attorney is later received giving power of attorney to patent practitioners associated with a different Customer Number, the second power of attorney will be processed, with the first Customer Number being replaced with the second. The power of attorney to the practitioners associated with the first Customer Number is automatically revoked in this situation. In all of these situations, the most recently filed power of attorney will control.

Comment 5: Several comments opposed the requirement in § 1.32(b)(2) to use Customer Number practice if more than ten patent practitioners are to be named. They argued that the proposed rule would require an applicant to choose between naming only a law firm by using the law firm's Customer Number, or to name ten attorneys in order to name some patent practitioners in the law firm as well as others not in the law firm. The commentators encouraged the Office to consider amending the rule to allow for appointment of both practitioners and Customer Numbers, as well as more than one Customer Number. The comments argued that using different Customer Numbers for different combinations of in-house practitioners and outside firm practitioners is burdensome and risky. One comment contended that all patent practitioners associated with a Customer Number needed to be at the same address.

Response: Applicants and assignees currently, as a matter of practice, do have to choose between giving a power of attorney to a list of individual practitioners and a power of attorney to the practitioners associated with a Customer Number. This is because the Office's computer systems only allow either a list of individual practitioners or a Customer Number to be entered, but not both, nor more than one Customer Number. The proposal to allow for entry of multiple Customer Numbers would likely result in separate registration numbers being entered. The programming required to allow for more than one Customer Number would be very costly, and updating the list of patent practitioners would be burdensome on the Office, so it has not been adopted.

A Customer Number does not need to have only patent practitioners in a single law firm associated with it. Instead, a Customer Number can be used to list all of the patent practitioners associated with a given client and who are working together to represent the client. As a result, requiring the use of a Customer Number if more than ten attorneys are to be appointed power of attorney would not require an applicant to make the choice suggested by the comment. Furthermore, to allow any of the patent practitioners access to private PAIR, Customer Number practice must be used.

The comments have not explained why appointment of more than ten patent practitioners, particularly hundreds of patent practitioners, is necessary. When a long list of patent practitioners is submitted to the Office, this list must be constantly updated with a separate submission for each application. When a patent practitioner leaves a law firm, he must file a withdrawal for each application in which he has a power of attorney. There could be thousands of applications in which he was given a power of attorney, even though he never personally signed a single communication in any of them. If the proper action is not taken in the application, he or she can be held responsible for the failure to take the appropriate action because he did not timely withdraw. Given the Office's extremely liberal policy of accepting correspondence from a patent practitioner who is acting in a representative capacity pursuant to § 1.34, whether someone is of record is only relevant for a patent practitioner signing a change of correspondence address, an express abandonment without filing a continuing application, or a disclaimer. The work required for the Office to constantly update the lists of patent practitioners of record in receipt, matching and processing of the relevant paper has not been shown to be justified in exchange for the value actually given to applicants.

All patent practitioners associated with a Customer Number do not need to be at the same address. A Customer Number can be used like a client number, with all the patent practitioners who represent the client being associated with a single Customer Number.

Comment 6: Another comment asked if more than one Customer Number could be used to designate the list of patent practitioners of record so that applicants could give power of attorney to Customer Number A (all in-house counsel), and Customer Number B (several patent practitioners who are not in-house counsel). Alternatively, it was suggested that § 1.32(b)(2) be revised to permit the naming of more than one Customer Number.

Response: The suggestion has not been adopted. As stated in response to comment 5, in order to implement a change to permit use of more than one Customer Number to identify either the list of patent practitioners to be made of record or the correspondence address, reprogramming of multiple Office computer systems would be required, which is an automation project that the Office does not have resources to devote to at this time. Furthermore, the Office could not reprogram the software to allow multiple Customer Numbers to be used for the list of patent practitioners without also allowing multiple Customer Numbers being used for the correspondence address because access to private PAIR is a function of the correspondence address being associated with a single Customer Number. Thus, if the Office were to allow more than one Customer Number to be given for correspondence address purposes so that practitioners associated with each of the Customer Numbers can have access to private PAIR, then applicants would need to elect a single Customer Number for mailing purposes, and the Office would have to reprogram its system so as to be able to capture only the elected Customer Number for mailing purposes. The more Customer Numbers that the applicant has associated with a given application, the more likely that the applicant will need to change one or more of the Customer Numbers associated with the application. If only a single Customer Number is used (the Office permits up to three different Customer Numbers to be used, one for the power of attorney, one for the correspondence address and one for the fee address, but the same Customer Number can be used), then only a single Request for Customer Number Data Change can effectuate any changes necessary to the list of patent practitioners, or the address associated with a Customer Number. Given that a law firm, or a sole practitioner, can have multiple Customer Numbers without the Office being required to make any programming changes, it is more appropriate for the patent practitioners to use multiple Customer Numbers, with each Customer Number for a set of practitioners to be associated with a set of patent applications, rather than the Office to incur the cost of permitting multiple Customer Numbers to be used for the correspondence address (private PAIR access), or for the list of patent practitioners of record in an application.

Comment 7: Most of the comments opposed the proposal of denying entry of a power of attorney that was not in compliance with the proposed rules, and noted that there would be significant costs to applicants as a result of this policy. For example, where the power of attorney was given by the applicant in a combined declaration and power of attorney, many comments argued that a new declaration would be required to provide a proper power of attorney, and that a new declaration would be difficult to obtain because the applicant may no longer be employed by the company. Several comments emphasized the burden to applicants in changing their forms to comply with the limit of ten patent practitioners of record and requested a several-year delay in the effective date.

Response: After careful consideration, the Office has decided to permit applicants to supply a separate paper listing the patent practitioners who shall be made of record. Where a power of attorney is included as part of a declaration pursuant to § 1.63, and the power of attorney does not comply with § 1.32(b), the declaration would not be considered defective so long as the requirements of § 1.63 (or § 1.64) are met. If a separate paper indicating which ten registered patent attorneys or registered patent agents named in the power of attorney are to be recognized by the Office as being of record in the application or patent to which the power of attorney is directed is provided pursuant to § 1.32(c)(3), then the registered patent practitioners listed on the separate paper will be made of record. On the other hand, if the power of attorney does not comply with § 1.32(b) and the separate paper of § 1.32(c)(3) is not provided, then no patent practitioners will be made of record.

The Office does not encourage combined declarations and power of attorney. If such a combined format is used, however, it is recommended that the following language be inserted into the oath or declaration so that the patent practitioner will be able to take instructions from the actual client:

See Responsibilities of Practitioners Representing Clients in Proceedings Before the Patent and Trademark Office , 1091 Off. Gaz. Patent Office 26 (May 25, 1988). If the client is the company that employed the inventor, then if the company is the assignee of the entire interest of the applicant, the assignee should sign the power of attorney in the patent application, not the inventor who may no longer be employed by the assignee (company). Because an inventor who is no longer being employed by a company is unlikely to be represented by a patent practitioner who has filed a patent application on behalf of the assignee, the fact that it would be difficult to obtain the signature of the inventor on a new power of attorney is not persuasive, and a petition under § 1.183 to waive this provision of the rules is unlikely to be granted for such a reason. An inventor may be available to sign a power of attorney, but may have a divergent interest from the company. Where the company (assignee) has not chosen to intervene in the application, and the power of attorney is given by the inventor (applicant), the inventor may later revoke the original power of attorney to the patent practitioners chosen by the assignee and appoint his/her own patent attorney and change the correspondence address in the application (or patent). Such an exercise of authority by an inventor (applicant) is appropriate so long as the assignee of the entire interest of the applicant has not appointed a power of attorney, but adds unnecessary complexity to the prosecution of the application.

Where a power of attorney lists more than ten patent practitioners and the Office enters those patent practitioners listed on a separate paper provided pursuant to § 1.32(c)(3), a patent practitioner who is not recognized as the patent attorney or patent agent of record and, as a result is not entered into the Office's computer systems, is not required to request to be withdrawn, if the practitioner ceases to represent the applicant or assignee of the applicant. If such a patent practitioner files a request to withdraw, the Office will enter the paper in the patent application file, but will not process the paper, as the practitioner cannot be withdrawn because the practitioner was not made of record and was not entered into the Office's computer records.

Comment 8: One comment, while questioning the wisdom of having any limit on the number of patent practitioners who may be given a power of attorney, suggested a limit of 25, and for the Office to enter in the first 25 when more than 25 are listed in a power of attorney. Alternatively, it was suggested in two comments that a fee be required for the entry of more than 10 patent practitioners. Another comment questioned the limit contending that where an application is electronically filed, the Office does not have to enter in any lists of registration numbers, because if PrintEFS were updated, the application data sheet could be scanned and optical character recognition (OCR) be used to upload the data.

Response: A smaller number would be preferred by some, a larger by others, but the Office has decided that ten best balances the need of applicants to appoint several practitioners without using Customer Number practice and the need of the Office to avoid unnecessary work. The suggestion to adopt a fee to accept more than a set number of patent practitioners of record is noted and may be pursued in a future rule making, but the extra burden associated with entering additional names was a significant factor for not adopting the suggestions at this time.

Comment 9: Many comments disapproved of the deletion of associate power of attorney practice. The comments argued that when a new attorney takes over prosecution of a patent application from a former counsel, an associate power of attorney is useful to bridge the gap until a new power of attorney can be executed. In addition, an associate power of attorney is considered useful where a patent practitioner of record who is not in the Washington, DC, area appoints another patent practitioner within the area to assist in the prosecution for the purpose of some procedural or petition matter, but does not wish to have the practitioner made of record in all patent applications (as would happen if they used Customer Number practice, and added the practitioner to the list of practitioners associated with the Customer Number). Another comment argued that the associate power of attorney practice was desirable because of the delays in obtaining a new power of attorney, and that such delays would lead to the original attorney of record receiving correspondence for too long. Another comment suggested that the rules be amended to provide that an associate attorney's authority is not dependent upon the continued representation by the appointing principal attorney.

Response: Associate power of attorney practice has been eliminated because the practice is unnecessary in view of Customer Number practice. Customer Number practice, like an associate power of attorney, allows the list of patent practitioners to be changed easily to add an attorney without execution of a new power of attorney from the client, and therefore it is not necessary to be able to give an associate power of attorney if the power of attorney is to the practitioners associated with a Customer Number. Instead of using an associate power of attorney, if the power of attorney is to the patent practitioners associated with a Customer Number, a Request for Customer Number Data Change can be filed to add a practitioner that would have been given an associate power. In order to most effectively represent a patent applicant, a patent practitioner needs access to the private Patent Application Information Retrieval (private PAIR) system. Private PAIR enables the practitioner to obtain direct access the Office's electronic records for a patent application, including in many instances images of the papers in the patent application. In order to obtain access to these records, however, a Customer Number must be associated with the correspondence address of the application, and the registered practitioner must be associated with the Customer Number. The availability of the associate power of attorney practice to add new patent practitioners would encourage practitioners to give an associate power of attorney rather than having a new power of attorney to the practitioners associated with a Customer Number signed by the applicant or assignee of the entire interest of the applicant, even though the new power of attorney to the practitioners associated with a Customer Number would enhance their ability to represent the applicant or assignee of the entire interest of the applicant because of the access to private PAIR gained by Customer Number practice.

Using a Customer Number effectively as a client number, so that both in-house patent counsel and other patent practitioners are associated with the Customer Number, may only be appropriate for clients who file many patent applications. If the set of practitioners who are representing a client on a matter is so unique that it is not efficient to establish a Customer Number specifically for this set of practitioners, then the power of attorney would be to a list of patent practitioners and the correspondence address could be given as a Customer Number so that only those patent practitioners associated with the Customer Number for the correspondence address (a subset of those with power of attorney) would have access to private PAIR.

As to the suggestion that an associate power of attorney is necessary for the attorney to conduct an interview, e.g. , in the situation where a non-Washington, DC, firm appoints a Washington, DC, area patent practitioner to conduct an interview in a patent application, it is noted that the Washington, DC, patent practitioner does not need to be of record or have an associate power of attorney if the Washington, DC, practitioner has in their possession a copy of the application file. Even if the Washington, DC, practitioner does not have a copy of the application file, the practitioner may conduct an interview with “proper authority from the applicant or attorney or agent of record in the form of a paper on file in the application.” See MPEP § 713.05. Should an examiner object to a practitioner who is not of record conducting the interview, the practitioner is encouraged to bring a letter signed by an attorney of record, authorizing the practitioner to conduct the interview. For example, a sample of an “Authorization to Act in a Representative Capacity” is posted on the Office's Internet Web site under “Forms” at http://www.uspto.gov/web/forms/sb0084.pdf. A faxed copy of the letter would be acceptable.

Similarly, a patent practitioner does not need to be of record to file a reply to an Office action. See § 1.34, and MPEP §§ 405 and 714.01(c). Although the practitioner who is acting in a representative capacity pursuant to § 1.34 cannot sign a change of correspondence address (§ 1.33(a)(2)), a disclaimer (§ 1.321), or a request to expressly abandon a patent application (§ 1.138) (unless also filing a continuing application), he can take all other actions necessary to continue the prosecution of the application. An associate power of attorney does not put a patent practitioner in a significantly better position to represent an applicant than they could exercise by acting in a representative capacity pursuant to § 1.34. An associate power of attorney does, however, increase the workload of the Office as the Office practice was to enter the associate patent attorneys or patent agents into the Office computer records, indicate that the practitioner is an associate attorney, and then change the listing if the primary attorney ceased to have a power of attorney, or as new associates were appointed. In order to reduce the paperwork that the Office needs to process for a patent application, the Office will no longer enter associate powers of attorney into the electronic records for patent applications so as to make the associate attorney of record.

Patent practitioners with an associate power of attorney cannot directly access private PAIR, and as a result, are less able to represent a client than one with direct access to private PAIR. Private PAIR allows access to the Office's computer records for the patent application, for example to the Patent Application Locating and Monitoring (PALM) system contents, to the patent term adjustment calculations, and, if the application is maintained in the Image File Wrapper (IFW) system, to the image filed of the documents in the file history. One particularly helpful feature of private PAIR is the “View Outgoing Correspondence,” a feature that allows patent practitioners to obtain a list of applications with recently mailed correspondence, and, if the application is maintained in the IFW system, to view the documents. To have access to private PAIR for a patent application, the patent practitioner must be associated with a Customer Number that is associated with the correspondence address for the application. In addition, the patent practitioner's computer system (or his or her paralegal's computer system) must be loaded with the appropriate software. Public PAIR also allows access to much of this same information, but is only available for applications that have either published or issued as patents. If the patent practitioner merely has an associate power of attorney, the practitioner is not associated with the Customer Number, and is not able to access Private PAIR. Without access to private PAIR, a patent practitioner may not have access to the complete patent application file and cannot fully represent the client. For example, patent term adjustment calculations are available in private PAIR, but are not mailed to applicants.

Currently, the Office records both primary attorneys of record (who may not be associated with a Customer Number) as well as associate powers of attorney in the Office's PreExam computer system, so as to have a readily available list of patent practitioners of record for a particular application. Since an associate power of attorney terminates with the termination of the power of attorney to the patent practitioner who gave the associate power of attorney, associate powers of attorney require record keeping in addition to the entry of the associate powers of attorney into attorney of record fields, because the Office must take down the associate power of attorney once the primary attorney no longer has power of attorney. The suggestion to allow an associate power of attorney to remain valid even after the power of attorney to the primary attorney has been revoked, or where the primary attorney has withdrawn, has not been adopted. If an applicant or assignee desires the associate to be an attorney of record, the applicant or assignee should sign the required power of attorney.

In the situation where a practitioner is being brought in to assist with some overflow work, no appointment of an associate power of attorney is necessary before the Office is willing to accept the paper from the practitioner. Part 1 of the rules of practice do not address engagement letters between one patent practitioner and another. As a result, if the attorney of record desires the assistance of another patent practitioner, the rules of practice do not prohibit the patent practitioner from obtaining an “Associate Power of Attorney” or “Authorization of Agent” from the patent practitioner of record for their records. Furthermore, such a document would be considered a showing under § 1.34 that a person was acting in a representative capacity pursuant to § 1.34 on behalf of the applicant.

As to the delay inherent in obtaining a new power of attorney, although the original attorney will no longer be permitted to give an associate power of attorney, the original attorney can withdraw, or simply change the correspondence address to the new attorney's address.

Comment 10: One comment explained that the list of practitioners associated with a Customer Number usually only includes the partners in a firm, whereas an associate power of attorney was given to associate attorneys. The comment argued that eliminating associate power of attorney practice would hamper development of associate attorneys.

Response: The Office's computer system does not allow both a power of attorney to the practitioners associated with a Customer Number and either a list of patent practitioners (without use of a Customer Number) or another list of practitioners associated with a different Customer Number. Accordingly, the Office cannot enter a power of attorney to a Customer Number and an associate power of attorney. Furthermore, the relationship between being of record in a patent application (as would have occurred where the Office was able to enter an associate power of attorney), and being able to develop as a patent practitioner is not understood. A patent practitioner who is an associate at a firm could act in a representative capacity pursuant to § 1.34, under the direction of a practitioner of record. The inability to sign a change of correspondence address, has little to do with professional development.

Comment 11: Many comments suggested that a benefit of associate power of attorney practice is to permit someone who is not of record to conduct an interview, and that many examiners deny such an interview because the attorney is not of record, even though the Manual of Patent Examining Procedure states that such an interview is acceptable.

Response: Applicants desiring to have an attorney who is not of record and are concerned that the examiner may question the authority of the practitioner to conduct the interview should delegate to the practitioner the authority to conduct the interview by a separate letter, such as an “Authorization to Act in a Representative Capacity.” This sample template is available on the Office's Internet Web site in the listing of forms after PTO/SB/83. A faxed copy of such a letter would be acceptable, and the practitioner could bring a copy of the letter to the interview in the event that the examiner has a question about the authority of the practitioner.

Comment 12: One comment noted that having applicant execute a new power of attorney would not be unduly burdensome, but requested clarification of the effect of elimination of associate power of attorney practice upon previously filed associate powers of attorney.

Response: Previously filed associate powers of attorney remain valid, and will continue to be effective.

Comment 13: One comment noted a discomfort with the use of Customer Number practice in that if the Office transposes digits when entering the Customer Number, the correspondence goes to an entirely incorrect address.

Response: The Office is sensitive to the need to carefully check for the correct entry of Customer Numbers and is taking steps to ensure that the correct Customer Number is entered. For example, when the Office keys in a Customer Number, the address associated with the Customer Number is retrieved. This address is compared to the name of the firm or company that filed the patent application, and any street address included with the application papers, to check the accuracy of the Customer Number that is entered. Applicants can assist the Office in improving the accuracy of entry of the Customer Number by ensuring that the Customer Number is clear and legible ( e.g. , at least 12- or 14-point font and not fuzzy).

Comment 14: One comment stated that the proposal to require the exact name as registered with his or her signature was unreasonable, but noted that it was not clear that the exact name as registered was in fact being proposed to be required.

Response: The Office did intend to propose to require the exact name as registered, as this change was also included in the rule changes proposed in a recent notice of proposed rule making. See Changes To Support Implementation of the United States Patent and Trademark Office 21st Century Strategic Plan, 68 FR 53816 (Sep. 12, 2003), 1275 Off. Gaz. Pat. Office Notices (Oct. 7, 2003) (proposed rule). On reflection, the Office agrees that it is not necessary to obtain the exact name as registered to confirm the identity of the person signing the correspondence, but will instead require the typed name of the person signing the correspondence. Signatures are not always legible, and digits on registration numbers are sometimes transposed or inadvertently omitted. Accordingly, having a typed name is considered necessary.

Comment 15: As to § 1.36, one comment stated that the revocation of the power of attorney should be available to fewer than all of the inventors, or fewer than the assignee of the entire interest of the applicant.

Response: The suggestion has not been adopted. The current practice is to permit revocation by fewer than all of the applicants only if a petition under § 1.182 is filed, explaining why a split power of attorney is necessary. See MPEP § 402.10. Having more than one attorney or an attorney and an applicant required to sign all correspondence in an application often leads to the application becoming abandoned due to the difficulty in obtaining the necessary signatures. As a result, the rules have not been amended to provide for fewer than all of the applicants to be able to revoke the power of attorney without a showing of sufficient cause.

Comment 16: One comment suggested that .jpg files be added to the list of formats accepted for electronic submission of assignment documents pursuant to § 3.24 and § 3.25, arguing that this format is accepted in Trademarks.

Response: At this time it is not feasible for the Office to expand the formats that will be accepted for electronic submission of assignment documents. The format .jpg is acceptable for Trademark documents filed through Trademark Electronic Application System (TEAS), but not assignments of Trademarks filed through ETAS.

Comment 17: Two comments noted the change in practice proposed in § 3.34 would be more acceptable to applicants if the Notice of Recordation were modified to also include an Attorney Docket Number, as well as the title of the invention according to the application on filing. Alternatively, one comment suggested use of the Express Mail number as an identifier on the Notice of Recordation.

Response: The proposal to use the Express Mail number as an identifier is not adopted. The Office can process faxed or electronically filed assignment documents much quicker than those received by mail, and allowing use of an Express Mail number would promote a practice of mailing at a time when the Office is seeking to discourage mailing and encourage electronic submissions. The Office has, however, adopted the suggestion to include the title of the invention, but notes that the title that will be printed on the Notice of Recordation is the title reflected in the Office's computer records, and will not be rekeyed from the assignment. As to the attorney docket number, the suggestion has also been adopted, if the assignment is for a single property. The notice of recordation cannot reflect docket numbers if the assignment is for more than one patent or trademark.

Comment 18: Another comment stated that sometimes the wrong patent assignment document is attached to the Notice of Recordation, and having a copy of the document has been useful in the past to enable the mix-up to be addressed.

Response: The Office has made patent and trademark assignment records available over the Internet. Although the copy of a patent assignment document cannot be displayed using http://assignments.uspto.gov/assignments/q?db=pat, the assignment records on the Internet provide a mechanism to check if the patent assignment was recorded correctly.

Administrative Procedure Act: This final rule changes the rules of practice to Office procedures involving power of attorney practice and recording of assignment documents. The changes addressed in this final rule are limited to the format for and the manner of submitting, establishing and changing the power of attorney, for submitting documents to be recorded in the assignment records, and the availability of assignment records to the public. Therefore, these changes involve rules of agency practice and procedure under 5 U.S.C. 553(b)(A). See Bachow Communications Inc. v. FCC, 237 F.3d 683, 690 (DC Cir. 2001). Therefore, prior notice and opportunity for public comment were not required pursuant to 5 U.S.C. 553(b) or (c) (or any other law). Nevertheless, the Office did provide an opportunity for public comment on the changes in the notice of proposed rule making because the Office desires the benefit of public comment on the proposed changes.

Regulatory Flexibility Act: As prior notice and an opportunity for public comment were not required pursuant to 5 U.S.C. 553 (or any other law), a regulatory flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) is not required. See 5 U.S.C. 603. The changes in this final rule impose no additional fees on patent applicants.

Executive Order 13132: This rule making does not contain policies with federalism implications sufficient to warrant preparation of a Federalism Assessment under Executive Order 13132 (Aug. 4, 1999).

Executive Order 12866: This rule making has been determined to be not significant for purposes of Executive Order 12866 (Sept. 30, 1993).

Paperwork Reduction Act: This final rule involves information collection requirements which are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ). The collections of information involved in this final rule have been reviewed and previously approved by OMB under OMB control numbers 0651-0027, 0651-0032, 0651-0034, and 0651-0035. The changes in this final rule do not affect the information requirements associated with these information collections. Therefore, the Office is not submitting these information collection packages to OMB for review and approval.

The title, description and respondent description of each of the information collections are shown below with an estimate of the annual reporting burdens. Included in the estimate is the time for reviewing instructions, gathering and maintaining the data needed, and completing and reviewing the collection of information. The principal impacts of the changes in this proposed rule are to: (1) Provide for power of attorney to a Customer Number and to limit the number of attorneys who may be given a power of attorney without using a Customer Number; (2) eliminate associate power of attorney practice; (3) require attorneys acting in a representative capacity to specify their name and registration number; (4) allow access to assignment records except those relating to any pending or abandoned patent application which is preserved in confidence under § 1.14; (5) provide that assignment documents submitted for recording must be on certain sizes of paper; (6) specifically state that the assignment documents that are submitted for recording will not be returned; (7) for assignments that are submitted electronically, provide for an electronic signature; (8) require the citizenship of the parties conveying and receiving the interest on a trademark assignment cover sheet; (9) provide that a request to issue a patent to an assignee filed after issue fee payment must be accompanied by a request for a certificate of correction; and (10) change the address that would be used for mailing certain patent applications.

OMB Number: 0651-0027.

Title: Recording Assignments.

Form Numbers: PTO-1594 and PTO-1595.

Type of Review: Approved through June of 2005.

Affected Public: Individuals or households, business or other for-profit institutions, not-for-profit institutions, farms, Federal Government, and State, local, or tribal governments.

Estimated Number of Respondents: 240,345.

Estimated Time Per Response: 30 minutes.

Estimated Total Annual Burden Hours: 120,173 hours.

Needs and Uses: The Office records over 200,000 assignments or documents related to ownership of patent and trademark cases each year. The Office requires a cover sheet to expedite the processing of these documents and to ensure that they are properly recorded.

OMB Number: 0651-0032.

Title: Initial Patent Application.

Form Number: PTO/SB/01-07, PTO/SB/13PCT, PTO/SB/16-19, PTO/SB/29 and 29A, PTO/SB/101-110.

Type of Review: Approved through July of 2006.

Affected Public: Individuals or households, business or other for-profit institutions, not-for-profit institutions, farms, Federal Government, and State, local, or tribal governments.

Estimated Number of Respondents: 454,287.

Estimated Time Per Response: 22 minutes to 10 hours and 45 minutes.

Estimated Total Annual Burden Hours: 4,171,568 hours.

Needs and Uses: The purpose of this information collection is to permit the Office to determine whether an application meets the criteria set forth in the patent statute and regulations. The standard Fee Transmittal form, New Utility Patent Application Transmittal form, New Design Patent Application Transmittal form, New Plant Patent Application Transmittal form, Declaration, Provisional Application Cover Sheet, and Plant Patent Application Declaration will assist applicants in complying with the requirements of the patent statute and regulations, and will further assist the USPTO in processing and examination of the application.

OMB Number: 0651-0034.

Title: Secrecy and License to Export.

Form Numbers: None.

Type of Review: Approved through April of 2004.

Affected Public: Individuals or households, business or other for-profit institutions, not-for-profit institutions, farms, Federal Government, and State, local, or tribal governments.

Number of Respondents: 1,669.

Estimated Time Per Response: Between 30 minutes and 4 hours.

Estimated Total Annual Burden Hours: 1,310 hours.

Needs and Uses: When disclosure of an invention may be detrimental to national security, the Director of the USPTO must issue a secrecy order and withhold the publication of the application or grant of a patent for such period as the national interest requires. The USPTO is also required to grant foreign filing licenses in certain circumstances to applicants filing patent applications in foreign countries. This collection is used by the public to petition the USPTO to allow disclosure, modification, or rescission of a secrecy order, or to obtain a general or group permit. Applicants may also petition the USPTO for a foreign filing license, a retroactive license, or to change the scope of a license.

OMB Number: 0651-0035.

Title: Representative and Address Provisions.

Form Numbers: PTO/SB/80/81/82/83/122/123/124A/124B/125A/125B.

Type of Review: Approved through November of 2005.

Affected Public: Individuals or households, business or other for-profit, not for-profit institutions and Federal Government.

Estimated Number of Respondents: 355,005.

Estimated Time Per Response: 3 minutes (0.05 hours) to 1 hour 30 minutes (1.5 hours).

Estimated Total Annual Burden Hours: 30,088 hours.

Needs and Uses: Under 35 U.S.C. 2 and 37 CFR 1.31-1.36 and 1.363, this information is used to submit a request to grant or revoke power of attorney in an application or patent, to withdraw as patent attorney or patent agent of record, or to designate or change the correspondence address for one or more applications or patents, and to request or change information associated with a customer number.

Interested persons are requested to send comments regarding these information collections, including suggestions for reducing this burden, to Robert J. Spar, Director, Office of Patent Legal Administration, Commissioner for Patents, P.O. Box 1450, Alexandria, VA 22313-1450, or to the Office of Information and Regulatory Affairs, OMB, 725 17th Street, NW., Washington, DC 20503, (Attn: USPTO Desk Officer).

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

Throughout this document, “we,” “us” and “our” refer to EPA.

Table 1 lists the rules we are approving with the dates that they were adopted by the local air agencies and submitted by the California Air Resources Board (CARB).

On March 26, 1993, and December 23, 1993, the rules submitted on November 12, 1992, and November 18, 1993, respectively were found to meet the completeness criteria in 40 CFR part 51, appendix V, which must be met before formal EPA review.

There are no previous versions of these rules with the exception of FRAPCD Rule 4.8, Further Information. We approved Sutter County Air Pollution Control District (SCAPCD) Rule 4.8, Public Information and Yuba County Air Pollution Control District (YCAPCD) Rule 4.8, Further Information into the California SIP on April 12, 1982. SCAPCD and YCAPCD joined together to form the FRAPCD on September 3, 1991. FRAPCD Rule 4.8 has now been revised to include emission statement requirements.

Section 182(a)(3)(B)(i) of the CAA requires that States with areas designated as nonattainment for ozone require emission statement data from sources of volatile organic compounds or oxides of nitrogen in the nonattainment areas. This requirement applies to all ozone nonattainment areas regardless of the classification (Marginal, Moderate, etc. ). Emission statements were required to be submitted by November 15, 1993, and annually thereafter. Section 182(a)(3)(B)(ii) of the CAA allows the States and Districts to waive the requirement for emission statements for classes or categories of sources with less than 25 tons per year if the class or category is included in the base year and periodic inventories and emissions are calculated using emission factors established by EPA or other methods acceptable to EPA.

Section 110(a) of the CAA requires States to submit regulations that control volatile organic compounds and oxides of nitrogen, particulate matter, and other air pollutants which harm human health and the environment. These rules were developed as part of the local agency's program to control these pollutants and meet the requirements of sections 110 and 182 of the CAA.

These rules require owners or operators of sources which emit oxides of nitrogen (NO X ), volatile organic compounds (VOC), or reactive organic gas (ROG) to provide the Air Pollution Control Officer (APCO) and CARB with a statement showing actual emissions of NO X , VOC, and ROG annually. The statement must contain a certification by a responsible official of the company that the information contained in the statement is accurate. The statement must contain the same information required in CARB's Emission Inventory Turn Around Document. The CARB's Emission Inventory Turn Around Document complies with the suggested contents of an emission statement found in EPA's draft Guidance on the Implementation of an Emission Statement Program. In combination with the other requirements, these rules must be enforceable ( see section 110(a) of the Act) and must not relax existing requirements ( see sections 110(l) and 193). EPA policy that we used to help evaluate enforceability requirements consistently includes the Bluebook (“Issues Relating to VOC Regulation Cutpoints, Deficiencies, and Deviations,” EPA, May 25, 1988) and the Little Bluebook (“Guidance Document for Correcting Common VOC & Other Rule Deficiencies,” EPA Region 9, August 21, 2001).

We believe these rules are consistent with the relevant policy and guidance regarding enforceability and SIP relaxations. The TSDs have more information on our evaluation.

The TSDs recommend that the CARB's most current emission inventory document, the “California Emission Inventory and Development And Reporting System II (CEIDARSII),” be referenced in the rules the next time the local agencies modify their rules.

As authorized in section 110(k)(3) of the Act, EPA is fully approving the submitted rules because we believe they fulfill all relevant requirements. We do not think anyone will object to this approval, so we are finalizing it without proposing it in advance. However, in the Proposed Rules section of this Federal Register , we are simultaneously proposing approval of the same submitted rules. If we receive adverse comments by June 25, 2004, we will publish a timely withdrawal in the Federal Register to notify the public that the direct final approval will not take effect and we will address the comments in a subsequent final action based on the proposal. If we do not receive timely adverse comments, the direct final approval will be effective without further notice on July 26, 2004. This will incorporate these rules into the federally enforceable SIP.

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

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

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

The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by July 26, 2004. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. ( See section 307(b)(2).)

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), e.g., agricultural workers; greenhouse, nursery, and floriculture workers; farmers.

• Animal production (NAICS 112), e.g., cattle ranchers and farmers, dairy cattle farmers, livestock farmers.

• Food manufacturing (NAICS 311), e.g., agricultural workers; farmers; greenhouse, nursery, and floriculture workers; ranchers; pesticide applicators.

• Pesticide manufacturing (NAICS 32532), e.g., agricultural workers; commercial applicators; farmers; greenhouse, nursery, and floriculture workers; residential users.

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 .

In addition to using EDOCKET ( http://www.epa.gov/edocket/ ), 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 E-CFR Beta Site Two at http://www.gpoaccess.gov/ecfr/ .

In the Federal Registers of June 9, 1999 (64 FR 30997) (FRL-6082-6), and June 30, 2000 (65 FR 40632) (FRL-6592-6), EPA issued notices pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 9E5060) by Aventis CropScience, formerly AgrEvo USA, now doing business as Bayer CropScience, P.O. Box 12014, 2 T.W. Alexander Drive, Research Triangle Park, NC 27709. That notice included a summary of the petition prepared by the petitioner.

The petition requested that 40 CFR 180.570 be amended by establishing tolerances for the combined residues of the herbicide safener isoxadifen-ethyl, (ethyl 5,5-diphenyl-2-isoxazoline-3-carboxylate) (CAS No. 163520-33-0) and its metabolites: 4,5-dihydro-5,5-diphenyl-3-isoxazolecarboxylic acid and β-hydroxy-β-benezenepropanenitrile, in or on the following rice commodities: rice, grain; rice, straw; rice hulls; and rice bran at 0.10, 0.25, 0.50, and 0.80 parts per million (ppm), respectively. There were no comments received in response to the notice of filing.

In the Federal Register of June 21, 2001 (66 FR 33179) (FRL-6786-1), EPA established time-limited tolerances (expiring June 21, 2004) for isoxadifen-ethyl in or on rice commodities. Submission of the following data was required: Confined/field accumulation in rotational crops study; rice processed commodity study; successful petition method validation of the analytical enforcement method; and adequate storage stability data.

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 a tolerance for combined residues of isoxadifen-ethyl (CAS No. 163520-33-0) and its metabolites: 4,5-dihydro-5,5-diphenyl-3-isoxazolecarboxylic acid and β-hydroxy-β-benezenepropanenitrile on rice commodities. EPA's assessment of exposures and risks associated with establishing the tolerance 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 isoxadifen ethyl as well as the no observed adverse effect level (NOAEL) and the lowest observed adverse effect level (LOAEL) from the toxicity studies reviewed by the Agency are discussed in the Federal Register of June 21, 2001 (66 FR 33179) (FRL-6786-1). At that time the Agency considered the toxicity database to be complete. No additional toxicity studies have been submitted by the petitioner.

The dose at which 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 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.

A summary of the toxicological endpoints for isoxadifen-ethyl used for human risk assessment is shown in Table 1. of this unit:

1. Dietary exposure from food and feed uses . Permanent tolerances on corn commodities and time-limited tolerances on rice commodities are established (40 CFR 180.570) for the combined residues of isoxadifen-ethyl. The time-limited tolerances will expire on June 21, 2004. To convert these time-limited tolerances to permanent tolerances, risk assessments were conducted by EPA to assess dietary exposures from isoxadifen-ethyl.

At this time there is a time-limited tolerance for rice, bran at 0.80 ppm. The Agency's review of residue chemistry data indicated that residues of isoxadifen-ethyl do not concentrate in rice, bran. Therefore, the rice, grain tolerance will cover this processed commodity. The existing time-limited tolerance for rice, bran is therefore not needed and will be removed. Hence, a permanent tolerance for rice, bran is not established in this final rule.

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 U.S. Department of Agriculture (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: Tolerance level residues, 100% crop treated and DEEM (version 7.76) default concentration factors for all commodities. No anticipated residues were used.

The Agency estimated the acute dietary food exposure for females (ages 13-49 years old) to be 0.000511 mg/kg/day. The Agency's LOC for acute dietary risk is greater than 100% of the aPAD. When compared to the aPAD of 0.15 mg/kg/day for isoxadifen-ethyl, the dietary risk is less than 1.0% of the aPAD and therefore less than the Agency's LOC.

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: Tolerance level residues, 100% crop treated and DEEM (version 7.76) default processing factors. No anticipated residues were used. The chronic dietary exposure estimates were all less than or equal to 1.5% of the cPAD for all population subgroups and are therefore less than the LOC (greater than 100% of the cPAD). The chronic dietary exposure estimates for representative population subgroups are presented below in Table 2:

iii. Cancer . After consideration of the Agency's “Proposed Guidelines for Carcinogen Risk Assessment (April 10, 1996),” EPA has classified isoxadifen-ethyl as “not likely to be a human carcinogen.” This classification is based on the lack of evidence of carcinogenicity in mice and rats. Therefore, a cancer risk analysis is not necessary.

2. Dietary exposure from drinking water . The Agency lacks sufficient monitoring exposure data to complete a comprehensive dietary exposure analysis and risk assessment for isoxadifen-ethyl 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 isoxadifen-ethyl.

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 incorporates 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 LOCs.

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, used to quantify drinking water exposure and risk as a %RfD or %PAD. Instead drinking water levels of comparison (DWLOC) 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 isoxadifen-ethyl, they are further discussed in the aggregate risk sections in Unit III.E.

Based on the GENEEC, FQPA Index Reservoir Screening Tool (FIRST) and SCI-GROW models, the EECs of isoxadifen-ethyl for acute exposures are estimated to be 80 parts per billion (ppb) for surface water and 5 ppb for ground water. The EECs for chronic exposures are estimated to be 40 ppb for surface water and 5 ppb for ground water.

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). The petitioner has requested to use isoxadifen-ethyl on turf, which could result in residential exposures.

The proposed turf use is intended for professional application to Bermudagrass on golf courses, sod farms, residential and commercial site lawns, parks, recreational facilities, and similar sites. It is not intended for use by homeowners or other non-professional applications. Therefore, residential mixer/loader and applicator exposures are not anticipated. The following short-term post-application residential exposures are anticipated: Adult (dermal - golf course and residential lawn), children (dermal - residential lawn), and toddler (dermal and incidental oral - residential lawn). However, dermal exposures for golfers are considered to be less than those resulting from a residential turf application, and were therefore not assessed.

Hand to mouth (HTM), object to mouth (OTM), and soil hand to mouth short-term incidental oral exposures may occur as a result of the proposed turf use. However, the soil hand to mouth exposure is considered to be very small in comparison to the other exposures. MOEs were estimated to be 790 (for a 15 kg child) and 1,500 (for an adult). MOEs greater than 100 are not of concern.

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.”

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 isoxadifen-ethyl and any other substances and isoxadifen-ethyl 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 isoxadifen-ethyl 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 Office of Pesticide Programs 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 . A summary of the developmental toxicity studies for isoxadifen-ethyl which have been reviewed and evaluated by the Agency published in the Federal Register of June 21, 2001 (66 FR 33179) (FRL-6786-1).

3. Conclusion . Based on the following considerations, the Agency concluded that the special FQPA safety factor is reduced to 1X.

• No neurotoxicity studies are available. However, no clinical signs of neurotoxicity were observed in the available toxicity studies conducted with isoxadifen-ethyl in rats, rabbits, or dogs, other than those neurotoxic clinical signs associated with agonal toxicity in these species.

• There was no evidence of enhanced susceptibility in the rabbit developmental study or the 2-generation rat reproduction study.

• In the developmental rat study, quantitative susceptibility was evidenced as increased fetal incidences of bent scapula at (120 mg/kg/day) a dose lower than that evoking maternal toxicity (mortality, reduced body weights, body weight gains, and food consumption at 1,000 mg/kg/day). The overall toxicity profile and the doses and endpoints selected for risk assessment for isoxadifen-ethyl, characterize the degree of concern for the effects observed in this study as low. There is a clear NOAEL and well-characterized dose response for the developmental effects observed. No residual uncertainties were identified. The NOAEL for developmental effects in this study (15 mg/kg/day) is used as the basis for the aRfD for the females 13-50 population subgroup. For all other toxicity endpoints established for isoxadifen-ethyl, a NOAEL lower than this developmental NOAEL is used.

• The residue chemistry and environmental fate databases are complete.

• The acute and chronic dietary food exposure assessments assumed tolerance level residues and 100% crop treated for all crops. Therefore dietary exposures/risks are unlikely to be underestimated.

• The drinking water assessment utilizes water concentration values generated by models and associated modeling parameters which are designed to provide conservative, health protective, high-end estimates of drinking water concentrations.

• The residential assessment is considered a Tier I assessment. Therefore residential exposures/risks are unlikely to be underestimated.

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 chronic water exposure (mg/kg/day) = cPAD - (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. For isoxadifen-ethyl DWLOCs are calculated for: Acute, short-term, and chronic scenarios.

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 previously discussed in this unit for acute exposure, the acute dietary exposure from food to isoxadifen-ethyl will occupy < 1.0% of the aPAD for females ages 13 and 50 years old. In addition, there is potential for acute dietary exposure to isoxadifen-ethyl in drinking water. The DWLOC is much greater than the EECs. Therefore, EPA does not expect acute aggregate exposure to exceed 100% of the aPAD, as shown in Table 3 of this unit:

2. Chronic risk . Using the chronic dietary exposure analysis discussed previously, EPA has concluded that exposure to isoxadifen-ethyl from food will utilize < 1.0% of the cPAD for the U.S. population, 1.0% of the cPAD for all infants ( < 1 year old), and 1.5% of the cPAD for children 3-5 years old. Based on the use pattern, chronic residential exposure to residues of isoxadifen-ethyl is not expected. But, there is potential for chronic dietary exposure to isoxadifen-ethyl in drinking water. For each population subgroup, the DWLOC is much greater than the estimated EEC. Therefore, EPA does not expect the aggregate exposure to exceed 100% of the cPAD. Thus, there is no concern for chronic aggregate exposure to isoxadifen-ethyl, as shown in Table 4. below:

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). Isoxadifen-ethyl is proposed for a use that could result in short-term residential exposure, and the Agency has determined that it is appropriate to aggregate chronic food and water, and short-term exposures for isoxadifen-ethyl.

Using the exposure assumptions described in this unit for short-term exposures, EPA has concluded that aggregated food and residential exposures result in the following aggregate MOEs: U.S. population (1,450), all infants < 1 year old (780), children 1-2 years old (776), children 3-5 years old (774), children 6-12 years old (779), youth 13-19 years old (1,438), adults 20-49 years old (1,455), adults 50+ years old (1,468) and females 13-49 years old (1,456). These aggregate MOEs do not exceed the Agency's LOC ( < 100) for aggregate exposure to food and residential uses. In addition, short-term DWLOCs were calculated and compared to the chronic EECs of isoxadifen-ethyl in ground water and surface water. DWLOCs were calculated and then compared to the EECs for surface water and ground water. All DWLOCs are greater than the EECs. Therefore, EPA does not expect short-term aggregate exposure to exceed the Agency's LOC, as shown in Table 5 below:

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 code 111)

• Animal production (NAICS code 112)

• Food manufacturing (NAICS code 311)

• Pesticide manufacturing (NAICS code 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 .

In addition to using EDOCKET (http://www.epa.gov/edocket/) , 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 E-CFR Beta Site Two at http://www.gpoaccess.gov/ecfr/ .

In the Federal Register of March 12, 2003 (68 FR 11843) (FRL-7295-3), EPA issued a notice pursuant to section 408 of the FFDCA, 21 U.S.C. 346a, as amended by the FQPA (Public Law 104-170), announcing the filing of a pesticide petition (3E6549) by Holliday Pigments Limited, Morley Street, Hull, East Yorkshire, England, HU88DN. That notice included a summary of the petition prepared by the petitioner.

The petition requested that 40 CFR part 180 be amended by establishing an exemption from the requirement of a tolerance for residues of ultramarine blue, which is also known as C.I. Pigment Blue 29 (CAS Reg. No. 57455-37-5). There were no comments received in response to the notice of filing.

In incorporating IBFS into the Code of Federal Regulations, applicants now have assurance in the viability of their online filings through IBFS.

Applicants may voluntarily file the following applications through IBFS.

• International Accounting Rate Change Filings.

• Submarine Cable Landing License Applications.

• Requests for Assignment of Data Network Identification Codes

• Foreign Carrier Affiliation Notification Filings.

• International Section 214 Applications.

• International Section 214 Special Temporary Authority.

• International Signaling Point Code Filings.

• Recognized Operating Agency Filings.

• Renewal of Radio License in Specific Services (except as noted in paragraph 6).

• Space and Earth Station Applications (except as noted in paragraph 6).

Applicants are required to file the following applications electronically through IBFS.

• Space Station Applications except for Digital Broadcast Service (DBS) and Digital Audio Radio Service (DARS).

• Earth Station Applications to Access a Non-U.S. Satellite Not Currently Authorized to Provide the Proposed Service in the Proposed Frequencies in the United States.

• Routine Earth Station Applications.

The International Bureau wrote the new and amended rules in plain language pursuant to Executive Order 12866.

On December 15, 2003, RSPA/OPS published a final rule (68 FR 69778) that requires operators of gas transmission pipelines to develop and implement a comprehensive integrity management program for pipeline segments located in areas where a failure would have the greatest impact to the public or property. On April 6, 2004, RSPA/OPS published a correction rule that made editorial and typographical corrections to the final rule and addressed a petition for reconsideration filed by the Interstate Natural Gas Association of America.

The April 6, 2004, correction rule contained errors. This correction document corrects those errors and corrects additional errors identified in the December 15, 2003, final rule.

In the April 6, 2004, correction rule, RSPA/OPS amended the definition of “high consequence areas” by clarifying that an operator using Method (1) to identify these areas would have to calculate and evaluate potential impact circles on any transmission line in a Class 1 or Class 2 location. RSPA/OPS removed the phrase “outside a Class 3 or Class 4 location” to clarify that an operator does not have to evaluate segments that have already been classified as “high consequence areas.” However, RSPA/OPS erroneously used the term “potential impact radius” in paragraph (1)(iv) instead of the term “potential impact circle.” In this correction rule, RSPA/OPS is replacing the word “radius” with “circle.”

Section 192.925 sets forth the requirements for external corrosion direct assessment. This was change number 9 in the April 6, 2004 correction rule. In that document, RSPA/OPS revised the introductory text in paragraph (b) to clarify what an operator is required to do if the External Corrosion Direct Assessment detects pipeline coating damage. RSPA/OPS has since become aware that the Federal Register read this instruction as revising paragraph (b) and as deleting the further requirements in subparagraphs (b)(1) through (b)(4). RSPA/OPS did not intend for the revision to delete these requirements. This correction rule adds back to the final rule the missing requirements of paragraphs (b)(1) through (b)(4). This correction rule presents § 192.925(b) in its entirety, with the revised language in the introductory paragraph.

In the April 6, 2004, correction rule, we revised paragraph (d) of § 192.935 to include requirements for additional preventive and mitigative measures for a pipeline operating below 30% SMYS located in a Class 3 or Class 4 area. In the requirements, we referenced the reassessment requirements of §§ 192.941(b) and 192.941(c). RSPA/OPS did not mean to add these references as they only add confusion to the final rule. In this correction rule, RSPA/OPS is removing the references to the reassessment requirements of §§ 192.941(b) and 192.941(c) to avoid further confusion.

Section I of Appendix E provides additional guidance on determining a high consequence area. The second sentence in this section erroneously states that an operator must use method (a) or (b) from the definition in § 192.903 to identify a “high consequence area.” The sentence is now corrected to state that an operator must use method (1) or (2) from the definition in § 192.903 to identify a “high consequence area.”

The regulations at 50 CFR 660.323(a) (3) and (4) establish separate allocations for the catcher/processor, mothership, and shore-based sectors of the whiting fishery. For 2004, the 215,500 mt commercial OY for whiting is divided with the catcher/processor sector receiving 73,270 mt (34 percent); the mothership sector receiving 51,720 mt (24 percent); and the shore-based sector receiving 90,510 mt (42 percent). The regulations further divide the shore-based allocation so that no more than 5 percent (4,526 mt) of the shore-based allocation may be taken in waters off the State of California before the primary season begins north of 42° N. lat.

The primary season for the shore-based sector is the period(s) when the large-scale target fishery is conducted, and when “per trip” limits are not in effect. Because whiting migrate from south to north during the fishing year, the shore-based primary season begins earlier south of 42° N. lat. than north. For 2004, the primary season for the shore-based sector between 42°-40°30' N. lat. began on April 1; south of 40°30' N. lat. the primary season began on April 15; and the fishery north of 42° N. lat. is scheduled to begin June 15.

Because the 4,526-mt allocation for the early season fishery off California is estimated to be reached, NMFS is announcing the closure of the primary whiting season south of 42° N. lat. The 20,000-lb (9,072-kg) trip limit that was in place before the start of the southern primary season is being reinstated and will remain in effect until the primary season north of 42° N. lat. opens on June 15. A trip limit of 10,000 lb (4,536 kg) of whiting is in effect year-round (unless landings of whiting are prohibited) for vessels that fish in the Eureka area shoreward of the 100-fm (183-m) contour at any time during a fishing trip. This smaller limit is intended to minimize incidental catch of chinook salmon which are more likely to be caught shallower than 100 fm (183 m) in the Eureka area.

The best available information on May 20, 2004, indicates that 3,999 mt of whiting have been taken by the shore-based fishery south of 42° N. lat. through May, 16, 2004 and that the 4,526 mt allocation is projected to be taken by noon May 22, 2004. Therefore, the 20,000-lb (9,072-kg) per-trip limits announced in the 2004 specifications and management measures (69 FR 11064, March 9, 2004 as amended at 69 FR 23667, April 30, 2004) will resume until the primary season begins north of 42° N. lat.

For the reasons stated above, and in accordance with the regulations at 50 CFR 660.323 (a)(4)(i)(B) and (a)(4)(iii)(D), NMFS revises paragraph B. of Section IV. of the 2004 harvest specification and management measures (69 FR 11064, March 9, 2004, as amended at 69 FR 23667 (April 30, 2004), by adding a new paragraph.

IV. NMFS Actions

B. * * *

(3) * * *

(b) * * *

(iv) Closure of shore-based sector south of 42° N. lat. Effective noon May 22, 2004, to 0001 hours June 15, 2004 l.t. the primary whiting season south of 42° N. lat is closed. Landing and frequency limits imposed under paragraph (b) of this section are in effect until the primary whiting season reopens on June 15, 2004.

This action is authorized by the regulations implementing the FMP. The determination to take these actions is based on the most recent data available. The aggregate data upon which the determinations are based are available for public inspection at the office of the Regional Administrator (see ADDRESSES ) during business hours.

The Assistant Administrator for Fisheries, NOAA, (AA) finds good cause to waive the requirement to provide prior notice and opportunity for comment on this action pursuant to 5 U.S.C. 553 (b)(B), because providing prior notice and opportunity would be impracticable and contrary to the public interest. It would be impracticable and contrary to the pubic interest because if this closure were delayed in order to provide prior notice and opportunity for public comment, the fishery would exceed the early season sector allocation for whiting south of 42° N. lat. Similarly, the AA finds good cause to waive the 30-day delay in effectiveness requirement of 5 U.S.C. 553 (d)(3) as such a delay would cause the fishery south of 42° S. lat. to exceed its allocation. Allowing the early season fishery to continue would result in a disproportionate shift in effort which could result in greater impacts on Endangered Species Act listed chinook salmon and overfished groundfish species that had been considered when the 2004 Pacific Coast groundfish harvest specifications were established. This action is taken under the authority of 50 CFR 660.323(a)(4)(i)(B) and (a)(4)(iii)(D), and is exempt from review under Executive Order 12866.