This final rule was determined to be significant, although not economically significant, and was reviewed by the Office of Management and Budget (OMB) in conformance with Executive Order 12866.

The FSP is listed in the Catalog of Federal Domestic Assistance under No. 10.551. For the reasons set forth in the final rule in 7 CFR part 3105, subpart V and related Notice (48 FR 29115, June 24, 1983), the FSP is excluded from the scope of Executive Order 12372. This Executive Order requires intergovernmental consultation with State and local officials regarding Federal financial assistance and direct Federal development. The Food Stamp Program is excluded because it is an entitlement program and benefits are provided directly to individuals.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This final rule is intended to have preemptive effect with respect to any State or local laws, regulations, or policies that conflict with its provisions or that would otherwise impede its full implementation. This final rule is not intended to have retroactive effect unless so specified in the “Dates” paragraph of this rule. Prior to any judicial challenge to the provisions of this rule or the application of its provisions, all applicable administrative procedures must be exhausted.

This rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Eric M. Bost, Under Secretary for Food, Nutrition, and Consumer Services, has certified that this rule will not have a significant economic impact on a substantial number of small entities. The changes will affect State and local agencies that administer the FSP, to the extent that they must implement the provisions described in this action.

Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L. 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of UMRA, the Department generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, or tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of UMRA generally requires the Department to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective or least burdensome alternative that achieves the objectives of the rule.

This rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) that impose costs on State, local, or tribal governments or to the private sector of $100 million or more in any one year. Thus, this rule is not subject to the requirements of section 202 and 205 of UMRA.

This final rule is needed to implement the provisions of Section 4120 of the FSRIA that authorized FNS to establish performance measures relating to actions taken to correct errors, reduce rates of error, improve the eligibility determinations and other indicators of effective administration; measure States’ performance against these performance measures; and award performance bonus payments totaling $48 million for each fiscal year to State agencies that show high or improved performance relating to the performance measures.

State agencies will benefit from the provisions of this rule because they have the potential to be awarded bonuses for high or improved performance in administering the FSP.

Recipients will benefit from the provisions of this rule because, as the State agencies seek to improve their performance in determining eligibility, issuing benefits, and attracting and retaining participants, their actions will positively affect applicants and participants.

The cost of implementing these provisions is $48 million each fiscal year, or $240 million over 5 years.

Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have “federalism implications,” agencies are directed to provide a statement for inclusion in the preamble to the regulation describing the agency's considerations in terms of the three categories called for under section (6)(b)(2)(B) of Executive Order 13132.

Prior to drafting the NPRM, FNS received input from State and local agencies. Since the FSP is a State administered, Federally funded program, our national headquarters staff and regional offices have formal and informal discussions with State and local officials on an ongoing basis regarding FSP implementation and policy issues. This arrangement allows State and local agencies to provide feedback that forms the basis for any discretionary decisions made in this and other FSP rules. In addition, FNS solicited ideas at various State, regional, national, and professional conferences. FNS also consulted with State government representatives and our partners in the anti-hunger arena through meetings with such entities as the National Conference of State Legislators (NCSL), the National Governors Association (NGA), and the American Public Human Services Association (APHSA). Finally, we solicited comments on these amendments through the rulemaking process. The comment period for the NPRM opened on December 17, 2003 and closed on February 17, 2004. FNS received comments from 14 State or local agencies that administer the FSP, 3 interest groups, one university and one individual.

Results of the consultations that were held prior to the publication of the NPRM were discussed in the preamble of that rule and therefore will not be discussed here. The comments that FNS received in response to the NPRM are discussed at length later in this preamble.

FNS considered comments on the NPRM prior to publishing this final rule. Our responses to these comments are discussed at length later in this preamble.

FNS has reviewed this final rule in accordance with the Department Regulation 4300-4, “Civil Rights Impact Analysis,” to identify and address any major civil rights impacts the rule might have on minorities, women, and persons with disabilities. After a careful review of the rule's intent and provisions, and the characteristics of food stamp households and individual participants, FNS has determined that there is no adverse effect on any of the protected classes. The rulemaking is directed at State agencies and not applicants or recipients. If there were a trickle down effect on applicants or recipients, it would more than likely be positive and affect all applicants and recipients as this rulemaking includes incentives for State agencies to improve the eligibility determination and certification systems.

FNS has no discretion in implementing the law, which was effective upon enactment of the FSRIA on May 13, 2002. However, FNS does have discretion regarding the performance measures on which to base the awards. As discussed above, these performance measures are directed at State agencies. To the extent States act on these incentives, customer service and payment accuracy may improve. Therefore, FNS anticipates no adverse impact on any of the individuals eligible for food stamps and no disproportionate impact on any protected class.

In general, all data available to FNS indicate that protected individuals have the same opportunity to participate in the FSP as non-protected individuals. FNS specifically prohibits the State and local government agencies that administer the FSP from engaging in actions that discriminate based on race, color, national origin, gender, age, disability, marital or family status (FSP nondiscrimination policy can be found at 7 CFR 272.6(a)). Where State agencies have options, and they choose to implement a certain provision, they must implement it in such a way that it complies with the regulations at 7 CFR 272.6.

The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 1320) requires that the Office of Management and Budget (OMB) approve all collections of information by a Federal agency before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a current valid OMB control number. There are no revisions to information collections identified in this rule. This rule contains information collections that have been previously approved by OMB. The burden for the Quality Control Negative Case Action Review Schedule (FNS-245) is approved under OMB #0584-0034. The Quality Control Review Schedule (FNS-380-1) is approved under OMB #0584-0299. The Integrated Quality Control Review Worksheet (FNS-380) is approved under OMB #0584-0074. The State Coupon Issuance and Participation Estimates (FNS-388) is approved under OMB #0584-0081.

FNS is committed to compliance with the GPEA, which requires Government agencies, in general, to provide the public the option of submitting information or transacting business electronically to the maximum extent possible.

Section 16(a) of the Food Stamp Act of 1977 (the Act), 7 U.S.C. 2025(a), establishes the base administrative cost-sharing rate between the Federal Government and States at 50 percent. That is, pursuant to Section 16(a), FNS will typically reimburse half a State's costs incurred in administering the FSP. The Act, prior to enactment of the FSRIA, provided that a State agency would receive enhanced funding if it had a payment error rate less than or equal to 5.9 percent and a negative case error rate less than the national weighted mean negative case error rate for the previous year. State agencies and advocate groups expressed concerns that this incentive was too narrowly focused on payment accuracy and should be modified to also reward States for efficient management of the FSP in other areas.

On May 13, 2002, the enactment of FSRIA re-designed the quality control (QC) system, replacing enhanced funding with bonuses for States with high or most improved performance in administering the FSP, while significantly reducing liabilities assessed against States with poor accuracy outcomes.

On December 17, 2003, FNS published the NPRM titled “Food Stamp Program High Performance Bonuses” (68 FR 70193) which proposed to implement the FSRIA high performance bonus provisions. Elimination of enhanced funding and changes in the liability system will be dealt with in a separate rulemaking.

Section 4120 of the FSRIA (Pub. L. 107-171) amended Section 16 of the Act (7 U.S.C. 2025) to authorize FNS to: establish performance measures relating to actions taken to correct errors, reduce rates of error, improve eligibility determinations, and other indicators of effective administration; measure States' performance against these performance measures; and award performance bonus payments totaling $48 million for each fiscal year to State agencies that show high or most improved performance relating to the performance measures. Section 16(d)(2) of the Act (7 U.S.C. 2025 (d)(3)) provides that FNS must establish the performance measures through guidance for FY 2003 and FY 2004 and by regulation for FY 2005 and beyond. Section 16(d)(3) (7 U.S.C. 2025(d)(3)) prohibits a State from being eligible for a performance bonus payment any fiscal year for which it has a liability amount established. Section 16(d)(4) (7 U.S.C. 2025(d)(4)) provides that the amount of the bonus payment and whether or not to award such bonus payment is not subject to administrative or judicial review. Pursuant to Section 16(d)(2)(B)(ii) of the amended Act (7 U.S.C. 2025 (d)(2)(B)(ii)), FNS is to award the bonus payments in the fiscal year following the fiscal year of performance.

The NPRM proposed to establish a new section 7 CFR 275.24, High Performance Bonuses. Section 275.24 (a)(1) through (a)(7) of the proposal set forth the general guidelines for the high performance bonuses. We received several comments on these provisions. FNS will address each provision and the comments received individually.

In the NPRM, section 275.24(a)(1) proposed that FNS would award bonuses totaling $48 million for each fiscal year to State agencies that show high or most improved performance. Section 275.24(b) proposed to make awards to 30 States in 7 categories: the lowest and most improved combined payment error rates ($24 million); the lowest and most improved negative error rates ($6 million); the highest and most improved participant access rates (PAR) ($12 million); and the best application processing timeliness rate ($6 million). It proposed that 50 percent, or $24 million, of the award money be allocated to payment accuracy based upon States' error rates, the sole criterion used under the previous enhanced funding.

One commenter generally disagreed with dividing the bonuses among a limited number of States. The commenter claimed that such a distribution was a disincentive because States could maintain a low error rate year after year and yet never qualify for a bonus. This commenter suggested that every State that strives to reach and maintain an acceptable performance level should receive a bonus. FNS does not believe that providing bonus funds to all States that attempt to maintain a certain level of error meets the intent of the legislation or that such an approach would be as effective as the proposed process.

One commenter suggested FNS use a composite ranking to determine the best overall State and make awards based on that ranking. FNS held many discussions with various stakeholders prior to drafting the NPRM. It was clear from these meetings that several individual performance measures were preferable over a composite measure. Because many stakeholders specifically mentioned this in those discussions, and because FNS received no other comments to this affect on the NPRM, FNS has decided to retain the structure of providing the awards based on individual performance measures.

Five commenters expressed dissatisfaction with the way FNS proposed to divide the money among the categories. Four of these commenters expressed concern that too much money had been allocated towards payment accuracy. One commenter argued that, while program integrity is important, there are other indicators of successful FSP administration that should be recognized and rewarded equally. This commenter recommended allocating more money towards rewarding States with high and improved PAR. Another commenter argued that the FSRIA intended to move away from a system that measured FSP performance solely via payment accuracy. This same commenter pointed out that while the FSRIA modified the quality control sanction system, the system remains in place and, due to the national average feature, a number of States would continue to be sanctioned every year. Therefore, this commenter found it inappropriate that FNS should emphasize payment accuracy in the high performance bonus system as well. This commenter recommended a more balanced division of the bonus money—awarding the majority to customer service measures. A third commenter argued that the QC system already imposes severe fiscal penalties on States that do not perform within acceptable standards. In addition, States are given incentives to focus on program integrity by keeping a share of the recipient claims they collect. This commenter argued that the purpose of the high performance bonus system was to provide a balance to the system. This commenter recommended that the best way to do this would be to allocate 70 percent of the $48 million to client service/access measures. A fourth commenter urged FNS to consider apportioning a larger share of the $48 million towards the customer service measures thus buttressing an emphasis on improving access.

One commenter suggested that FNS allocate even more towards payment accuracy—$30 million. This suggestion was not based on the importance of payment accuracy, but on the belief that less should be allocated for the PAR due to inaccurate data.

FNS maintains its conviction that allocating fifty percent of the total amount towards payment accuracy is appropriate. FNS is aware that the FSRIA intended to move away from awarding States solely on the merits of error rates. The last year of enhanced funding, FNS paid out more than $77 million in bonuses based on States' error rates. Therefore, allocating $24 million in performance bonuses based on payment accuracy is a significant reduction in money awarded to States based on error rates. At the same time, FNS believes it is important to allocate this amount to payment accuracy as it continues to be one of the Agency's highest priorities and of critical importance to Congress and the taxpayer. In addition, it is an established index that measures outcomes that are influenced by many aspects of FSP management, such as policies, training and customer service. FNS believes allocating more than $24 million towards payment accuracy would be excessive, as the other measurements are also significant. Therefore, FNS is retaining this provision to allocate $24 million towards payment accuracy.

Section 275.24(a)(2) proposed awarding the bonuses no later than September 30th of the fiscal year following the performance measurement year. FNS received no comments on this specific provision. However, FNS did receive comments on how it relates to awarding the bonus for the best and most improved PAR. These comments will be discussed later in the preamble. This provision is statutorily mandated (7 U.S.C. 2025(d)(2)(B)(ii)) and, therefore, we are adopting the proposed regulatory modification as final with no changes.

Section 275.24(a)(3) proposed that a State agency would not be eligible for a bonus payment in any fiscal year for which it has a liability amount established. FNS received three comments opposing this provision. One commenter argued that this provision penalizes States that have made the greatest strides in addressing problem areas. This commenter suggested that, if a State against which a liability has been established wins an award, FNS should use the award to offset any liabilities. This commenter stressed that this would not only recognize improvement but serve as an incentive as well. Another commenter argued that awards for improvement should not be tied to a liability payment because improvement should be rewarded regardless of the national standard for payment accuracy. This commenter urged FNS to consider a legislative change. This commenter believes high achievement in customer service should be rewarded regardless of a State's payment accuracy rate. One commenter plans to seek a legislative change which would allow FNS to award bonuses to States even if they have been assessed a liability.

At this point in time, FNS is unable to modify this provision due to the statutory mandate of 7 U.S.C. 2025(d)(3). Therefore, FNS is adopting this provision as final with no changes.

FNS received one comment suggesting we modify the regulatory language to clarify that the only kind of liability that may render a State ineligible for a bonus is a penalty for an excessive QC payment error rate in the same year for which enhanced funding might otherwise be awarded. This commenter suggested that we articulate that this does not include leftover QC penalties due to a failed reinvestment plan or penalties for other deficiencies in FSP operations. This same commenter noted that the proposed rule does not clearly state that if a State is disqualified from receiving a bonus payment due to a QC penalty, the State with the next best performance will win the performance bonus just as if the disqualified State were a poor performer.

FNS agrees with this commenter and, therefore, is modifying the regulatory language at § 275.24(a)(3) to provide that a State agency is not eligible for a bonus payment in any fiscal year for which it has a liability amount established as a result of an excessive payment error rate in the same year. If a State is disqualified from receiving a bonus payment and the State is not tied for a bonus, the State with the next best performance will be awarded a bonus payment.

Section 275.24(a)(4) proposed that the determination whether, and in what amount, to award a performance bonus payment is not subject to administrative or judicial review. FNS received no comments on this provision. This provision is statutorily mandated by 7 U.S.C. 2025(d)(4) and, therefore, FNS is adopting it as final.

Section 275.24(a)(5) proposed that FNS divide the award money among the States in each category in proportion to the size of their caseloads (the average number of households per month for the fiscal year for which performance is measured). FNS received four comments on this provision, each arguing that this method is unfair to small States with small caseloads. Each of these commenters suggested that FNS establish a base amount for each award and then divide the remainder according to caseload size. This method, they argue, would provide more of an incentive for smaller States. Suggestions for the amount of the base award differed among commenters, from $150,000 in general to $1 million specifically in the payment accuracy category.

FNS recognizes that the proposed system is somewhat biased against smaller States, especially if a State with a small caseload wins in the same category as a State with a large caseload. Therefore, FNS is modifying the regulatory language at § 275.24(a)(5) to provide that FNS will award a base amount of $100,000 to each State agency that is an identified winner in each category. FNS will divide the remaining award money among the States in each category in proportion to the size of their caseloads.

Section 275.24(a)(6) proposed that a State cannot be awarded two bonuses in the same category (payment accuracy, negative error rate, or participant access rate). If a State is determined to be the best and the most improved in a category, it would only be awarded a bonus for being the most improved. This allows the “next best” State to receive an award as being among the best States.

FNS received three comments on this provision. One commenter agreed with awarding a State only one award, but suggested that it be for the best and not for the most improved. This commenter reasoned that the State with the best performance should get the award for being the best, regardless of the degree of improvement. One commenter agreed with the proposal to recognize the State in the most improved category thus allowing the State with the next best performance to receive an award. This commenter reasoned that this method allows more States exhibiting outstanding performance to receive awards. This commenter also stated that recognizing and rewarding improvement is important, but it is more appropriate to give award money to States qualifying as the best. The third commenter suggested that FNS first calculate the monetary amount of the award for each bonus and then award the State in the category in which it would receive the higher bonus.

FNS is committed to awarding both high and improved performance in administering the FSP. FNS believes it is important to emphasize high performance. Therefore, FNS has decided to award a State that is a double winner (best and most improved) the award for being the best while at the same time acknowledging that the State also achieved in the most improved category. FNS will then award a bonus to the next State in the best category. FNS is not adopting the commenter's suggestion concerning awarding the State the highest monetary amount. FNS believes that the amount of the bonus award is secondary to the recognition a State receives.

Section 275.24(a)(7) proposed that, where there is a tie to the fourth decimal point, FNS will add the additional State(s) into the category and the money will be divided among all the States. FNS received no comments on this provision and is adopting it as final with no changes.

In the preamble of the NPRM, FNS specifically solicited comments on whether or not to include “innovation” as a measure of high performance and, if so, what criteria could be used to rank innovative projects. We received two comments suggesting we create a category for innovation. One commenter indicated that to be valid, results of a project need to be measurable (quantifiable) and repeatable among other states; need to affect something important to the FSP; and need to be something an individual State can effect. One commenter strongly supported the idea of allocating money to reward State innovation, even if that pot of money is relatively small. This commenter recommended requiring States to apply for the award. This way, FNS would be able to collect information on innovative practices that it could then share with all the States. This commenter suggested that in the application the States answer the following questions: What problem did the State attempt to solve? Did the State work in partnership with other state agencies or non-profit groups to identify and resolve the problem? What quantifiable results are available to support the States' success? Is the idea exportable to other States?

FNS appreciates the comments concerning creating a performance bonus category for innovation. However, FNS received only two comments supporting this idea and has concluded that a determination of innovation would be too subjective. At the same time, FNS values the idea of collecting and sharing innovative ideas. Therefore, FNS is examining how best to do this outside of the performance bonus arena.

FNS received two comments suggesting it include a performance measurement for Food Stamp Employment and Training (FSET) participation rate and most employed. One of the commenters put forth this suggestion because FSET is a major component of the FSP. The other indicated that this category would be an outcome measure that supports the goal of increasing family self-sufficiency rather than just an administrative process.

In drafting the policy for FY 2003 and FY 2004 and in drafting the NPRM, FNS did consider including a category for FSET. While FNS recognizes that this activity is important, it is not critical to the administrative performance of the FSP as outlined in the FSRIA. Furthermore, FNS does not have access to data that would be necessary for such a measure. Therefore, FNS is not adopting this suggestion.

Section 275.24(b)(1) proposed to divide $24 million (50 percent of the total amount) among the 10 States with the lowest and the most improved combined payment error rate (the error rate). Section 275.24(b)(1)(i) proposed awarding bonuses to the 7 States with the lowest combined payment error rates based on the validated quality control payment error rates for the performance measurement year. One commenter suggested that FNS award bonuses in the area of payment accuracy to the ten best and the ten most improved States. This commenter argued that such a method would provide a greater incentive to States and would represent FNS' highest priority and the State's ability to manage the FSP. One commenter argued that rewarding improvement is more important than rewarding the best and, therefore, FNS should award 12 States in this category: six States that are the best and six States that are the most improved.

FNS appreciates these comments. However, FNS believes that awarding 20 States in the area of payment accuracy would result in bonus amounts that would be so small they would reduce States' incentive. Furthermore, FNS believes that the proposed provision strikes a good balance by recognizing three States that improved the most while still providing the greater number of bonuses for the best performers. FNS will adopt this provision as final with no changes.

Section 275.24(b)(1)(ii) proposed awarding the 3 States with the largest percentage point decrease in the combined payment error rates based on the comparison of the validated quality control payment error rates for the performance measurement year and the previous fiscal year. FNS received four comments on this provision.

Two commenters suggested that States only get awards if States' error rates are at or below the national average payment error rate. The FSRIA provided no restrictions on awarding States for improvement, while it did provide for a restriction for awarding States with established liabilities. FNS views these awards as an incentive for improvement, especially for States with already high error rates. If FNS only awarded States that were at or below the national average, what incentive then would these bonuses serve for those States that have high error rates? Also, if States had significantly higher error rates than the national average, they very well may be in sanction mode and would be statutorily prohibited from receiving a bonus. Finally, FNS contends that States that are already at or below the national average can compete for an award in the “best” category. Therefore, while FNS appreciates the comments on this subject, FNS is not adopting the commenters' suggestion.

One commenter supported basing the award for most improved on percentage point decrease (absolute improvement). Another commenter disagreed with this suggestion. This commenter argued that it is much harder for a State with an already low error rate to improve by several percentage points and, therefore, States with a solid performance record and significant percentage improvement would not be rewarded. In addition, this commenter argued that the State with a lower error rate is costing the FSP less money. This commenter suggested that FNS measure percentage improvement (relative improvement) so all States have an opportunity to realize a performance bonus not just those that have high dollar errors.

FNS stands by the proposal to use percentage point improvement (absolute improvement) as the best means of measuring improvement. To illustrate, we will repeat the example given in the proposed rulemaking at 68 FR 70197: if State A has a 10 percent error rate in FY 2004 and a 6 percent error rate in FY 2005, it has shown an absolute improvement rate of 4 percent (the difference between 10 and 6) and a relative improvement rate of 40 percent (the percentage reduction from 10) If State B has a 6 percent error rate in FY 2004 and a 3 percent error rate in FY 2005, it has had an absolute improvement rate of 3 and a relative improvement rate of 50 percent. States that improve by more percentage points have more of an impact on the national FSP and on their own caseload than States that make a relative improvement. And, as discussed above, States that have already low error rates can compete for and very well may win in the “best” category. Therefore, we are adopting this provision as final with no changes.

Section 275.24(b)(2) proposed to divide $6 million among the 4 States with the lowest negative error rates and the 2 States with the most improved negative error rates. The negative error rate measures the correctness of the State agency's action to deny an application, or suspend or terminate the benefits of a participating household. It also measures whether a State correctly determined a household's eligibility in terms of the State's compliance with Federal procedural requirements.

One commenter recommended that the definition of a negative error be revised to exclude procedural issues when the household is not eligible anyway, e.g. denying the case on the 29th day instead of the 30th. Negative cases are defined in 7 CFR 271.2 and the review procedures for negative cases are specified in 7 CFR 275.12 and the FNS Handbook 310, the Food Stamp Program Quality Control Review Handbook. Those procedures are based on certification policy. Revisions to quality control review policy are outside of the scope of this rulemaking. Therefore, FNS will not adopt the commenter's suggestion, but will consider the idea in future rulemaking.

Section 275.24(b)(2)(i) proposed to award bonuses to the 4 States with the lowest negative error rates based on validated quality control negative error rates for the performance year. One commenter supported this measure. One commenter questioned how FNS would validate the negative error rate from year to year to determine the most improved. This commenter pointed out that in the past the State's negative error rates have not been validated unless the State was below the national average for active reviews. This commenter questioned if the negative error rates would be validated for all States whether or not they have met the active error rate or would only the State's error rate be used. If the State's rate will be used, this commenter expressed concern that the results would be questionable if not validated. For several years, FNS has been validating all State agencies' negative case error rates because of concerns about the quality of the data and fair and equitable treatment of applicants. Although this comment is outside the scope of this rulemaking, FNS recognizes the merit of the comment and intends to continue to validate all State agencies” negative case error rates.

Section 275.24(b)(2)(ii) proposed to award bonuses to the 2 States with the largest percentage point decrease in their negative error rates based on the comparison or the performance measurements year's validated quality control negative error rates with those of the previous fiscal year. One commenter supported the idea of awarding States for improvement in the negative error rate but suggested it be a smaller amount of money than for the best. One commenter supported using percentage points versus percentage improved. One commenter opposed this method. This commenter suggested that awarding funds for improvement may result in States that have worked diligently to reach a low error rate losing to States that have had continuously high error rates. Again, as discussed above, FNS believes that States that improve by more percentage points have more of an impact on the national FSP and on their own caseload than States that make percentage improvement. Additionally, States that have already low error rates can compete for and very well may win in the “best” category. Therefore, we are adopting this provision as final with no changes.

In the preamble of the NPRM, FNS specifically solicited comments on whether States must attain a certain threshold to be rewarded for an improved negative error rate. For example, should a State be rewarded if it improves its negative error rate from 20 percent to 15 percent, even though its negative error rate is still very high? One commenter suggested setting separate thresholds for groups of States created within each bonus category. These groups could be based on caseload, metropolitan area, and expenditure level. Alternatively, this commenter suggested setting no threshold because it could exclude those States whose improvement had the largest possible impact on the caseload, in terms of the number of cases positively affected. In addition, using a threshold for the most improved negative error rate would be incongruous since no such thresholds are used for the other most improved categories. One commenter supported awarding States for most improved even if their negative error rate was above the national average. At the same time, this commenter suggested that in lieu of the bonus money, we award these States special recognition.

Three commenters opposed awarding States for most improved when their negative error rates were above the national average. One commenter argued that it would not be fair to award a State for improvement when its negative error rate was still very high. A second commenter argued that since the entire purpose of the bonuses is to reward States for correct administration of the FSP, a State that is incorrectly denying or terminating more cases than the national average should not receive a financial award. A third argued that States that win awards for improvement in their negative error rate should be held to some basic level of performance. This commenter suggested that States should not be awarded for most improved if they are more than 30 percent above the national average for negative error rates. According to this commenter this approach is consistent with the statutory provision that disqualifies States from receiving a bonus payment if they are subject to a QC penalty in that fiscal year.

FNS views these bonuses as incentives for States to improve. However, FNS also recognizes that if a State has an excessively high negative error rate even after improvement, then it should not be rewarded. While the FSRIA did not provide for a restriction, FNS agrees with the comments. Therefore, FNS has decided to take a moderate position on this issue and provide that States that are more than 50 percent above the national average negative error rate may not receive a bonus in this category regardless of improvement.

Section 275.24(b)(3)(i) and (b)(3)(ii) proposed to divide $12 million among the 4 States with the highest and the 4 States with the most improved participant access rate (PAR). Section 275.24(b)(3)(iii) proposed to use a variety of data sources to calculate the PAR. FNS proposed that the denominator be composed of annual State counts of persons below 125 percent of poverty from the Census Bureau's March Supplement to the Current Population Survey (CPS). These counts are based on annual income received in the previous calendar year. For the numerator, or the number of food stamp participants, FNS proposed to use administrative counts of participants by State over the same calendar year as for the Census Bureau's persons below 125 percent of poverty, averaging 12 months of data. In addition, FNS proposed to make adjustments for two special situations. First, because persons receiving Supplemental Security Income (SSI) are ineligible for food stamps in California, FNS proposed to reduce the number of persons below 125 percent of poverty in California by the percentage of such persons who received SSI in the previous year. Second, because some individuals residing on reservations may choose to receive food assistance from either the FSP or the Food Distribution Program on Indian Reservations (FDPIR) but not both simultaneously, FNS proposed to add the number of FDPIR participants to the number of food stamp participants, using administrative data averaged over a calendar year.

It has come to FNS' attention that there is a lot of confusion between the PAR and the official Participation Rate. FNS believes that part of the confusion is due to the similar names. In an attempt to distinguish this performance bonus measure from the official participation rate, FNS is changing the term Participant Access Rate (PAR) to the Program Access Index (PAI). Normally, “rate” is used to measure how often something occurs (food stamp participation) among all the times it could occur (food stamp eligibles). By changing this to an “index” FNS believes it will be clearer that it is relating a pair of numbers that are similar but do not have the same properties of a rate. Not all food stamp participants have low-income as defined in the denominator of the index, nor are all persons in the denominator eligible to participate.

Section 275.24(b)(3)(iii) proposed to use 125 percent of poverty in calculating the PAI. This threshold differs from what FNS used for fiscal years 2003 and 2004 (100 percent of poverty). However, our analysis showed that using 125 percent of poverty better correlates to the official FSP participation rates. The official FSP participation rate uses 130 percent of income in the denominator. FNS looked at using 130 percent of poverty in the PAI but found that the data is not readily available from the Census Bureau and it would require time and additional expense to obtain the tabulations. In addition, FNS analyses found that using 130 percent in the PAI denominator versus 125 percent made no impact in the correlation to the official participation rates. As a result, FNS decided for efficiency and validity that using 125 percent of poverty in the PAI denominator was acceptable. FNS proposed in the preamble that, if the Agency could receive the estimate of individuals with income below 130 percent of poverty from the Census Bureau within a reasonable timeframe and the data better correlates to the official statistics, FNS would use numbers of people below 130 percent rather than 125 percent of poverty.

FNS received several comments on this proposal. Two commenters supported using 130 percent of poverty, stating it is more accurate. One commenter suggested we request a re-tabulation of data from Census. Two commenters, while not opposed to using 125 percent or 130 percent, proposed making adjustments for immigrants and individuals who live on reservations. Finally, one commenter suggested FNS not foreclose the possibility of Census providing data on the number of individuals with income below 130 percent of the poverty line in a timely fashion. This commenter suggested FNS craft the regulatory language so that FNS reserves the right to substitute the number of people below 130 percent for the number below 125 percent of poverty if the data is available in a timely manner. Comments related to ineligible aliens and undocumented immigrants will be discussed later in the preamble. FNS analyses show that a denominator using persons with income below 125 percent of poverty with certain adjustments produces a rate that best correlates to the official State participation rates. However, FNS does not want to preclude using 130 percent of poverty if that information should become available in time to calculate the PAI. FNS agrees that the final regulation should allow certain flexibility in improving the PAI calculation because of new and better data. Therefore, FNS is amending the proposed language to provide that FNS reserves the right to use the number of people below 130 percent of poverty should the data be available in a timely manner. Any such substitution would apply to all States.

One commenter expressed concern that the Census Bureau poverty counts appeared to be inaccurate for FY 2002 because, in one particular State identified by the commenter, the poverty count increased more than the State population, and because unemployment did not increase by as much in that State during that time period. FNS contends that in addition to population growth, there are several other factors that can affect the poverty count. Poverty can increase faster than unemployment if wage rates are not increasing or more workers are employed only part-time. The Census Bureau and FNS recognize the problems small entities have with uncertainty in the poverty estimates. However, FNS knows of no specific problem in that particular State and, moreover, knows of no other more reliable data source. Lacking better information or data, FNS will continue to use Census Bureau data on the count of people in poverty in each State.

In the preamble to the proposed rule, FNS stated that since the American Community Survey (ACS) has a larger sample and is released earlier than the CPS, FNS was considering using data from that survey to calculate the PAI. However, since the survey was relatively new, FNS was going to examine the data over time to determine how well the PAI using ACS poverty counts correlated to the official FSP participation rate. If this data were more consistent, FNS would use it instead of the CPS.

FNS received several comments on this proposal. One commenter agreed that FNS should evaluate data from the ACS because of its larger sample size. One commenter suggested that FNS use whichever data source best correlates with the full Census. One commenter argued that neither data source was appropriate because they are both based on samples that do not accurately reflect the true extent of poverty, particularly in small jurisdictions subject to small sample sizes. One commenter urged FNS to use the ACS because it is a year-by-year supplement to the Decennial Census and is, therefore, more up-to-date, and because of its larger sample size.

FNS agrees that the national survey based on a sample is problematic for smaller jurisdictions. However, FNS knows of no other more reliable source of data available in a timely manner that could be used to calculate a measure of participation access that is comparable across all States and time. The CPS is made up of a scientifically selected sample designed to represent the civilian non-institutional population. While it does not pull a sample from every county in the country, it does statistically represent State populations. As it is planned, the ACS will have a much larger sample size than the CPS when fully implemented. FNS does not want to preclude using the ACS, especially if, when it becomes nationally representative, it proves to be a better source of data for calculating the PAI. Therefore, this final regulation provides that FNS will use the CPS, but reserves the right to use new and better data should it become available.

Section 275.24(b)(3)(iii) proposed using State participation data, averaged over 12 months, to determine the number of participants. One commenter opposed using an average because it flattens out the actual increase in participation, especially for States that are actively conducting outreach activities throughout the year. This commenter suggested using the end results for the last month of the year (December). However, using participation in a single month like December is an advantage only when caseloads are rising. When caseloads are decreasing, this would actually disadvantage some States.

Using an average smoothes out this effect. FNS chose average participation in the calendar year because the income data from the CPS, which is the basis for the count of persons with income below 125 percent of poverty, is available solely for a calendar year.

The Census Bureau does not collect monthly income in a large enough national survey to provide accurate monthly counts of persons with incomes below 125 percent of poverty by State. FNS is not adopting the commenter's suggestion and instead will continue to use an average 12 months of data based on a calendar year.

Section 275.24(b)(3)(iii) proposed that, to calculate the PAI, FNS would make adjustments for the SSI population in California and the FDPIR participants in States with reservations. FNS received several comments concerning the proposed adjustments. Several commenters proposed that, to improve the accuracy of the PAI, FNS should make adjustments for all those who are ineligible (such as immigrants or individuals who are not meeting the work requirements), or take into consideration other State specific situations that affect participation in the FSP such as the economy or urban versus rural populations. In addition, these commenters pointed out that FNS proposed to adjust differently for SSI recipients in California and individuals that received FDPIR. These commenters argued that since both populations are ineligible for the FSP they should be treated similarly. Several commenters suggested alternative ways to calculate the PAI, or that FNS seek a legislative change that would allow it to award these bonuses later so it can use the official participation rate.

FNS has decided not to change the method used to calculate the PAI or to adjust for such factors as ineligible individuals not addressed in the proposed rule (immigrants or individuals who are not meeting the work requirements), the economy, or rural versus urban populations with one exception. State-reported participation includes people provided benefits under special disaster conditions. FNS will subtract from the number of participants the state-reported number of people who received food stamp disaster assistance to better reflect on-going administration of the regular FSP. Disaster assistance is approved in limited circumstances and operates under special rules that differ from those of the regular FSP. FNS will subtract only those disaster assistance recipients who are new to the FSP—not existing participants who are issued replacement benefits. These individuals were not participating in the FSP under normal operations before the disaster. To the extent they apply and continue to participate under normal program rules in the following months, they are included in the count of participants.

FNS agrees with the comment that some adjustment should be made for FDPIR participants and SSI recipients in California, and that the adjustment approach should be consistent for both. Consistency could be achieved by either: (1) Adding the count of FDPIR and California SSI recipients to the numerator of the PAI, or (2) subtracting the count of low-income FDPIR and California SSI recipients from the denominator. Because the number of participants in FDPIR and California SSI recipients offers no information on the effectiveness of State food stamp agency operations, FNS believes it is preferable to exclude FDPIR and California SSI participants from the denominator of the PAI.

FNS will make this adjustment by using prior-year information from the CPS to estimate the number of California SSI recipients with income below 125 percent of poverty. Data limitations prevent a similar estimate of the number of FDPIR participants with income below the 125 percent of poverty. Therefore, FNS will subtract the average monthly number of FDPIR participants from the number of persons with income below 125 percent of poverty in each State. Although some FDPIR participants with incomes above 125 percent of poverty may qualify for benefits, FNS believes that the number will be relatively small.

We received one comment on the data used to remove SSI recipients in California from the denominator. This commenter suggested that since FNS is using Census data to determine the number of eligibles in the State, FNS should use Census figures to back out the SSI recipients from the denominator. In fact, the methodology proposed in the NPRM used Census data from the CPS to remove from the denominator the SSI recipients with incomes below 125 percent of poverty in California.

One commenter urged FNS to clarify in the regulations how the PAI is calculated in order to “ensure full transparency” regarding distribution of funds and to make it more difficult for future Administrations to tinker with the formula without going through the public comment process. FNS agrees with this commenter that the regulations should be as complete as possible and believes that the regulations as written in this final rule are complete.

This same commenter suggested that FNS specify that the PAI is the share of eligible individuals in food stamp households who participate in the FSP. FNS would like to reiterate in the preamble that the PAI is the ratio of participants to persons with incomes below 125 percent of poverty, not eligible individuals. The official State participation rate is the ratio of participants to eligibles. FNS agrees and regrets that there is a lot of confusion over these two rates. Therefore, as discussed above, this measure will now be referred to as the Program Access Index.

Section 275.24(b)(4) proposed to divide $6 million among the 6 States with the highest percentage of timely-processed applications. One commenter supported the proposal to measure application-processing timeliness because it is an essential component of customer service.

Section 275.24(b)(4)(i) proposed collecting data on application-processing timeliness through the QC system. FNS initiated collection of data as part of the QC reviews beginning with FY 2003 cases. Instructions for collecting this information are found in the FNS 310 Handbook, The Food Stamp Program Quality Control Review Handbook. In the preamble to the proposed rule, FNS specifically sought comment on this data collection instrument and its ability to collect the sought after information. FNS received two comments regarding the data collection instrument. One commenter suggested we use different QC codes for the data collection instrument: 1. Timely; 2. Not timely—agency caused; 3. Not timely—client caused; 4. Application filed outside of fiscal year; and, 5. Unable to determine timeliness of application processing. FNS appreciates the merit of this comment. However, FNS has determined that there is no reason to change the codes since client-versus agency-caused delays is not relevant with regard to this measure.

One commenter opposed using QC data for this measurement saying it would result in inconsistent reporting. This commenter cautioned that since the QC data collection instrument is new, States would be unfamiliar with it, and would, therefore, have many questions and may not report the data in the same way. This commenter suggested FNS modify the Program Activity Statement (FNS-366) to capture the data since States already have this procedure in place. This commenter felt that specific revisions to the FNS-366 form would result in more consistency since it is common to all States. FNS seriously considered using the FNS-366 form, but wanted to have a mechanism for validating these numbers. QC provides that mechanism. Therefore, FNS will verify the QC application processing data for any State that is in contention for a bonus.

Section 275.24(b)(4)(ii) proposed that a timely processed application is one that provides an eligible applicant the “opportunity to participate,” as defined in 7 CFR 274.2, within thirty days for normal processing or 7 days for expedited processing. New applications that are processed outside of this standard would be untimely for this measure, except for applications that are properly pended in accordance with 7 CFR 273.2(h)(1)(i)(C). Properly pended applications would not be counted for (as timely) nor against (as untimely) States' timeliness rate—they will be excluded from this particular calculation altogether.

One commenter argued that the measure as proposed does not fully capture the issue of timeliness and its importance in the delivery of food assistance. This commenter pointed out that this measure treats States with average processing times of 15 days the same as States with average processing times of 25 days and, thus, treating these States the same does not accurately reflect their performance with respect to timeliness. This commenter suggested we incorporate average processing time into the measure to provide States with an incentive to do better than simply meeting the statutory deadlines. FNS contends that average processing time can mask the effect of those States that process the bulk of their applications outside of the 30 days, but their average processing time is better than those States that consistently process their application within the 30 day standard. For example State X processes 100 applications, 20 in 31 days and the rest in 10 days, for an average of 14.1 days. State Y processes 90 applications in 20 days and 10 in 40 days, for and average of 22 days. FNS believes it is important that as many applicants as possible be served in a timely manner. Therefore, while FNS sees merit in using averaging, FNS believes that the timeliness rate as proposed is a more accurate measure and is adopting it in this final rule.

In the preamble of the NPRM, FNS specifically sought comment on whether to exclude all client-caused delays from this measure and, if so, how to work that into the existing reporting and QC framework. Two commenters opposed the proposal to measure timeliness against the statutory standard of 30 days from the date of application. These commenters suggested that we measure timeliness in accordance with the regulations at 7 CFR 273.2(h)(2)(i), which provide procedures for when the 30-day standard is not met (such as State and client-caused delays). Otherwise, a State following these regulatory procedures would be penalized for purposes of awarding the performance bonus even though all timeliness standards may have been complied with under Federal regulations. Excluding client-caused delays would also have a big impact on States with large immigrant populations and multiple languages as client-caused delays are considerably higher in such States than those without such populations. As discussed in the preamble to the NPRM, FNS recognizes that the statutory time frame differs from the latitude afforded by the regulations. However, FNS believes that excellent customer service should be measured by whether or not the statutory time frame of 30-day processing is met as opposed to compliance with the regulations that allows for up to 60-day processing in some cases. Furthermore, FNS believes all States are faced with challenges of serving applicants with one barrier or another (e.g., language and culture). Measuring application-processing timeliness against a 30-day standard, therefore, rewards States that take the extra steps to overcome these challenges.

Four commenters suggested excluding all client-caused delays from the measurement, not just those client-caused delays due to lack of verification. While FNS appreciates the merit of these comments, FNS believes that a State has the ability and the responsibility to influence clients' performance throughout the application process, such as helping to obtain verification, or accurately and adequately explaining the processing time frames and deadline dates. Again, this measure will reward States that go above and beyond to provide excellent customer service by providing needy individuals benefits in a timely fashion.

Two commenters agreed with the exception that applications that are properly pended because the applicant failed to provide verification should not count in the measure of overdue applications.

One commenter stated that States should not be held to a time frame of an application date for another program (such as TANF) when the client did not request food stamp benefits until a later date, perhaps during the interview for the other program. In this instance, the commenter suggested that the date of the interview should be the date the client requested food stamps. Existing FSP policy is that if an individual applies for another program but does not apply for the FSP until sometime later in the application process for the other program, then the date of application is the date that the individual applies for the FSP and not the other program.

Three commenters pointed out that the proposed rule does not address expedited time frames. One of these commenters questioned whether the policy regarding 30-day processing, which makes an exception for cases the State agency has pending due to incomplete verification, applied to expedited service cases. This commenter suggested that this policy be extended to all situations in which the client fails to comply with requirements necessary for agencies to meet the 7-day timeframe. FNS contends that the exception regarding failure to provide verification should not apply in cases that are entitled to expedited service. Verification requirements for expedited service cases are greatly reduced. The only information the State agency is required to verify in such cases is the identity of the head of the household. The State agency is not required to verify this information with paper documents, but may do so through a collateral contact. State agencies are encouraged to verify all other information prior to certification; however, they are permitted to postpone verification in the interest of providing food stamp benefits to destitute individuals. Therefore, since the probability of client-caused delays in expedited service cases due to failure to provide verification is minimal, FNS is not adopting the commenters suggestion.

Two commenters recommended that in cases of late determination for expedited service, the 7-day time period be calculated from the date the agency discovers a household is entitled to expedited service and not the date of application. FNS believes that it is important to note that States are required to pre-screen applications to determine whether or not the applicant is entitled to expedited service. While all States face the challenge of accurately determining this need, those that do an excellent job in this endeavor or take the extra step to determine if a client is in dire need of nutritional assistance should be rewarded appropriately.

Proposed § 275.24(b)(4) defined a timely-processed application as one that provides an eligible applicant the “opportunity to participate,” as defined in 7 CFR 274.2, within 30 days or 7 days for expedited processing. One commenter recommended that the “opportunity to participate” in the Electronic Benefit Transfer (EBT) environment be described. FNS recognizes that the “opportunity to participate,” as defined in 7 CFR 274.2, addresses systems that provide benefits in the form of food stamps or authorization documents as opposed EBT. However, revising that definition is outside of the scope of this rulemaking. Nevertheless, FNS has provided guidance delineating this term further, particularly in the EBT environment. Existing FSP policy regarding this performance measure is that the “opportunity to participate” consists of providing households with authorization documents (ATP cards), coupons, or EBT cards and having issuance facilities open and available for households to obtain their benefits. State agencies must mail or have EBT cards available for pick-up (and post benefits to the EBT account and provide all the training and PIN numbers) in time to assure that the recipient can access his benefits before the 30-day standard or 7-day standard expires.

Furthermore, in an EBT system, the client has the opportunity to participate:

• 24 hours after the client is notified by phone or in person to come into the office to pick up his card (assuming benefits are posted to the account, and the client has his PIN number or will be provided his PIN number when he comes in to get his card); or,

• Three days after he has been notified by mail to come in and pick up his card (assuming benefits are posted to his account, and the client has his PIN number or will be provided his PIN number when he comes in to get his card).

In the preamble of the NPRM, FNS proposed that only approvals be included in the determination of timeliness since this measure is focused on meeting the 30-day and 7-day standards for providing eligible households the opportunity to participate. FNS received five comments on this proposal. Two commenters supported excluding denials from this measurement because an early denial is not an indicator of strong performance. Three commenters supported including denials in this measurement because it is important to advise households of denials as well as certification and it requires as much time. While FNS believes it is important to notify a client about denial of benefits in a timely fashion, FNS agrees that an early denial is not good if the applicant has not been provided sufficient time to provide the required documentation. FNS is not aware of problems with late denials, but also does not collect information on the timeliness of denials at this time. FNS will investigate the timeliness of denials with States and determine whether further data analysis and regular collection of data might be warranted. However, denials will not be included in this measure.

Section 275.24(b)(4)(iii) proposed that QC reviewers evaluate for timeliness only new applications in the State QC active sample that were filed on or after the beginning of the fiscal year because they were filed within the performance measurement year for which the bonuses are awarded. Two commenters opposed this provision. One commenter expressed concern that the sample pool would be too small to yield valid program data. This commenter suggested that the sample be expanded to all active cases sampled during the fiscal year. One commenter pointed out that this method excludes clients who apply in August and September whose eligibility is not determined until October or later. This might bias timeliness determinations for states that experience increases in applications in the late summer. FNS has been monitoring the sample size based on the proposed policy and contends that it is large enough to be statistically valid. In addition, FNS believes that it is important to measure a State agency's performance within a fiscal year and, therefore, will retain the provision as proposed.

This final rule is issued under Marketing Agreement No. 148 and Order No. 932, both as amended (7 CFR part 932), regulating the handling of olives grown in California, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This final rule consolidates the four existing producer districts into two larger districts. Producer representation on the committee is reapportioned accordingly. These changes reflect recent shifts in olive acreage and producer numbers within the production area and should assure equitable committee representation from each district. This action was unanimously recommended by the committee at a meeting on July 8, 2004.

Section 932.21 of the order defines the producer districts as geographical areas of the State of California. Section 932.25 establishes an administrative committee of olive handlers and producers and provides for the allocation of committee membership to assure equitable producer representation from the districts. Section 932.35(k) authorizes the redefinition of the producer districts and the reapportionment of committee membership as needed to reflect shifts in olive acreage within the districts and area, numbers of growers in the districts, and the tonnage produced to assure equitable producer representation on the committee.

Currently, § 932.121 of the order's administrative rules and regulations lists and defines four producer districts within the production area. District 1 includes Glenn, Tehama and Shasta Counties. District 2 includes the counties of Mono, Mariposa, Merced, San Benito, Monterey, and all counties south thereof excluding Tulare County. District 3 includes the counties of Alpine, Tuolumne, Stanislaus, Santa Clara, Santa Cruz, and all counties north thereof except those in District 1. District 4 includes Tulare County.

Section 932.125 specifies the producer representation on the committee. Currently, District 1 is represented by two producer members on the committee. District 2 is represented by one producer member. District 3 is represented by one producer member. District 4 is represented by four producer members.

At its meeting on July 8, 2004, the committee recommended redefining the producer districts to consolidate the four existing districts into two. The committee also recommended reapportionment of the producer membership on the committee to reflect the consolidation of the districts. The committee believes that redistricting and reapportioning the eight producer member positions and alternates should provide equitable representation throughout the production area. The committee based this recommendation on the current olive acreage and number of producers as required under the marketing order.

Total canned ripe olive acreage in the production area has declined by approximately four percent since 1994. Although production acreage in District 1 has increased by approximately 21 percent, shifts in varietal preference and challenging production conditions have led to declining acreages in the other districts. Production acreages in Districts 2, 3, and 4 have declined by approximately 34 percent, 99 percent, and 1 percent, respectively.

The number of producers in the entire production area has declined by approximately 23 percent since 1994. Some of the decline has been caused by changes in ownership of productive acreage, and some producers have stopped growing olives for cannery use. While District 1 has lost only two percent of its producers since 1994, Districts 2, 3, and 4 have lost 49 percent, 89 percent, and 29 percent, respectively. Some districts no longer have enough available or eligible producers to fill all the member seats currently allocated them on the committee.

Revisions to both the district definitions and committee membership apportionment were last made in 1987. At that time District 4 was created because Tulare County represented more than 45 percent of the average production, number of producers, and acreage of the entire production area. District 4 now represents approximately 56 percent of the canned ripe olive acreage as well as approximately 51 percent of the producers in the production area. District 4 is represented by 50 percent of the producer members and alternates on the committee.

Other districts are less equitably represented. District 1 currently has 36 percent of the total acreage in the production area and 46 percent of the producers, but is represented by only 25 percent of the committee's producer members and alternates. District 2, with nine percent of the acreage and two percent of the producers is represented by 12.5 percent of the committee members. District 3, with less than 1 percent of both the total acreage and number of producers is likewise represented by 12.5 percent of the committee's producer members and alternates.

Recent shifts in production acreage as well as the decline in producer numbers in the districts prompted the committee to recommend the consolidation of the two northern districts into one producer district, and the two southern districts into one producer district. The shifts in production acreage and the declines in producer numbers reflect similar changes in the tonnage produced.

The committee believes that it should be easier for each district to provide equitable representation on the committee if the districts with declining acreages and producer numbers are combined with districts having higher acreages and producer numbers. The pool of available producers from which to select committee members should then be increased for each producer district.

Accordingly, it was proposed that Districts 1 and 3 be combined to form a new District 1. District 1 will then include the counties of Alpine, Tuolumne, Stanislaus, Santa Clara, Santa Cruz and all other counties north thereof. Districts 2 and 4 will be combined to form a new District 2, which will include the counties of Mono, Mariposa, Merced, San Benito, Monterey and all other counties south thereof. Producer representation on the committee will then be reapportioned to provide three members (and alternates) from District 1 and five members (and alternates) from District 2.

These changes should benefit producers by maintaining an equitable representation on the committee as to production acreage and number of producers in each district. Under this final rule, District 1, with 36 percent of the total production acreage and 47 percent of the total number of producers will be represented by 38 percent of the producer members and alternates on the committee. District 2, with 64 percent of the total acreage and 53 percent of the total number of producers will be represented by 62 percent of the committee's producer members and alternates.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this rule on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions to ensure that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility.

There are approximately 850 producers of olives in the production area and 3 handlers subject to regulation under the marketing order. The Small Business Administration (13 CFR 121.601) defines small agricultural producers as those with annual receipts less than $750,000, and small agricultural service firms as those with annual receipts less than $5,000,000.

Based upon information from the committee, the majority of olive producers may be classified as small entities, but only one of the three handlers may be classified as a small entity.

This rule revises § 932.121 of the order's administrative rules and regulations pertaining to producer districts, and § 932.125 pertaining to producer representation on the committee. The changes decrease the number of producer districts from four to two and reapportion producer membership on the committee to reflect the consolidation. District 1, comprising the northern part of the production area, is apportioned three producer members (and alternates) on the committee. District 2, comprising the southern part of the production area, is apportioned five producer members (and alternates) on the committee. These changes reflect recent shifts in olive acreage and producer numbers within the production area and should provide equitable committee representation from each district. The committee unanimously recommended these changes.

This rule consolidates producer districts and reallocates producer membership on the committee; thus, there should be no additional anticipated costs to handlers or producers.

The only alternative to these changes discussed by the committee was to leave the districts and producer membership allocation as they currently exist. However, the committee believes that the recent shifts in acreage and producer numbers within the districts and production area have made these changes necessary to assure equitable producer representation from the districts.

This final rule imposes no additional reporting or recordkeeping requirements on California olive handlers. As with all Federal marketing order programs, reports, and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

As noted in the initial regulatory flexibility analysis, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

In addition, the committee's meeting was widely publicized throughout the California olive industry and all interested persons were invited to attend the meeting and participate in committee deliberations on all issues. Like all committee meetings, the July 8, 2004, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

A proposed rule concerning this action was published in the Federal Register on October 28, 2004 (69 FR 62829). Copies of the rule were mailed or sent via facsimile to all committee members and olive handlers. Finally, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 60-day comment period ending December 27, 2004, was provided to allow interested persons to respond to the proposal.

Two comments were received during the comment period in response to the proposal. One comment generally opposed the program while the second indicated that the olive committee should be disbanded. However, neither comment added anything specific to the proposed rule. Accordingly, no changes will be made to the rule as proposed, based on the comments received.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant matter presented, including the information submitted by the committee and other available information, the comments received, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

It is further found that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because nominations for committee positions are scheduled to take place in February 2005. The committee needs as much time as possible to make adequate preparations for the nomination meetings. Further, producers and handlers are aware of this rule, which was recommended at a public meeting. Also, a 60-day comment period was provided for in the proposed rule, and no comments were received from the California olive industry.

This final rule is issued under Marketing Agreement and Order No. 989 (7 CFR part 989), both as amended, regulating the handling of raisins produced from grapes grown in California, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, California raisin handlers are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate increased herein will be applicable to all assessable raisins beginning on August 1, 2004, and continue until amended, suspended, or terminated. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This final rule increases the assessment rate established under the order for the 2004-05 and subsequent crop years from $8.00 to $11.00 per ton of free tonnage raisins acquired by handlers, and reserve tonnage raisins released or sold to handlers for use in free tonnage outlets. Authorization to assess raisin handlers enables the Committee to incur expenses that are reasonable and necessary to administer the program. The 2004-05 crop is smaller than normal, and no volume regulation will be implemented this year. As a result, some expenses funded by handler assessments will increase. The $8.00 per ton assessment rate will not generate enough revenue to cover expenses. This action was recommended by the Committee at a meeting on October 5, 2004.

Sections 989.79 and 989.80, respectively, of the order provide authority for the Committee, with the approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the program. The members of the Committee are producers and handlers of California raisins. They are familiar with the Committee's needs and with the costs of goods and services in their local area and are thus in a position to formulate an appropriate budget and assessment rate. The assessment rate is formulated and discussed in a public meeting. Thus, all directly affected persons have an opportunity to participate and provide input.

Section 989.79 also provides authority for the Committee to formulate an annual budget of expenses likely to be incurred during the crop year in connection with reserve raisins held for the account of the Committee. A certain percentage of each year's raisin crop may be held in a reserve pool during years when volume regulation is implemented to help stabilize raisin supplies and prices. The remaining “free” percentage may be sold by handlers to any market. Reserve raisins are disposed of through various programs authorized under the order. Reserve pool expenses are deducted from proceeds obtained from the sale of reserve raisins. Net proceeds are returned to the pool's equity holders, primarily producers.

When volume regulation is in effect, an administrative budget funded by handler assessments is developed, and a reserve pool budget funded by the current year's reserve pool is developed. Committee costs are apportioned between the two revenue sources. When volume regulation is not implemented, the Committee develops an administrative budget funded solely from handler assessments.

When the Committee met on August 12, 2004, it recommended two budget scenarios for the 2004-2005 crop year to accommodate both situations, because it was not known at that time if volume regulation would be implemented. At that time, it appeared the crop may be short, but the initial crop estimate would not be available until a later date.

The first budget scenario recommended was premised on the assumption that volume regulation would be implemented. Under this scenario, the Committee recommended an administrative budget of expenses totaling $2,200,000 and a reserve pool budget of $2,839,225. The assessment rate would remain unchanged at $8.00 per ton. This assessment rate applied to estimated acquisitions of raisins by handlers of 275,000 tons would provide adequate revenue to fund the administrative budget.

The second budget scenario recommended was based on the premise that volume regulation would not be implemented for the 2004-05 season. Under this scenario, various expenses typically split between the reserve pool budget and the administrative budget would be funded by the administrative budget. In addition, some expense categories would be eliminated, some reduced, and another would be allocated to the existing 2003-04 reserve pool budget. The administrative budget would increase to $3,025,000, thus necessitating an increase in the assessment rate to $11.00 per ton.

The Committee met on October 5, 2004, and determined that no volume regulation for the 2004-05 crop year was warranted because of a short crop. The crop estimate for Natural (sun-dried) Seedless raisins, the major raisin variety produced, was 199,344 tons. If realized, this would be the smallest crop in over 20 years. Production of other varietal types was also estimated to be relatively low. The lack of volume regulation triggered implementation of the Committee's recommendation for an administrative budget of $3,025,000 and an increased assessment rate from $8.00 per ton to $11.00 per ton.

In developing this budget, the Committee reviewed and identified those expenses that were considered reasonable and necessary to continue operation of the raisin marketing order program. Several costs normally associated with administering a reserve pool were eliminated, such as insurance coverage ($400,000), costs for repairing reserve storage bins ($300,000), raisin hauling costs ($65,000), auditing fees ($20,000), and bank charges ($20,000). Other costs usually split between the administrative and reserve pool budgets were also to be eliminated, such as production of industry brochures ($20,000) and research and communication activities ($70,000). It was determined that these activities, while desirable, could be eliminated without adversely impacting Committee operations.

Other expenses traditionally split between the reserve and administrative budgets were reduced. For example, total compliance activity costs budgeted at $500,000 ($250,000 allocated to the reserve budget and $250,000 allocated to the administrative budget) were reduced to $320,000, to be funded from the administrative budget. Purchase of equipment was also reduced, from a combined amount of $50,000, to $25,000 funded from the administrative budget.

Other costs usually split between the reserve pool and administrative budgets that will be funded by the administrative budget include general overhead costs such as salaries, taxes, retirement and other benefits, insurance, rent, office supplies, and Committee travel. These costs remain the same regardless of whether there is a reserve pool, as they are necessary to continue administration of the program. Finally, $836,000 in costs associated with administering export programs will be funded by the existing 2003-04 reserve pool budget, and $536,000 will be funded under the administrative budget for 2004-05.

A direct comparison of expenses between the recommended 2004-05 budget and the 2003-04 budget is difficult because the 2004-05 budget is only administrative, whereas in 2003-04 there was an administrative and a reserve pool budget. In total, the 2004-05 recommended administrative budget of $3,025,000 compares to the 2003-04 administrative budget of $2,000,000. However, the $3,025,000 administrative budget is $1,609,800 less than the combined 2003-04 administrative and reserve pool budgets of $4,634,800.

Major expense categories include $1,000,000 for salaries, $536,000 for export program activities (administrative budget only), $320,000 for compliance activities, $150,000 for group health insurance, $110,000 for rent, $120,000 for Committee member and staff travel, and $110,000 for computer software and programming.

A continuous assessment rate of $8.00 per ton has been in effect since the 2002-03 crop year. For the 2004-05 crop year, the Committee recommended increasing the assessment rate to $11.00 per ton of assessable raisins to cover recommended administrative expenditures of $3,025,000. The recommended $11.00 per ton assessment rate was derived by dividing the $3,025,000 in anticipated expenses by an estimated 275,000 tons of assessable raisins. Sufficient income should be generated at the higher assessment rate for the Committee to meet its anticipated expenses. Pursuant to § 989.81(a) of the order, any unexpended assessment funds from the crop year must be credited or refunded to the handlers from whom collected.

The assessment rate established in this rule will continue in effect indefinitely unless modified, suspended, or terminated by USDA upon recommendation and other information submitted by the Committee or other available information.

Although this assessment rate will be in effect for an indefinite period, the Committee will continue to meet prior to or during each crop year to recommend a budget of expenses and consider recommendations for modification of the assessment rate. The dates and times of Committee meetings are available from the Committee or USDA. Committee meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate Committee recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking will be undertaken as necessary. The Committee's 2004-05 budget and those for subsequent crop years will be reviewed and, as appropriate, approved by USDA.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility.

There are approximately 20 handlers of California raisins who are subject to regulation under the order and approximately 4,500 raisin producers in the regulated area. Small agricultural firms are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less that $5,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000. Thirteen of the 20 handlers subject to regulation have annual sales estimated to be at least $5,000,000, and the remaining 7 handlers have sales less than $5,000,000. No more than 7 handlers, and a majority of producers, of California raisins may be classified as small entities.

This rule increases the assessment rate established for the Committee and collected from handlers for the 2004-05 and subsequent crop years from $8.00 to $11.00 per ton of assessable raisins acquired by handlers. The 2004-05 crop is estimated to be smaller than normal, and as a result, the Committee determined that volume regulation for the season was not warranted.

When volume regulation is in effect, the Committee establishes two budgets; one for administrative expenses funded by handler assessments, and one for expenses incurred in connection with a reserve pool. Many of the Committee costs are split between the reserve pool budget and the administrative budget.

When no volume regulation is in effect during a crop year, there is no reserve pool budget for that crop year. However, the Committee continues to incur fixed costs associated with administering the marketing order program. Therefore, the Committee reviewed and identified the expenses that would be reasonable and necessary to continue program operations without a reserve pool in effect during the 2004-05 crop year. Operating expenses typically split between the administrative and reserve pool budgets were allocated to the administrative budget, some expenses were reduced, some expenses were eliminated, and some export program activity expenses were allocated to the existing 2003-04 reserve pool budget.

The resulting administrative budget recommended includes expenses totaling $3,025,000 for the 2004-05 crop year. While this is an increase from the 2003-04 administrative budget of $2,000,000, it represents a decrease in the 2003-04 combined administrative and reserve pool budgets which totaled $4,634,800.

Because the 2004-05 administrative budget funded some of the costs typically allocated to a reserve budget, a direct comparison to 2003-04 administrative costs would be difficult. A comparison of 2004-05 recommended administrative expenditures to combined 2003-04 administrative and reserve pool budget expenditures therefore follows: 2004-05 salaries, $1,000,000 (2003-04 combined budgeted expenditures for salaries was $1,000,000); $456,000 for export program activities, ($1,246,000); $320,000 for compliance activities, ($320,000); $150,000 for group health insurance, ($165,000); $110,000 for rent, ($106,000); $120,000 for Committee member and staff travel, ($120,000); and $110,000 for computer software and programming, ($107,800).

With anticipated assessable tonnage at 275,000 tons, sufficient income should be generated at the $11.00 per ton assessment rate to meet expenses. Pursuant to § 989.81(a) of the order, any unexpended assessment funds from the crop year must be credited or refunded to the handlers from whom collected.

The industry considered an alternative assessment rate and budget prior to arriving at the $11.00 per ton and $3,025,000 administrative budget recommendation. The Committee's Audit Subcommittee met on July 1, 2004, to review preliminary budget information. The subcommittee was aware that the 2004-05 crop may be short and no volume regulation may be implemented. The subcommittee thus developed two budgets and assessment rates to accommodate a scenario with volume regulation and another scenario with no volume regulation. If volume regulation was to be implemented, the assessment rate would remain at $8.00 per ton. If volume regulation was not implemented, costs typically allocated to a reserve pool budget would be absorbed by the administrative budget, thus necessitating an increased assessment rate to $11.00 per ton. The Committee approved these budget and assessment recommendations on August 12, 2004.

The Committee met again on October 5, 2004, and determined that volume regulation was not warranted for the season. This triggered implementation of the Committee's recommendation for an administrative budget of $3,025,000 and assessment rate of $11.00 per ton.

A review of statistical data on the California raisin industry indicates that assessment revenue has consistently been less than one percent of grower revenue in recent years. A grower price of a minimum of $1,210 per ton for the 2004-05 crop raisins has been announced by the Raisin Bargaining Association. If this price is realized, assessment revenue will continue to be less than one percent of grower revenue in the 2004-05 crop year, even with the increased assessment rate.

Regarding the impact of this action on affected entities, this action will increase the assessment obligation imposed on handlers. While assessments impose some additional costs on handlers, the costs are minimal and uniform on all handlers. Some of the additional costs may be passed on to producers. However, these costs will be offset by the benefits derived by the operation of the marketing order.

Additionally, the Audit Subcommittee and full Committee meetings held on July 1, 2004, and August 12, 2004, respectively, where this action was deliberated were public meetings widely publicized throughout the California raisin industry. All interested persons were invited to attend the meetings and participate in the industry's deliberations.

This final rule imposes no additional reporting or recordkeeping requirements on either small or large raisin handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. Finally, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

A proposed rule concerning this action was published in the Federal Register on December 10, 2004 (69 FR 71753). Copies of the proposed rule were also mailed or sent via facsimile to all raisin handlers. Finally, the proposed rule was made available through the Internet by USDA and the Office of the Federal Register. A 10-day comment period ending December 20, 2004, was provided to allow interested persons to respond to the proposal.

One comment was received in reference to the proposal. The comment did not address anything specific to the proposed rule. No changes are made to the final rule in response to the comment.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant material presented, including the recommendation and information submitted by the Committee and other available information, the comment received, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

It is further found that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register (5 U.S.C. 553) because the marketing order requires that the rate of assessment for each crop year apply to assessable raisins handled during such period. The crop year began on August 1, 2004, and the harvest is completed. The Committee needs additional revenues to meet its ongoing expenses. Further, handlers are aware of this rule, which was recommended at a public meeting. Also, a 10-day comment period was provided for in the proposed rule, and no comments from the California raisin industry were received.

National banks are authorized by statute to engage in real estate lending activities, subject to the requirements of Federal law, 1 and national banks' real estate lending is closely supervised and comprehensively regulated under a regulatory framework that includes a wide variety of Federal laws and regulations designed to ensure the protection of consumers of banks' residential mortgage products and services. 2

Fair treatment of customers is fundamental to sound banking practices and the OCC has taken a number of measures in recent years to assure that the lending practices of national banks reflect that standard. In particular, in February, 2003, we issued two advisory letters alerting national banks to practices that may be considered predatory or abusive and advising national banks on measures to avoid such practices. The advisories addressed national banks' mortgage origination activity, as well as purchases of loans and use of third-party brokers to conduct mortgage lending. 3 In January, 2004, we added to our rules an express prohibition on making mortgage loans based predominantly on the bank's realization of foreclosure or liquidation value of the collateral, without regard to the borrower's ability to repay the loan according to its terms, a prohibition that goes to the heart of predatory lending. In that same rulemaking, we also added provisions prohibiting banks from engaging in unfair or deceptive practices within the meaning of section 5 of the Federal Trade Commission Act, 15 U.S.C. 45. 4 In addition to establishing standards by regulation and in guidance, our overall approach includes taking prompt enforcement action to remedy abusive practices if we find that they have occurred. 5

In order to enhance our ability to apply the guidance described in our February, 2003 advisory letters, we are now adopting the core elements of that guidance in the form of guidelines for residential mortgage lending standards, in a new Appendix C to part 30 of our regulations. These standards further the OCC's goal of ensuring that national banks and their operating subsidiaries are not involved directly or indirectly through loans that they purchase or make through intermediaries, in predatory or abusive residential mortgage lending practices. The Guidelines incorporate and implement the principles of, but do not replace, the February, 2003 advisory letters. The advisories remain in effect as supervisory guidance that provides supplemental context and explanation of the issues addressed in these Guidelines. Like the advisories, the Guidelines apply to national banks and, pursuant to OCC regulations, to their operating subsidiaries. 6 The Guidelines focus on the substance of activities and practices, not on the creation of policies. The Guidelines are enforceable pursuant to the process provided in Section 39 of the Federal Deposit Insurance Act (FDIA) and part 30.

The OCC is issuing these Guidelines pursuant to Section 39 of the FDIA. 7 Section 39 authorizes the OCC to prescribe safety and soundness standards in the form either of a regulation or guidelines. These standards currently include, among others, operational and managerial standards for insured depository institutions that relate to internal controls, information systems, and audit systems; loan documentation; credit underwriting; interest rate exposure; and asset growth. Section 39 also provides, without qualification, that “each appropriate Federal banking agency” may prescribe “such other operational and managerial standards” as it “determines to be appropriate.”

Section 39 prescribes different consequences depending on whether the standards it authorizes are issued by regulation or guidelines. Pursuant to Section 39, if a national bank fails to meet a standard prescribed by regulation, the OCC must require it to submit a plan specifying the steps it will take to comply with the standard. If a national bank fails to meet a standard prescribed by guideline, the OCC has the discretion to decide whether to require the submission of such a plan. 8 Issuing these residential mortgage lending practices standards by guideline rather than regulation provides the OCC with the flexibility to pursue the course of action that is most appropriate, taking into consideration the specific circumstances of a national bank's noncompliance with one or more standards, and the bank's self-corrective and remedial responses.

The Guidelines incorporate key provisions of the February, 2003 advisory letters and describe certain practices the OCC believes are inconsistent with sound residential mortgage lending practices. They also describe other terms and practices that may be conducive to predatory, abusive, unfair, or deceptive lending, and which, accordingly, warrant a heightened degree of care by lenders. The Guidelines thus incorporate the central principles and considerations contained in the February, 2003 advisories into a framework that specifically provides for their enforcement on a case-by-case basis under the framework provided by Section 39 and part 30 of our regulations.

The enforcement remedies prescribed by Section 39 are implemented in procedural rules contained in part 30 of the OCC's rules. Under these provisions, the OCC may initiate the part 30 process when we determine, by examination or otherwise, that a national bank has failed to meet the standards set forth in the Guidelines. 9 Upon making that determination, we may request, through a supervisory letter or in a report of examination, that the national bank submit a compliance plan to the OCC detailing the steps the bank will take to correct the deficiencies and the time within which it will take those steps. This request is termed a Notice of Deficiency. Upon receiving a Notice of Deficiency from the OCC, the national bank must submit a compliance plan to the OCC for approval within 30 days.

If a national bank fails to submit an acceptable compliance plan, or fails materially to comply with a compliance plan approved by the OCC, the OCC may issue a Notice of Intent to Issue an Order pursuant to Section 39 (Notice of Intent). The bank then has 14 days to respond to the Notice of Intent. After considering the bank's response, the OCC may issue the order, decide not to issue the order, or seek additional information from the bank before making a final decision. Alternatively, the OCC may issue an order without providing the bank with a Notice of Intent. In such a case, the bank may appeal after-the-fact to the OCC and the OCC has 60 days to consider the appeal and render a final decision. When the OCC issues an order, a bank is deemed to be in non-compliance with part 30. Orders are formal, public documents, and they may be enforced in district court or through the assessment of civil money penalties under 12 U.S.C. 1818.

The Guidelines consist of three parts. Part I provides an introduction to the Guidelines and explains their scope and application. Part II sets forth general standards for residential mortgage lending practices. Part III describes the implementation of those standards. We have also made technical conforming amendments to the part 30 regulations to add references to new Appendix C, which contains the Guidelines, where appropriate.

Part I describes the purpose of the Guidelines, which is to protect against involvement by national banks and their operating subsidiaries, either directly or through loans that they purchase or make through intermediaries, in predatory or abusive residential mortgage lending practices that are injurious to bank customers and that expose the bank to credit, compliance, reputation, and other risks associated with abusive lending practices. The Guidelines apply to residential mortgage lending by national banks, federal branches and agencies of foreign banks, and operating subsidiaries of such entities, except for brokers, dealers, persons providing insurance, investment companies, and investment advisers, all of which are functionally regulated pursuant to various provisions of law. For purposes of the Guidelines, a residential mortgage loan is any loan or other extension of credit made to one or more individuals for personal, family, or household purposes and secured by an owner-occupied, 1-4 family residential dwelling, including a cooperative unit or mobile home.

The Guidelines are enforceable, pursuant to Section 39 of the FDIA and part 30 of our rules, as we have described. However, as set forth in Part I, nothing in the Guidelines in any way limits the authority of the OCC to address unsafe or unsound practices or conditions, unfair or deceptive practices, or other violations of law. Thus, for example, a bank's failure to comply with the standards set forth in these Guidelines also may be actionable under section 8 of the FDIA if the failure constitutes an unsafe or unsound practice, or under section 5 of the Federal Trade Commission Act if it is an unfair or deceptive practice.

Part II of the Guidelines describes two overarching objectives that should inform a bank's residential mortgage lending activities. First, the bank must be able effectively to manage the various risks—including credit, legal, compliance, and reputation risks—associated with those activities. Second, the bank must not become engaged in abusive, predatory, unfair, or deceptive practices, directly, indirectly through mortgage brokers or other intermediaries, or through purchased loans. These objectives reflect expectations that are fundamental to sound banking practices. Different banks may achieve these objectives using different methods, however, and the Guidelines expressly recognize that the practices a bank follows in its residential mortgage lending activities need to be consistent with, and appropriate to, its size and complexity and the nature and scope of those activities.

Part III describes standards for the implementation of the objectives described in Part II. It comprises six components. First, Part III lists and briefly describes specific lending practices inconsistent with sound residential mortgage lending practices, including practices known as equity stripping, fee packing, and loan flipping, refinancing of a special subsidized mortgage on terms adverse to the consumer, and encouraging a borrower to breach a contract and default on an existing loan in connection with a refinancing of that loan. The features of these practices are widely recognized as abusive and were addressed by the OCC in our February, 2003 advisory letters.

Second, Part III describes certain loan terms, conditions and features—such as financing single premium insurance, negative amortization and mandatory arbitration—that may, under particular circumstances, be susceptible to abusive, predatory, unfair or deceptive practices, yet may be acceptable and may benefit customers under other circumstances. Part III cautions banks to exercise care when they offer loans containing these terms, conditions, and features, particularly in connection with subprime lending.

Third, banks that decide to offer loans with the types of features just described should take particular account of the circumstances of the consumers to whom the loans are offered. Banks should exercise heightened diligence if they offer such loans to consumers who are elderly, substantially indebted, not financially sophisticated, have language barriers, have limited or poor credit histories, or have other characteristics that limit their credit choices. In addition, banks should apply heightened internal controls and monitoring with regard to this type of lending.

Fourth, banks should provide timely, sufficient, and accurate information to consumers concerning the terms and the relative costs, risks, and benefits of the loan.

Fifth, with respect to consumer residential mortgage loans that a bank purchases, or makes through a mortgage broker or other intermediary, the bank's residential mortgage lending activities also should include appropriate measures to mitigate risks. Part III provides a number of examples of such measures, including criteria for entering into and continuing relationships with intermediaries and originators, methods through which the bank may retain appropriate controls over mortgage origination functions, and criteria and procedures for the bank to take appropriate corrective action if necessary.

Finally, Part III makes clear that a bank's responsibilities for maintaining appropriate consumer residential mortgage lending practices are ongoing. For example, on a continuing basis, a bank should monitor its compliance with applicable law and its internal lending standards, and monitor and evaluate its handling of customer complaints. The bank's activities also should include appropriate steps for taking corrective action in response to failure to adhere to the requirements of the law or its internal lending standards, and for making adjustments to the bank's activities to enhance their effectiveness or to reflect changes in business practices, market conditions, or the bank's lines of business, residential mortgage loan programs, or customer base.

These Guidelines take effect April 8, 2005. The Administrative Procedure Act  10 (APA) requirements for notice and opportunity for comment do not apply to the Guidelines. The APA excepts from its notice and comment requirements, among other types of issuances, “general statements of policy.”  11 General statements of policy are “statements issued by an agency to advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power.”  12 Consistent with this definition, courts have found that an issuance is a general statement of policy if it applies prospectively and “leaves the [agency] free to exercise [its] informed discretion in the situations that arise.”  13

Although these residential mortgage lending standards build on the standards in our 2003 Advisory Letters, their placement within the enforcement framework established by Section 39 of the FDIA applies prospectively only. Moreover, we are issuing the Guidelines in a form that, by the express terms of Section 39, preserves the OCC's discretion to require a compliance plan, and, thus, whether to initiate the part 30 process in any particular case. For these reasons, we conclude that the Guidelines fall within the APA exception for general statements of policy and that notice and comment procedures are, accordingly, not required.

The Regulatory Flexibility Act (RFA) does not apply to a rule for which an agency is not required to publish a notice of proposed rulemaking. 5 U.S.C. 603.

The OCC has determined that the Guidelines are not a significant regulatory action under Executive Order 12866.

The Unfunded Mandates Reform Act of 1995 (UMA), Public Law 104-4, applies only when an agency is required to promulgate a general notice of proposed rulemaking or a final rule for which a general notice of proposed rulemaking was published. 2 U.S.C. 1532. As noted earlier, the OCC has determined that a notice of proposed rulemaking was not required for these Guidelines. Accordingly, the OCC concludes that the UMA does not require an unfunded mandates analysis of the Guidelines.

Moreover, the OCC believes that the Guidelines will not result in expenditures by State, local, and tribal governments, or by the private sector, of more than $100 million in any one year. Accordingly, the OCC has not prepared a budgetary impact statement or specifically addressed the regulatory alternatives considered.

This amendment to 14 CFR 71 modifies the Class E airspace area extending upward from 700 feet above the surface at Rolla, MO. An examination of controlled airspace for Rolla Downtown Airport revealed it does not meet the criteria for 700 feet AGL airspace required for diverse departures as specified in FAA Order 7400.2E, Procedures for Handling Airspace Matters. The criteria in FAA Order 7400.2E for an aircraft to reach 1200 feet AGL, taking into consideration rising terrain, is based on a standard climb gradient of 200 feet per mile plus the distance from the airport reference point to the end of the outermost runway. Any fractional part of a mile is converted to the next higher tenth of a mile. This amendment expands the airspace area from a 6-mile radius to a 7.8-mile radius of Rolla Downtown Airport and brings the legal description of the Rolla, MO Class E airspace area into compliance with FAA Order 7400.2E. This area will be depicted on appropriate aeronautical charts. Class E airspace areas extending upward from 700 feet or more above the surface of the earth are published in paragraph 6005 of FAA Order 7400.9M, Airspace Designations and Reporting Points, dated August 30, 2004, and effective September 16, 2004, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in the Order.

The FAA anticipates that this regulation will not result in adverse or negative comment and, therefore, is issuing it as a direct final rule. Previous actions of this nature have not been controversial and have not resulted in adverse comments or objections. Unless a written adverse or negative comment, or a written notice of intent to submit an adverse or negative comment is received within the comment period, the regulation will become effective on the date specified above. After the close of the comment period, the FAA will publish a document in the Federal Register indicating that no adverse or negative comments were received and confirming the date on which the final rule will become effective. If the FAA does receive, within the comment period, an adverse or negative comment, or written notice of intent to submit such a comment, a document withdrawing the direct final rule will be published in the Federal Register , and a notice of proposed rulemaking may be published with a new comment period.

Interested parties are invited to participate in this rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2005-20060/Airspace Docket No. 05-ACE-2.” The postcard will be date/time stamped and returned to the commenter.

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

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

This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority since it contains aircraft executing instrument approach procedures to Rolla Downtown Airport.

On September 3, 2004, the FAA published in the Federal Register a notice proposing to establish G-16 (69 FR 53860), a new IFR route in Alaska. This action would convert an uncharted non-regulatory part 95 route to a colored Federal airway. The route conversion provides an airway structure to support existing commercial services in Alaska. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal. No comments were received. With the exception of editorial changes, this amendment is the same as that proposed in the notice.

The FAA is amending Title 14 Code of Federal Regulations (14 CFR) part 71 (part 71) to extend G-16 from the Put River, NDB, to the Barter Island, NDB in Alaska. This action adds to the IFR airway and route structure in Alaska. The FAA is taking this action to enhance the safety and management of aircraft operations in Alaska. Adoption of this Federal airway: (1) Provides pilots with minimum en route altitudes and minimum obstruction clearance altitudes information; (2) establishes controlled airspace thus eliminating some of the commercial IFR operations in uncontrolled airspace; and (3) improves the management of air traffic operations and thereby enhance safety.

Green Colored Federal Airways are published in paragraph 6009(a) of FAA Order 7400.9M dated August 30, 2004, and effective September 16, 2004, which is incorporated by reference in 14 CFR 71.1. The Green Colored Federal Airway listed in this document will be published subsequently in the order.

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

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with Paragraph 311(a) of FAA Order 1050.1E, Policies and Procedures for Considering Environmental Impacts. This airspace action is not expected to cause any potentially significant impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

On November 23, 2004, the FAA published in the Federal Register a notice proposing to establish V-623 (69 FR 68105). Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on this proposal to the FAA. No comments were received in response to the proposal.

The FAA is amending Title 14 Code of Federal Regulations (14 CFR) part 71 (part 71) by establishing V-623 in the vicinity of Newark, NJ, between the Sparta, NJ, VORTAC, and the Carmel, NY, VOR/DME. The FAA is taking this action to enhance the management of aircraft transiting from the New England area to airports in the Newark, NJ, area.

VOR Federal Airways are published in paragraph 6010 of FAA Order 7400.9M dated August 30, 2004 and effective September 16, 2004, which is incorporated by reference in 14 CFR 71.1. The VOR Federal Airway listed in this document will be published subsequently in the order.

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

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with Paragraph 311(a) of FAA Order 1050.1E, Policies and Procedures for Considering Environmental Impacts. This airspace action is not expected to cause any potentially significant impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

This amendment to part 95 of the Federal Aviation Regulations (14 CFR part 95) amends, suspends, or revokes IFR altitudes governing the operation of all aircraft in flight over a specified route or any portion of that route, as well as the changeover points (COPs) for Federal airways, jet routes, or direct routes as prescribed in part 95.

The specified IFR altitudes, when used in conjunction with the prescribed changeover points for those routes, ensure navigation aid coverage that is adequate for safe flight operations and free of frequency interference. The reasons and circumstances that create the need for this amendment involve matters of flight safety and operational efficiency in the National Airspace System, are related to published aeronautical charts that are essential to the user, and provide for the safe and efficient use of the navigable airspace. In addition, those various reasons or circumstances require making this amendment effective before the next scheduled charting and publication date of the flight information to assure its timely availability to the user. The effective date of this amendment reflects those considerations. In view of the close and immediate relationship between these regulatory changes and safety in air commerce, I find that notice and public procedure before adopting this amendment are impracticable and contrary to the public interest and that good cause exists for making the amendment effective in less than 30 days.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

This amendment to part 97 of the Federal Aviation Regulations (14 CFR part 97) establishes, amends, suspends, or revokes Standard Instrument Approach Procedures (SIAPs). The complete regulatory description of each SIAP is contained in official FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of the Federal Aviation Regulations (FAR). The applicable FAA Forms are identified as FAA Forms 8260-3, 8260-4, and 8260-5. Materials incorporated by reference are available for examination or purchase as stated above.

The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. The provisions of this amendment state the affected CFR (and FAR) sections, with the types and effective dates of the SIAPs. This amendment also identifies the airport, its location, the procedure identification and the amendment number.

This amendment to part 97 is effective upon publication of each separate SIAP as contained in the transmittal. Some SIAP amendments may have been previously issued by the FAA in a National Flight Data Center (NFDC) Notice to Airmen (NOTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for some SIAP amendments may require making them effective in less than 30 days. For the remaining SIAPs, an effective date at least 30 days after publication is provided.

Further, the SIAPs contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports. Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making some SIAPs effective in less than 30 days.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The basic purpose of the SSI program (title XVI of the Social Security Act (the Act)) is to ensure a minimum level of income to people who are age 65 or older, or blind or disabled, and who have limited income and resources. The law provides that payments can be made only to people who have income and resources below specified amounts. Therefore, the amount of income and resources a person has is a major factor in deciding whether the person can receive SSI benefits and in computing the amount of the benefits.

The Government Accountability Office (GAO) has reported that annual costs to the Federal Government for administering means-tested Federal programs are significant and that eligibility determination activities make up a substantial portion of these costs (Means-Tested Programs: Determining Financial Eligibility Is Cumbersome and Can Be Simplified, GAO-02-58 , November 2, 2001 available at http://www.gao.gov ). In particular, the GAO cited the variations and complexity of Federal financial eligibility rules as contributing to processes that are often duplicative and cumbersome for staff workers (including state and local caseworkers) and for those who apply for assistance. In order to streamline our eligibility determination process, as well as make our financial eligibility rules more consistent with those of other means-tested Federal programs, we are making the following changes to our rules on determining income and resources under the SSI program.

Section 1612 of the Act defines income as both earned income and unearned income, including support and maintenance furnished in cash or in kind. Under our current rules, income may include anything you receive in cash or in kind that you can use to meet your needs for food, clothing, and shelter. Both earned income and unearned income can include items received in kind. Generally, we value in-kind items at their current market value. However, we have special rules for valuing food, clothing, or shelter that is received as unearned income.

In-kind support and maintenance is unearned income in the form of food, clothing, or shelter that is given to a person or that the person receives because someone else pays for it. Section 1612(a)(2)(A) of the Act provides that if an eligible individual receives in-kind support and maintenance, his or her SSI payment may be reduced by up to one-third of the monthly Federal benefit rate. To determine whether the one-third reduction applies, we must ask claimants and beneficiaries a lengthy series of questions about their living arrangements and household expenses. We also must obtain similar information from the homeowner or head of the household, who often is not a claimant or recipient.

The complexity of the rules for valuing in-kind support and maintenance results in reporting requirements that are difficult for the public to understand and follow. We are, therefore, simplifying the SSI program by eliminating clothing from the definition of income and from the definition of in-kind support and maintenance. Clothing is one of the basic sustenance needs, along with food and shelter. However, unlike food and shelter, clothing generally is not received every month. Items of clothing are more likely to be received infrequently and sporadically, and they generally have no substantial financial value. In addition, our attempts to discover and assign a value to gifts of clothing are not only administratively burdensome, but have been viewed as harsh and demeaning and as providing a disincentive for family members to help needy relatives.

After 30 years of administering the SSI program, our experience shows that clothing received as in-kind support and maintenance rarely affects an individual's eligibility for SSI or the amount of benefits. Thus, questioning individuals about items as personal as basic clothing may be seen as intrusive without achieving any substantial program goal or enhancing program integrity. We are making this change to simplify our rules and improve our work efficiency. This change will make our rules less intrusive and more protective of the dignity and privacy of claimants and beneficiaries, and will not significantly increase SSI program costs.

We are removing the specific reference to clothing from our broad definition of income in § 416.1102, which covers both earned and unearned income. This will permit us to disregard gifts of clothing when we apply the special rules for valuing in-kind support and maintenance. Counting gifts of clothing puts a negative face on the SSI program without advancing any substantial program goal and incurs administrative costs.

There will be one situation where we will be required to consider clothing as income. This situation could occur when an individual receives clothing from an employer that we must count as wages under section 1612(a)(1)(A) of the Act. Wages are the same for SSI purposes as for the earnings test in the Social Security retirement program. Under the earnings test, wages may include the value of food, clothing, or shelter, or other items provided instead of cash. We refer to these items as in-kind earned income. Because we are required by the Act to count the value of these items as income, we are not making any changes to our current rule in § 416.1110(a). Situations where clothing constitutes wages are very uncommon.

These rules remove references to clothing throughout subpart K, which explains how we count income. We also are updating the second example in § 416.1103(g) to reflect that SSI eligibility is now based on an individual's income, resources, and other relevant circumstances in a month rather than in a calendar quarter . The change from a quarterly determination to a monthly determination, which is explained in § 416.420, was effective April 1, 1982 pursuant to section 2341 of Public Law 97-35. This example was inadvertently overlooked when conforming changes were previously made.

Section 1613(a)(2)(A) of the Act provides that in determining the resources of an individual (and eligible spouse, if any), SSA will exclude household goods and personal effects to the extent that their total value does not exceed an amount that the Commissioner decides is reasonable. In interpreting “reasonable” value of household goods and personal effects, § 416.1216(b) of our regulations provides for an exclusion of up to $2,000 of the total equity value. The amount in excess of $2,000 is counted against the resource limit, currently $2,000 for an individual and $3,000 for an individual and spouse.

Section 416.1216(a) defines household goods as including household furniture, furnishings, and equipment that are commonly found in or about a house and used in connection with the operation, maintenance, and occupancy of the home. Also included are furniture, furnishings, and equipment used in the functions and activities of home and family life as well as those items that are for comfort and accommodation. This section specifically defines personal effects as including clothing, jewelry, items of personal care, and individual educational and recreational items. In addition, § 416.1216(c) provides specific exclusions for a wedding ring, an engagement ring, and equipment required because of a person's physical condition.

To determine the equity value of household goods and personal effects, we ask the person for a list of household and personal items, the value of each, and what the individual owes on each. This process can be complex, difficult for the public to understand, and unduly intrusive into personal affairs. We are amending these rules as part of our efforts to simplify the SSI program.

We are amending our regulations for household goods and personal effects by eliminating the dollar value limit and by excluding from countable resources all:

• Household goods if they are items of personal property, found in or near a home, that are used on a regular basis, or items needed by the householder for maintenance, use and occupancy of the premises as a home; and

• Personal effects if they are items of personal property that ordinarily are worn or carried by the individual, or are articles that otherwise have an intimate relation to the individual.

Thus, we will interpret the word “reasonable” in section 1613(a)(2)(A) of the Act in terms other than a specific dollar limit. The reasonable value will instead be based on the uses and characteristics of the item. Our current rules on household goods and personal effects reflect our view that it is reasonable to totally exclude certain items of personal property because they are rarely of significant value or are intimately related to the individual and his or her particular needs. Accordingly, we have determined that requiring conversion of such items for subsistence needs is unreasonable.

Currently, § 416.1216(c) provides for totally excluding a wedding ring and an engagement ring, and household goods and personal effects required because of a person's physical condition. We are expanding this approach generally to household goods and personal effects so that they may be totally excluded from resources because our experience in 30 years of administering the SSI program shows that these items almost never have any substantial value, particularly once they are used.

These rules amend § 416.1216 to define and identify household goods and personal effects that we will not count as resources. Included in the list of excluded personal effects are items of cultural or religious significance since these items have an intimate relationship to an individual. The list of exclusions also includes items required due to an individual's impairment. This will allow for exclusion of items required because of any impairment, not just physical impairments. For example, our experience has shown that children and adults with learning disabilities use personal computers to assist them with schoolwork and other daily activities. This change will allow us to exclude items such as personal computers from countable resources.

We are also amending § 416.1210(b) by referring to § 416.1216 for the definition of household goods and personal effects that we will not count as resources.

While simplifying the SSI program, our changes continue to recognize that individuals applying for SSI may own items for investment purposes which may be quite valuable. Such items as gems, jewelry that is not worn or held for family significance, and collectibles will still be considered countable resources and subject to the limits in § 416.1205. Thus, the exclusion for household goods and personal effects will not apply to such items that have investment value.

Our experience in administering the SSI program suggests that the change we are making will affect the eligibility of only a few applicants and recipients. However, this change will simplify our rules and improve our work efficiency without significantly increasing program costs. It will make our rules less intrusive and more protective of the dignity of applicants and recipients. This intrusion into the privacy of a person's home unnecessarily puts a negative face on the SSI program without achieving any corresponding gain in program integrity or payment accuracy. It also will more accurately reflect the reality that all SSI applicants and recipients need household goods and personal effects to perform activities of daily living and maintain quality of life. Accordingly, we believe it would be unreasonable to require applicants and recipients to convert these items to cash in order to meet their subsistence needs. The resale value of typical household items is minimal after the item has been used. Although it could be expensive to replace certain household items, these items would be worth very little if the individual tried to resell them to get cash for subsistence needs.

Section 1613(a)(2)(A) of the Act provides that, in determining the resources of an individual (and eligible spouse, if any) for SSI purposes, SSA will exclude an automobile to the extent that its value does not exceed an amount that the Commissioner of Social Security decides is reasonable. Current regulations at § 416.1218 define an “automobile” as a passenger car or other vehicle used to provide necessary transportation.

In interpreting “reasonable” value, § 416.1218(b)(1) provides that an automobile is totally excluded regardless of value if it meets any of the four following criteria:

• It is necessary for employment;

• It is necessary for the medical treatment of a specific or regular medical problem;

• It is modified for a handicapped person; or

• It is necessary because of certain factors to perform essential daily activities.

If no automobile can be excluded based on its use, one automobile is excluded to the extent its current market value does not exceed $4,500. See § 416.1218(b)(2). Additional automobiles are counted as nonliquid resources to the extent of their equity value. See § 416.1218(b)(3).

We are amending our rules to exclude one automobile from resources regardless of its value if it is used for transportation for the individual or a member of the individual's household. We are doing so because our data establish that the vast majority of “first” automobiles owned by SSI recipients are currently excluded based on one of the four transportation criteria set out in § 416.1218(b)(1). In addition, there is no indication that the automobiles which are not covered by the special circumstances represent significant resources. Based on quality assurance data for 1998, in approximately 98 percent of those SSI cases involving automobile ownership, the value of one car was completely excluded. Anecdotal data from SSA claims representatives support the 1998 quality assurance data.

We are revising § 416.1210(c) to exclude from resources an automobile that is used for transportation as provided in § 416.1218. We are also changing § 416.1218(b) to exclude totally one automobile regardless of value if it is used for transportation for the individual or a member of the individual's household and to eliminate the existing four specific reasons for exclusion. We are also removing § 416.1218(c), which contains the definition of the current market value of an automobile.

Under current policy, we virtually always exclude one automobile for each individual or couple applying for or receiving SSI. Our aim in simplifying the automobile rules is to achieve essentially the same outcome by automatically excluding one automobile used for transportation for each individual or couple without unnecessary claims development.

The Act states that we will exclude an automobile of reasonable value. We have previously interpreted the word “reasonable” in terms of the uses and needs of disabled individuals and in terms of dollar limits. Specifically, the preamble to the final regulation which increased the exclusion of the automobile value to $4,500 on July 24, 1979 (44 FR 43265) stated that we had “concluded that there are special circumstances which justify entirely excluding an automobile. For example, if the automobile is needed for employment or medical treatment or if it has been modified for use by a handicapped person, we will exclude it without regard to value.” Since October 22, 1985 (50 FR 42687), the regulations also provide for total exclusion of an automobile if, due to certain factors, it is necessary for transportation to perform essential daily activities. Our experience shows that virtually all SSI claimants and recipients who have automobiles need them for transportation under the circumstances listed above.

It should be noted that our interpretation of “reasonable” will not eliminate the requirement to develop the value of second or additional automobiles. Nor will the “first” automobile be excluded if it is not used for transportation. In those cases where a vehicle is inoperable, or operable but not used at all, or used only for recreation ( e.g. , a dune buggy), it will still be valued according to current rules. We believe it would be unreasonable to exclude from resources the value of a vehicle that is not used for transportation.

The change will have a negligible effect on program costs and will simplify administration of the exclusion. It will eliminate the need for SSA claims representatives to ask the SSI recipient if his/her vehicle meets one of the four specific exclusion criteria or otherwise determine the value of the vehicle.

On January 6, 2004, we published proposed rules in the Federal Register at 69 FR 554 and provided a 60-day period for interested parties to comment. We received comments from 49 individuals and 20 organizations. Because some of the comments received were quite detailed, we have condensed, summarized or paraphrased them in the discussion below. We have tried to present all views adequately and to carefully address all of the issues raised by the commenters that are within the scope of the proposed rules.

Fifty-nine of the commenters fully support the proposed rules and have not requested any additional changes in the regulations. Most of these commenters cited “simplification of the SSI rules” and “reducing the burden on the public” as the reasons for their support of the proposed rules.

The remaining commenters raised the following issues that are within the scope of the proposed rules.

Comment: Several commenters supported the proposed regulations but recommended a change to the automobile exclusion. We proposed to exclude one automobile regardless of value if it is used for transportation by the SSI eligible individual or a member of that individual's household. The commenters recommended inserting language which would also permit exclusion of one automobile if SSA determines that the automobile is being used by a person who lives outside the household to help the SSI eligible individual. The commenters state that this would address the situation in which the automobile is never used by the SSI eligible individual or any member of the household but it is used by a person outside the household to run errands for the eligible individual.

Response: After careful consideration, we decided not to adopt this suggested change. The Social Security Act provides an exclusion for an automobile of reasonable value. Since 1985, our interpretation of reasonable value has been based on the premise that the excluded automobile is used to provide necessary transportation for the individual or a member of the individual's household. If an automobile is not used to provide transportation for the individual or members of the individual's household, it is not excluded from resources. Limiting the exclusion to an automobile used to provide transportation for the individual or a household member is appropriate because it links the exclusion of the automobile with use of the automobile by the person who owns the automobile or by a member of his or her household. In addition, the revised rules will permit an exclusion of the automobile if a person residing outside the individual's household uses the automobile to provide transportation for the individual or a household member.

Comment: One individual disagreed with our proposed rule for the automobile exclusion because the rule does not limit the dollar value of the automobile being excluded. The commenter stated that such a rule would not be well-received by the public.

Response: After careful consideration, we have decided not to make any change based on this comment. Under our revised rules, we are simplifying the procedures for determining whether an automobile is excluded. However, we are not making any change to the exclusion on the basis of a dollar limit. We have excluded automobiles used for necessary transportation regardless of value since 1985. After nearly 20 years of experience with excluding automobiles regardless of value, we have not found that this approach has caused concern in the general public. In addition, our effort to simplify the rules for this exclusion would be negated by adding a requirement to determine the value of excluded automobiles which in many situations would require determining the individual's equity in the automobile and the condition of the automobile.

Comment: One individual expressed overall support for the proposed rules but recommended that artwork and antiques should not be excluded under the exclusion for household goods and personal effects. The commenter expressed concern that an applicant for SSI benefits could own valuable artwork or antiques and that there should be a limit on the value of such items.

Response: After careful consideration, we have decided not to change the language of the exclusion for household goods and personal effects to specify that artwork and antiques should not be excluded. We do not believe such a change is necessary. Although these rules will eliminate the dollar limit for the exclusion of household goods and personal effects, they will still permit us to consider the resources of an individual who owns valuable items that are not considered as household goods or personal effects under our regulatory definition. Our experience of 30 years of administering the SSI program shows that household goods and personal effects rarely have substantial resale value, particularly once they are used. However, our rules will continue to recognize that individuals applying for SSI benefits may own items for investment purposes which may be quite valuable. Such items as gems, jewelry not held for family significance, and collectibles will still be considered as countable resources and be subject to the SSI resource limit. Artwork and antiques can fall within the category of collectibles, and, where they have been acquired or held for their investment value, such items will be countable resources. Although in our claims development process we will not routinely examine all of an individual's furniture and personal possessions to determine if any pieces are valuable artwork or antiques, we will have the regulatory authority to count such value items as resources when we become aware of such items.

The Office of Management and Budget (OMB) has reviewed these final rules in accordance with Executive Order 12866, as amended by Executive Order 13258. We have also determined that these final rules meet the plain language requirement of Executive Order 12866, as amended by Executive Order 13258.

We certify that these final rules will not have a significant economic impact on a substantial number of small entities, because they will affect only individuals. Thus, a regulatory flexibility analysis as provided in the Regulatory Flexibility Act, as amended, is not required.

These final rules will impose no additional reporting or recordkeeping requirements requiring OMB clearance.

On October 12, 2004, we published a notice of proposed rulemaking (NPRM) entitled “Drawbridge Operation Regulations; Mantua Creek, Paulsboro, NJ” in the Federal Register (69 FR 60595). We received no letters commenting on the proposed rule. No public meeting was requested, and none was held.

The New Jersey Department of Transportation (NJDOT) owns and operates the S.R. 44 Bridge over Mantua Creek in Paulsboro, NJ. The current regulations set out in 33 CFR 117.729 require the draw to open on signal from March 1 through November 30 from 7 a.m. to 11 p.m., and shall open on signal at all other times upon four hours notice.

Parsons Brinckerhoff, a design consultant, on behalf of NJDOT requested a temporary change to the existing regulations for the S.R. 44 Bridge over Mantua Creek to facilitate necessary repairs. The repairs consist of structural rehabilitation and various mechanical, electrical repairs and improvements. To facilitate repairs, the vertical lift span must be closed to vessel traffic from 8 a.m. on September 12, 2005, through 6 p.m. on December 9, 2005.

The Coast Guard has reviewed bridge opening data provided by the NJDOT. The data, from years 2000 to 2002, shows a substantial decrease in the numbers of bridge openings and vessel traffic transiting the area after the Labor Day weekend. Based on the data provided, the proposed closure dates will have minimal impact on vessel traffic.

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

We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary. We established this conclusion based on historical data, and on the fact that the closure dates support minimal impact due to the reduced number of vessels requiring transit through the bridge.

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

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

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking process. No assistance was requested from any small entity.

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

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

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

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

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

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

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

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

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this rule under Commandant Instruction M16475.lD, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (32)(e) of the Instruction, from further environmental documentation.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B) and (d)(3), the Coast Guard finds that good cause exists for not publishing a NPRM and for making this regulation effective less than 30 days after publication in the Federal Register . Due to the construction of the new Sidney Lanier Bridge, the widening of the channel, and the removal of the old bridge structure, the maneuver required by the current RNA is no longer necessary. Because the old Sidney Lanier Bridge no longer exists, an NPRM to remove the RNA is unnecessary. Similarly, it is unnecessary to delay the effective date of the regulation beyond the date of publication on the Federal Register .

The Regulated Navigation Area at 33 CFR 165.735 Brunswick, Georgia, Turtle River, Vicinity of Sidney Lanier Bridge was introduced in 1987 to improve navigational safety after the old Sidney Lanier Bridge had suffered allisions in 1972 and 1987. The close proximity of the bridge to the turn from the East River onto the Turtle River, in conjunction with the heavy current and narrow channel width, provided insufficient time for many vessels departing the East River, outbound for sea under the old Sydney Lanier Bridge, to properly shape up for safe transit. The RNA requires every vessel over 500 GRT departing the Port of Brunswick for sea to depart only from the Turtle River, except during flood tide. Vessels over 500 GRT departing for sea southbound down the East River negotiate a 129§ starboard turn, westward onto the Turtle River, transit up river to the turning basin to negotiate a 180° turn, and then transit down bound on the Turtle River through what was previously a 200′ wide restricted channel.

Due to the construction of the new Sidney Lanier Bridge and widening of the channel, the maneuver required by the current RNA is no longer necessary. The current navigation requirements of 33 CFR 165.735 pose a greater risk of a vessel casualty due to the now unnecessary complex maneuvering. The rule removes the maneuvers required by the current RNA and will reduce the transit time of vessels bound for sea from the East River. Due to the removal of the old bridge structures, no other navigational or safety requirements are necessary.

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

We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary. This rule removes navigation restrictions currently imposed on mariners and make transit easier and quicker. The anticipated beneficial result forms the basis for the determination that the economic impact will be minimal.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. The current Regulated Navigation Area imposes restrictions on vessels transiting the area. The mariners who pilot the affected vessels have requested this rule. The impact of this rule will be a beneficial one as it removes restrictions, improves safety and enhances navigability.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we want to assist small entities in understanding this rule. If the rule affects your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact LT Aloysious Zealy, Planning Officer, MSO Savannah at 912-652-4353 ext. 240. The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

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

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

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

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

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

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

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

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

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

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this rule under Commandant Instruction M16475.lD, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation. Paragraph (34)(g) applies because this rule disestablishes a Regulated Navigation Area, an action expressly recognized by paragraph (34)(g).

Under figure 2-1, paragraph (34)(g), of the Instruction, an “Environmental Analysis Check List” and a “Categorical Exclusion Determination” are not required for this rule.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B) and (d)(3), the Coast Guard finds that good cause exists for not publishing a NPRM and for making this regulation effective less than 30 days after publication in the Federal Register . While formation of ice generally occurs in the winter months, predicting when ice will begin to form, where it will be located and the thickness of the ice is difficult and depends on the weather conditions. Ice has just begun to form in the area of this safety zone. Publishing a NPRM and delaying its effective date would be contrary to public interest, since immediate action is needed to protect mariners against potential hazards associated with ice and to ensure the safety of the environment on the Upper Chesapeake Bay and its tributaries.

Although we did not publish a notice of proposed rulemaking, we encourage you to participate in this rulemaking by submitting comments and related materials.

If you do so, please include your name and address, identify the docket number for this rulemaking (CGD05-05-008), indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this rule in view of them.

During a moderate or severe winter, frozen waterways present numerous hazards to vessels. Ice in a waterway may hamper a vessel's ability to maneuver, and could cause visual aids to navigation to be submerged, destroyed or moved off station. Ice abrasions and ice pressure could also compromise a vessel's watertight integrity, and non-steel hulled vessels would be exposed to a greater risk of hull breach.

When ice conditions develop to a point where vessel operations become unsafe, it becomes necessary to impose operating restrictions to ensure the safe navigation of vessels. A safety zone is a tool available to the Captain of the Port (COTP) to restrict and manage vessel movement when hazardous conditions exist. The COTP Baltimore is establishing a safety zone within all navigable waters within the COTP Baltimore zone, which will restrict access to only those vessels meeting conditions specified in broadcast notice to mariners and marine safety information bulletins.

Ice generally begins to form in the Upper Chesapeake Bay and its tributaries, including the Chesapeake and Delaware (C & D) Canal, in late December or early January. During a moderate or severe winter, ice in navigable waters can become a serious problem, requiring the use of federal, state and private ice breaking resources. The Commander, Coast Guard Activities Baltimore will use its COTP authority to promote the safe transit of vessels through ice-congested waters and the continuation of waterborne commerce throughout the winter season.

Ice fields in the Upper Chesapeake Bay and its tributaries move with prevailing winds and currents. Heavy ice buildups can occur in the C & D Canal, from Town Point Wharf to Reedy Point. Other areas that are commonly affected by high volumes of ice are, the Elk River, Susquehanna River, Patapsco River, Nanticoke River, Wicomico River, Tangier Sound, Pocomoke River and Sound, and the Potomac River. Once ice build up begins it can affect the transit of large ocean-going vessels.

Ice reports over the last several years have varied greatly on the Upper Chesapeake Bay and its tributaries. Historically, ice has been reported as NEW, FAST OR PACK ICE. The percentage of ice covering the river has been reported any where from 10% to 100%. The thickness has been reported any where from 1/2 ″ to 18″ thick.

The purpose of this regulation is to promote maritime safety, and to protect the environment and mariners transiting the area from the potential hazards due to ice conditions that become a threat to navigation. This rule establishes a safety zone encompassing all waters of the COTP Baltimore zone. The COTP will notify the maritime community, via marine broadcasts, of the location and thickness of the ice as well as the ability of vessels to transit through the safety zone. Mariners allowed to travel through the safety zone with the permission of the COTP must maintain a minimum safe speed, in accordance with the Navigation Rules as seen in 33 CFR Chapter I, Subchapters D and E.

Ice Condition One means the emergency condition in which ice has largely covered the upper Chesapeake Bay and its tributaries, and the C & D Canal. Convoys are required and restrictions to shaft horsepower and vessel transit are imposed.

Ice Condition Two means the alert condition in which at least 2 inches of ice begins to form in the Upper Chesapeake Bay and its tributaries, and the C & D Canal. The COTP Baltimore may impose restrictions, including but not limited to, shaft horsepower and hull type restrictions.

Ice Condition Three means the readiness condition in which weather conditions are favorable for the formation of ice in the navigable waters of the Upper Chesapeake Bay and its tributaries, and the C & D Canal. Daily reports for the Coast Guard Stations and commercial vessels are monitored. (No limitations on vessel traffic, hull type or shaft horsepower).

This temporary rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866 and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not significant under the regulatory policies and procedures of the Department of Homeland Security (DHS).

We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary.

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

This rule will have virtually no impact on any small entities. This rule does not require a general notice of proposed rulemaking and, therefore, it is exempt from the requirement of the Regulatory Flexibility Act. Although this rule is exempt, we have reviewed it for potential economic impact on small entities.

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

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking process.

Small businesses may send comments on the actions of Federal employees who enforce or otherwise determine compliance with Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-743-3247).

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

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

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

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

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

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

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. We invite your comments on how this rule might impact tribal governments, even if that impact may not constitute a “tribal implication” under the Order.

We have analyzed this rule under Executive Order 12211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that, under figure 2-1, paragraph (34)(g), of Commandant Instruction M16475.1D, this rule is categorically excluded from further environmental documentation. A “Categorical Exclusion Determination” is available in the docket where indicated under ADDRESSES.

EPA is amending the table of currently approved information collection request (ICR) control numbers issued by OMB for various regulations. The amendment updates the table to list those information collection requirements promulgated under the Transportation Conformity Rule Amendments for the New 8-hour Ozone and PM 2.5 National Ambient Air Quality Standards and Miscellaneous Revisions for Existing Areas; Transportation Conformity Rule Amendments: Response to Court Decision and Additional Rule Changes, which appeared in the Federal Register on July 1, 2004 (69 FR 40004). The affected regulations are codified at 40 CFR part 93. EPA will continue to present OMB control numbers in a consolidated table format to be codified in 40 CFR part 9 of the Agency's regulations, and in each CFR volume containing EPA regulations. The table lists CFR citations with reporting, recordkeeping, or other information collection requirements, and the current OMB control numbers. This listing of the OMB control numbers and their subsequent codification in the CFR satisfies the requirements of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ) and OMB's implementing regulations at 5 CFR part 1320.

This ICR was previously subject to public notice and comment prior to OMB approval. Due to the technical nature of the table, EPA finds that further notice and comment is unnecessary. As a result, EPA finds that there is “good cause” under section 553(b)(B) of the Administrative Procedure Act, 5 U.S.C. 553(b)(B), to amend this table without prior notice and comment.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and is therefore not subject to review by the Office of Management and Budget. In addition, this action does not impose any enforceable duty, contain any unfunded mandate, or impose any significant or unique impact on small governments as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). This rule also does not require prior consultation with State, local, and tribal government officials as specified by Executive Order 12875 (58 FR 58093, October 28, 1993) or Executive Order 13084 (64 FR 27655 (May 10, 1998), or involve special consideration of environmental justice related issues as required by Executive Order 12898 (59 FR 7629, February 16, 1994). Because this action is not subject to notice-and-comment requirements under the Administrative Procedure Act or any other statute, it is not subject to the regulatory flexibility provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). This rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because EPA interprets E.O. 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This rule is not subject to E.O. 13045 because it does not establish an environmental standard intended to mitigate health or safety risks. EPA's compliance with these statutes and Executive Orders for the underlying rule is discussed in the July 1, 2004, Federal Register notice.

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. Section 808 allows the issuing agency to make a good cause finding that notice and public procedure is impracticable, unnecessary or contrary to the public interest. This determination must be supported by a brief statement. 5 U.S.C. 808(2). As stated previously, EPA has made such a good cause finding, including the reasons therefor, and established an effective date of February 7, 2005. 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 . This action is not a “major rule” as defined by U.S.C. 804(2).

I. General Information A. How Can I Get Copies of This Document and Other Related Information?

In addition to the publicly available docket materials available for inspection electronically in Regional Material in EDocket, and the hard copy available at the Regional Office, which are identified in the ADDRESSES section above, copies of the State submittal and EPA's technical support document are also available for public inspection during normal business hours, by appointment at the Bureau of Air Quality Control, Department of Environmental Protection, First Floor of the Tyson Building, Augusta Mental Health Institute Complex, Augusta, ME 04333-0017.

EPA is approving Maine's Chapter 155, “Portable Fuel Container Spillage Control,” and incorporating this regulation into the Maine SIP.

Chapter 155 includes performance standards for portable fuel containers and spouts in order to ensure spill-proof systems. Chapter 155 prohibits any person to sell, supply, offer for sale, or manufacture for sale in Maine, on or after January 1, 2004, any portable fuel container or spout that does meet all of the specified performance standards. However, there is a one year sell-through period whereby containers and spouts manufactured before January 1, 2004 may be sold, supplied, or offered for sale until January 1, 2005. The rule also includes the appropriate testing and recordkeeping requirements to ensure compliance with the specified performance standards.

EPA has evaluated Maine's Chapter 155 and has found that this regulation is consistent with EPA guidance and the OTC model rule for portable fuel containers. The specific requirements of the regulation and EPA's evaluation of these requirements are detailed in a memorandum dated December 22, 2004, entitled “Technical Support Document—Maine—Portable Fuel Containers Regulation” (TSD). The TSD and Maine's Chapter 155 are available in the docket supporting this action.

As noted in the TSD, when Maine submitted this regulation for approval and incorporation by reference into the SIP, the state did not submit the word “or” in subsection 7(C) of Chapter 155. 1 In adopting Chapter 155, Maine was responding to a comment from EPA on this subsection in which EPA made it clear that any alternative test methods would have to be approved by both Maine DEP and EPA. DEP inadvertently used the formulation “and/or” to respond to EPA's comment, despite the fact that it is DEP's intent and commitment to EPA that any alternative test methods will have to be approved by both DEP and EPA Therefore, DEP deleted the word “or” from subsection 7(C) when DEP submitted it to EPA for approval to clarify DEP's intent in implementing this provision.

The OTC (Ozone Transport Commission) has developed model rules for several VOC source categories, and the OTC states, including Maine, have signed a memorandum of understanding (MOU) committing to adopt these model rules. One of the categories for which a model rule has been developed is portable fuel containers. (See “OTC Model Rule: Portable Fuel Container Spillage Control,” March 6, 2001.)

The OTC model rule for portable fuel containers was based on a similar rule adopted by the California Air Resources Board (CARB). Compliance with CARB's rule was due in January 2001. Several other OTC states have also recently adopted a portable fuel container rule based on the OTC model rule and EPA has already approved some of these states' rules. 2

The EPA is publishing this rule without prior proposal because the Agency views this as a noncontroversial amendment and anticipates no adverse comments. However, in the proposed rules section of this Federal Register publication, EPA is publishing a separate document that will serve as the proposal to approve the SIP revision should adverse comments be filed. This action will be effective April 8, 2005 without further notice unless the EPA receives adverse comments by March 9, 2005.

If the EPA receives such comments, then EPA will publish a document withdrawing the final rule and informing the public that the rule will not take effect. All public comments received will then be addressed in a subsequent final rule based on the proposed rule. The EPA will not institute a second comment period. Parties interested in commenting should do so at this time. If no such comments are received, the public is advised that this rule will be effective on April 8, 2005 and no further action will be taken on the proposed rule.

EPA is approving Maine's Chapter 155, “Portable Fuel Container Spillage Control,” and incorporating this regulation into the Maine 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), because it 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 April 8, 2005. Interested parties should comment in response to the proposed rule rather than petition for judicial review, unless the objection arises after the comment period allowed for in the proposal. 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).)

Since these rule amendments do not add substantive requirements and ease certain compliance obligations, EPA finds that there is good cause to make the rule amendments immediately effective upon the close of the comment period, within the meaning of 5 U.S.C. section 553(d).

Regulated Entities . Categories and entities potentially regulated by this action include:

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. To determine whether your facility is regulated by this action, you should carefully examine the applicability criteria in 40 CFR 63.5285. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

Worldwide Web (WWW) . In addition to being available in the docket, an electronic copy of today's document will also be available on the WWW through EPA's Technology Transfer Network (TTN). Following signature by the EPA Administrator, a copy of the direct final rule amendments will be posted on the TTN's policy and guidance page for newly proposed or promulgated rules at http://www.epa.gov/ttn/oarpg . The TTN provides information and technology exchange in various areas of air pollution control. If more information regarding the TTN is needed, call the TTN HELP line at (919) 541-5384.

Comments . We are publishing the direct final rule amendments without prior proposal because we view the amendments as noncontroversial and do not anticipate significant adverse comments. However, in the Proposed Rules section of this Federal Register notice, we are publishing a separate document that will serve as the proposal to amend the national emission standards for leather finishing operations if significant adverse comments are filed. If we receive any significant adverse comments on one or more distinct amendments, we will publish a timely withdrawal in the Federal Register informing the public which provisions will become effective, and which provisions are being withdrawn due to adverse comment. We will address all public comments in a subsequent final rule, should the Agency determine to issue one. Any of the distinct amendments in today's direct final rule for which we do not receive significant adverse comment will become effective on the previously mentioned date. We will not institute a second comment period on the direct final rule amendments. Any parties interested in commenting must do so at this time.

Judicial Review . Under section 307(b)(1) of the CAA, judicial review of the direct final rule amendments is available only by filing a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit by February 28, 2005. Under section 307(d)(7)(B) of the CAA, only an objection to the direct final rule amendments which was raised with reasonable specificity during the period for public comment can be raised during judicial review. Moreover, under section 307(b)(2) of the CAA, the requirements established by the direct final rule amendments may not be challenged separately in any civil or criminal proceedings brought by EPA to enforce these requirements.

Outline . The following outline is provided to aid in reading the preamble to the direct final rule amendments.

The EPA promulgated NESHAP for leather finishing operations on February 27, 2002 (67 FR 9156). The final rule (40 CFR part 63, subpart TTTT) includes standards for hazardous air pollutants (HAP), as well as monitoring, performance testing, recordkeeping, and reporting requirements related to those standards. Today's action includes direct final rule amendments to clarify the frequency for categorizing leather product process types, modify the definition of “specialty leather,” add a definition for “vacuum mulling,” and add an alternative procedure for determining the actual monthly solvent loss from an affected source.

We noticed that the promulgated standards were silent regarding how often an affected source will perform appropriate testing to properly categorize each finish application in one of four leather product process operations: (1) Upholstery operations with less than four grams of finish add-ons, (2) upholstery operations with four grams or more of finish add-ons, (3) water-resistant/specialty, and (4) nonwater-resistant. In the final rule, to determine whether a leather finish application is categorized as “water-resistant” or “nonwater-resistant,” you must use the Maeser Flexes test method on finished leather samples according to American Society for Testing and Materials (ASTM) Designation D2099-00, or use an alternative testing method approved by the Administrator (40 CFR 63.5345-63.5350). We are amending the final rule to clarify that once you have determined that a unique finish application corresponds to one of the four product process operations, the applied finish categorization can remain valid for up to 5 years, provided there are no changes in the applied finish chemical characteristics. However, if the chemical characteristics of the applied finish change, or if you operate for 5 years with an unchanged applied finish formula, you must re-categorize the applied finish using appropriate testing procedures to document the leather product process operation to which the applied finish will correspond. Thus, once a leather finish application has been categorized through proper documentation, you will need to renew the categorization every 5 years or when the applied finish chemical characteristics change, whichever occurs sooner.

The definition of specialty leather in the final rule states that it is a select grade of chrome tanned, bark retanned, or fat liquored leather that is retanned through the application of greases, waxes, and oils in quantities greater than 25 percent of the dry leather weight. The specialty leather definition was added to the final rule after commenters to the proposed rule noted that leather that has been retanned with greater than 25 percent greases, fats, and oils requires finishing with coatings that contain more solvents and, therefore, more HAP to achieve proper adhesion of the finish to the leather and produce the color and textures the market demands.

While the definition in the final rule appeared to cover all the specialty leather produced at the time, one leather finishing company (Horween Leather Company) raised the issue that they finish leather that should meet the definition of “specialty” based on the amount of solvent they are required to use in the coatings. These products, however, did not meet the definition of specialty leather in the final rule. In fact, in order to produce some high-quality dress or performance shoe leathers, higher solvent-based finishes are required to provide the rich color, luster, or an oily/tacky feel demanded by the market. These leathers are produced by retanning with oils, fat, and greases of less than 25 percent which does not qualify them for the specialty leather category.

In a letter sent via a facsimile on December 3, 2002, Horween Leather provided EPA with technical information relating to the solvent content of the coatings required for their proposed specialty leather products and the oil, fat, and grease content of the retanned leather. This information clearly showed that higher solvent coatings were required to achieve satisfactory product qualities down to some oil, fat, and grease content of approximately 12 percent. EPA discussed this information with representatives of Horween, as well as with coatings experts for the leather industry, to determine whether alternatives for the higher solvent coatings could be used with lower oil, fat, and grease content leather and achieve the same results. After considering these discussions and reviewing the data, EPA determined that the only means of producing this leather with the lower fat, oil, and grease content and achieving the same results is by revising the specialty leather definition.

The revised specialty leather definition in the direct final rule amendments lowers the minimum percentage of applied grease, waxes, and oil used for retanning the leather to greater than 12 percent of the dry leather weight. This revision enables leather finishers to use the higher solvent coatings required to achieve the desired results since no other options exist. The Agency estimates that this change in definition will only affect one or two facilities that produce this specialty leather and will enable them to meet market demand for products with a lower fat, oil, and grease content. The fraction of leather produced at these facilities that will be affected by this change is estimated to be approximately 3 percent of their total amount of leather finished in a year. This change will therefore have the effect of moving this quantity of leather from the non-water resistant leather category with an emission limit of 3.7 pounds of HAP loss per 1,000 square feet of leather finished to the water resistant/specialty leather category with an emission limit of 5.6 pounds of HAP loss per 1,000 square feet of leather finished.

In addition to lowering the percentage of oil, fat, and grease, we are revising the specialty leather definition to also include high-quality dress or performance shoe leather that can withstand one or both of the following visual tests: Moisture injection into the leather using vacuum mulling without signs of blistering, or prolonged ironing at 200 °F for smoothing out surface roughness without finish lift off. As noted above, one of the reasons for using higher solvent coatings was to achieve a higher level of adhesion. Vacuum mulling and prolonged ironing are used as an indicator of coating adhesion to the leather substrate and are, therefore, being incorporated into the definition. Incorporating these criteria into a revised specialty leather definition allows for these mostly low-production quantities of high-quality dress or performance shoe leathers to be appropriately categorized as “specialty leather” products.

After promulgation of the final rule, we received several comment letters on behalf of the trade organization, Leather Industries of America (LIA), and two leather finishing companies (Prime Tanning Company and S.B. Foot Tanning Company). The primary issue centered on the potential recordkeeping burden of a finish inventory log to determine the actual monthly solvent loss from an affected source. As stated in the final rule, each source must record the pounds of each type of finish applied for each leather product process operation and the mass fraction of HAP in each applied finish. The basis for this type of recordkeeping was that each source knew the chemical composition of each applied finish and was capable of measuring the amount of finish as applied to each leather product; thus, a “measure-as-you-directly-apply” approach appears generally reasonable.

Two leather finishing companies indicated that current company practices determine actual monthly solvent loss through mass balance calculations based on a detailed inventory of stored chemicals, at the beginning- and end-of-each month, and business purchasing records to indicate additions to the inventory of chemical supplies. Thus, the net loss of finishing solvents is determined by subtracting the end-of-the month chemical inventory from the beginning-of-the-month chemical inventory and adding the quantities of all chemicals purchased during the same 1-month period. Typically, a unique finish application is prepared by removing known quantities of chemicals from a storage location, and the unique finish is formulated in a separate location, commonly referred to as a mixing room. In situations when an excess amount of finish is formulated, the companies indicated that the excess amount is generally accounted for in the mass balance procedures as consumed by the process ( i.e. , fugitive solvent loss). This assumption is often taken as a simplifying step which results in a conservative and slightly overestimated measure of the solvent loss. Excess finish may eventually be used in other finish applications; thus, its use and consumption by the process may not be immediate. Nonetheless, the excess amount is immediately accounted for as a solvent loss.

In other situations, the companies indicated they may choose to dispose of the excess finish and make an appropriate adjustment in their corresponding mass balance calculations. If the disposed quantities of finish are small, the companies may choose to record the disposed quantity in the mass balance as consumed by the process ( i.e. , fugitive solvent loss). Again, this assumption is a simplifying step which results in a conservative and slightly overestimated measure of the solvent loss. However, the companies may choose to record the quantity as disposed and remove the quantity from the mass balance, so it is neither listed as released to the air nor is the quantity of solvent listed as remaining in the inventory.

The two companies indicated it would cause an extreme labor and cost burden to change and implement a “measure-as-you-directly-apply” approach. Furthermore, they stated that their current “mass balance” approach is just as accurate in determining actual monthly solvent losses as the “measure-as-you-directly-apply” approach. Both of these leather finishing companies provided sufficient supporting documentation that their current solvent measurement procedures are capable of accurately determining the quantity of solvent finishes used each month and determining the mass fraction of HAP in the consumed solvent finishes.

Therefore, in today's action, we are allowing a monthly chemical inventory mass balance as an alternative procedure in 40 CFR 63.5335(b) for determining actual monthly HAP loss from an affected source. A monthly chemical inventory mass balance is appropriate, as long as the source follows its detailed mass balance procedures and calculations in its plan for demonstrating compliance, in accordance with 40 CFR 63.5325. Regardless of which approach is used to determine finish loss, each source is still required to maintain a written or printed log that documents the total quantity of solvents/finishes used each month in the process and the mass fraction of HAP in each solvent/finish.

Today's action includes amendments that add an alternative procedure for determining the actual monthly solvent loss from an affected source, clarify the frequency in which leather product process types must be categorized, modify the definition of “specialty leather,” and add a definition for “vacuum mulling.”

Section 63.5335 of 40 CFR part 63 is amended by adding a new alternative requirement for maintaining a finish application log based on a detailed chemical inventory mass balance. This was accomplished by splitting paragraph (b) into two subparagraphs to list the two acceptable methodologies for determining actual monthly solvent loss from an affected source. The revised paragraph (b)(1) includes the previous requirements for maintaining a log of finish types as they are applied to a leather product process. Previously, these requirements were listed in paragraphs (b)(1) through (7) of § 63.5335. However, the requirements have been redesignated, without any further changes, as paragraphs (b)(1)(i) through (vii). Paragraph (b)(2) of § 63.5335 includes the new alternative requirements for maintaining a finish application log based on a detailed chemical inventory mass balance.

Section 63.5345 is amended by adding paragraph (d) to clarify the frequency for the two types of upholstery product process operations which must be categorized.

Section 63.5350 is amended by clarifying the frequency for water-resistant and nonwater-resistant product process operations which must be categorized, incorporating the revised definition of specialty leather, and by providing alternative visual test criteria to support the categorization of high-quality dress or performance shoe leather as specialty leather. We have also clarified the frequency for categorizing specialty leather product process operations.

Section 63.5460 is amended by revising the definition for the term specialty leather and adding a definition for the term vacuum mulling.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), the Agency must determine whether the regulatory action is “significant” and, therefore, subject to Office of Management and Budget (OMB) review and the requirements of the Executive Order. The Executive Order defines “significant regulatory action” as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or,

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

It has been determined that the direct final rule amendments are not a “significant regulatory action” under the terms of Executive Order 12866 and are, therefore, not subject to OMB review.

This action does not impose any new information collection burden. This action modifies a definition and adds a new definition to the final standards. It also adds an alternative option for determining HAP loss from the process. Since this action only clarifies the existing standards and adds an option, this action will not increase the information collection burden. The OMB has previously approved the information collection requirements contained in the existing regulations under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. , and has assigned OMB control number 2060-0478 (EPA ICR No. 1985.02).

Copies of the Information Collection Request (ICR) document(s) may be obtained from Susan Auby, by mail at the Office of Environmental Information, Collection Strategies Division; U.S. EPA (2822T); 1200 Pennsylvania Ave., NW., Washington, DC 20460, by email at auby.susan@epa.gov , or by calling (202) 566-1672. A copy may also be downloaded off the Internet at http://www.epa.gov/icr . Include the ICR number in any correspondence.

Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information.

An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.

The EPA has determined that it is not necessary to prepare a regulatory flexibility analysis in connection with the direct final rule amendments.

For purposes of assessing the impact of today's direct final rule amendments on small entities, small entities are defined as: (1) A small business that has fewer than 750 employees; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's direct final rule amendments on small entities, the EPA has concluded that this action will not have a significant impact on a substantial number of small entities. The direct final rule amendments will not impose any new requirements on small entities.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, the EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any 1 year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires the EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least-costly, most cost-effective, or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows the EPA to adopt an alternative other than the least-costly, most cost effective, or least-burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before the EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements.

The EPA has determined that the direct final rule amendments do not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any 1 year. The direct final rule amendments apply only to affected sources in the leather finishing industry and clarify the frequency for categorizing leather product process types, modify the definition of “specialty leather,” add a definition for “vacuum mulling,” and add an alternative procedure for determining the actual monthly solvent loss from an affected source and, therefore, impose no additional burden on sources. Therefore, the direct final rule amendments are not subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 13132 (64 FR 43255, August 10, 1999) requires the EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” are defined in the Executive Order to include regulations that has “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.”

The direct final rule amendments do not have federalism implications. They will 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. The direct final rule amendments apply only to affected sources in the leather finishing industry and clarify the frequency for categorizing leather product process types, modify the definition of “specialty leather,” add a definition for “vacuum mulling,” and add an alternative procedure for determining the actual monthly solvent loss from an affected source and, therefore, impose no additional burden on sources. Thus, Executive Order 13132 does not apply to the direct final rule amendments.

In the spirit of Executive Order 13132 and consistent with EPA policy to promote communications between the EPA, State and local governments, the EPA specifically solicits comment on the direct final rule amendments from State and local officials.

Executive Order 13175 (65 FR 67249, November 9, 2000) requires the EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” The direct final rule amendments do not have tribal implications, as specified in Executive Order 13175. The direct final rule amendments apply only to affected sources in the leather finishing industry and clarify the frequency for categorizing leather product process types, modify the definition of “specialty leather,” add a definition for “vacuum mulling,” and add an alternative procedure for determining the actual monthly solvent loss from an affected source and, therefore, impose no additional burden on sources. Thus, Executive Order 13175 does not apply to the direct final rule amendments.

The EPA specifically solicits additional comment on the direct final rule amendments from tribal officials.

Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any rule that: (1) Is determined to be “economically significant” as defined under Executive Order 12866 and (2) concerns and environmental health or safety risk that the EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the EPA must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the EPA.

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Executive Order has the potential to influence the regulation. Today's direct final rule amendments are not subject to Executive Order 13045 because they are based on technology performance, not health or safety risks. Furthermore, the direct final rule amendments have been determined not to be “economically significant” as defined under Executive Order 12866.

The direct final rule amendments are not subject to Executive Order 13211 (66 FR 28355, May 22, 2001) because they are not a significant regulatory action under Executive Order 12866.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law No. 104-113, 12(d) (15 U.S.C. 272 note), directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs the EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.

No new standard requirements are cited in the direct final rule amendments. Therefore, the EPA is not proposing or adopting any voluntary consensus standards in the direct final rule amendments.

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. The EPA will submit a report containing the direct final 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 direct final rule in the Federal Register . The direct final rule is not a “major rule” as defined by 5 U.S.C. 804(2).

Throughout this document, wherever “we,” “us” or “our” is used, we mean EPA. Information is organized as follows:

On November 29, 2004, EPA solicited public comment on a proposal to correct the boundary of the Yakima County nonattainment area (Yakima NAA) for particulate matter with an aerodynamic diameter less than or equal to a nominal 10 micrometers (PM-10) by excluding approximately six square miles of Yakama Indian Reservation land. Section 107(d)(4)(B) of the Clean Air Act (CAA or the Act) sets out the general process by which areas were to be designated nonattainment for the national ambient air quality standards (NAAQS) for PM-10 upon enactment of the 1990 Clean Air Act amendments. The Act states that each area that had been identified by EPA as a PM-10 Group I area  1 prior to the 1990 CAA Amendments is designated nonattainment for PM-10 by operation of the law upon enactment of the 1990 CAA Amendments. Prior to enactment of the 1990 CAA amendments, EPA published technical corrections clarifying the boundaries of concern for some of the areas previously identified as Groups I and II areas. See 55 FR 45799. October 31, 1990. With this action, the Yakima County Group I area was revised to correspond to a rectangular study area that encompassed the cities of Yakima, Selah, and Union Gap and surrounding areas. The revised Yakima County Group I area included approximately six square miles of fee land within the exterior boundaries of the Yakama Indian Reservation.

EPA now believes that it mistakenly construed then-existing air quality data and, as a consequence, incorrectly included this small portion of the Yakama Indian Reservation within the Yakima County Group I area that would later become the Yakima NAA. When EPA delineated the boundary of the Yakima County Group I area in 1990, EPA policy called for drawing the boundary based on political boundaries unless there was technical information identifying particular sources contributing to violations of the NAAQS that warranted a different approach. In other words, EPA policy called for not including land within the exterior boundaries of the Yakama Indian Reservation as part of the Yakima Group I area unless there was information showing that sources within the Yakama Indian Reservation contributed to the PM-10 violations recorded on state lands. At the time of the determination of the boundaries of the Yakima Group I area, which by operation of the law became the Yakima NAA, there was no technical information provided by Washington indicating that sources on the Yakama Indian Reservation contributed to the violations of the PM-10 NAAQS that had been recorded on monitors in the city of Yakima. EPA policy therefore called for using political boundaries to delineate the nonattainment area. As such, EPA erred in including a portion of the Yakama Indian Reservation in the Yakima NAA.

Accordingly, under the authority of section 110 (k) (6) of the CAA, EPA is revising the boundary of the Yakima NAA to exclude the portion within the exterior boundary of the Yakama Indian Reservation. A detailed description of our action was published in the Federal Register on November 29, 2004. See 69 FR 69338.

EPA received the following comments from one commenter on December 28, 2004.

Comment:

Although the PM-10 emissions originating within the portion of the Yakima PM-10 NAA south of Ahtanum Creek and within the exterior boundary of the Yakima Indian Reservation are minimal and did not contribute to the original classification of the NAA as a Group 1 area in 1987, we believe that other large rural and agricultural areas south and west of the City of Yakima that remain in the nonattainment area and that had similar land uses, population densities and commercial uses in 1987 also made a minimal contribution to the PM-10 emissions for the NAA. Air dispersion modeling documented in the 1989 and 1992 supplements indicates that the predicted highest values will generally occur in the City of Yakima. We believe the air dispersion modeling is an accurate presentation of the PM-10 distribution across the NAA, and request the proposed boundary revision to remove the area south of Ahtanum Creek of the NAA include all of the rural and agricultural lands in the NAA with similar land uses, population densities, commercial uses and transportation patterns to those of the tribal portion of the NAA.

Response:

As discussed in the proposal, EPA is basing its decision to revise the boundary of the Yakima NAA on its policy for determining the boundaries of PM-10 nonattainment areas, as well as air quality considerations. See 69 FR 69340. November 29, 2004. When EPA delineated the boundary of the Yakima County Group 1 area through technical corrections in 1990, EPA's policy called for using political boundaries associated with the area where the monitored violations occurred and in which it is reasonably expected that sources contributing to the violations are located. See 57 FR 43846, 43848 (September 22, 1992). The Yakima NAA includes the City of Yakima, as well as the cities of Selah and Union Gap and surrounding areas with sources contributing to the violations. 2 Together, the Cities of Selah, Union Gap and surrounding areas comprise a portion of Yakima County and therefore are within a single political boundary.

In contrast, the area south of Ahtanum Creek that is the subject of this action is within the boundary of the Yakama Indian Reservation, which is a different political jurisdiction than Yakima County. At the time of determination of the boundaries of the Yakima Group I area, there was no technical information provided by Washington indicating that sources on the Yakama Indian Reservation contributed to the violations of the PM-10 NAAQS that had been recorded on monitors in the city of Yakima. Because this area is a different political jurisdiction and did not contribute to the violations, EPA is correcting its error in including a portion of the Yakama Indian Reservation in the Yakima NAA. In contrast, the other rural and agricultural areas within Yakima County that the commenter seeks to remove from the NAA are subject to the same political jurisdiction as the area where the violations occurred.

Comment:

As an alternative to removing these state rural and agricultural lands from the NAA, the commenter requests that EPA determine that the area south of Ahtanum Creek be redesignated to attainment.

Response:

Section 107 (d) (3) (E) of the Clean Air Act, and the General Preamble to Title 1 ( 57 FR 13498) provide the criteria for designation. These criteria are further clarified in a policy and guidance memorandum from John Calcagni, Director, Air Quality Management Division, EPA Office of Air Quality Planning and standards dated September 4, 1992, Procedures for Processing Requests to Redesignate Areas to attainment. The criterion that the Administrator has fully approved a maintenance plan for the area as meeting the requirements of section 175A of the Act is among the criteria for redesignation outlined in this memo.

In a concurrent action published today, EPA is redesignating the Yakima NAA (with the boundary revised to exclude lands within the Yakama Indian Reservation) to attainment for PM-10. EPA refers the reader to a November 29, 2004 action proposing to approve the Limited Maintenance Plan entitled Yakima PM 10 Limited Maintenance Plan and Redesignation Request, Yakima County and the redesignation request for the Yakima NAA. See 69 FR 69342. Section 2.12 of the Limited Maintenance Plan, submitted by the State of Washington and approved by EPA in a concurrent action published today, states that the plan does not include the portion of the NAA within the exterior boundary of the Yakama Indian Reservation. In a concurrent action published today, EPA is clarifying that the SIP it is approving does not extend to lands which are within the boundaries of the Yakama Indian Reservation.

Therefore, the area within the Yakama Indian Reservation does not meet the criteria for redesignation to attainment. As discussed in the proposal, this area will revert to an unclassifiable designation.

The Environmental Protection Agency is revising the boundary of the Yakima NAA to exclude the portion of the Yakima NAA that is within the exterior boundary of the Yakama Indian Reservation. This correction changes the boundary of the Yakima NAA to read as follows:

The area bounded on the south by a line from UTM coordinate 694000mW, 5157000mN, west to 681000mW, 5157000mN, thence north along a line to coordinate 681000mN, 5172000mN, thence east to 694000mW, 5172000mN, thence south to the beginning coordinate 694000mW, 5157000mN, excluding the area within the exterior boundary of the Yakama Indian Reservation.

The excluded area will revert to an unclassifiable designation consistent with the original and current designation of the Yakama Indian Reservation.

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 corrects the description of a nonattainment area to exclude land that did not contribute to the nonattainment problem and was under a different regulatory jurisdiction and does not impose any additional requirements on state, local or tribal governments or the private sector. 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).

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 6, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” “Policies that have tribal implications” is defined in the Executive Order to include regulations that have “substantial direct effects on one or more Indian tribes, on the relationship between the Federal government and the Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.” Under section 5(b) of Executive Order 13175, EPA may not issue a regulation that has tribal implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by tribal governments, or EPA consults with tribal officials early in the process of developing the proposed regulation. Under section 5(c) of Executive Order 13175, EPA may not issue a regulation that has tribal implications and that preempts tribal law, unless the Agency consults with tribal officials early in the process of developing the regulation. EPA has concluded that this rule may have tribal implications. EPA's action will remove a portion of the Yakama Indian Reservation from the Yakima NAA. However, it will neither impose substantial direct compliance costs on tribal governments, nor preempt tribal law. Thus, the requirements of sections 5(b) and 5(c) of the Executive Order do not apply to this rule. Consistent with EPA policy, EPA nonetheless consulted with representatives of tribal governments early in the process of developing this rule to permit them to have meaningful and timely input into its development. In the spirit of Executive Order 13175, and consistent with EPA policy to promote communications between EPA and tribal governments, EPA specifically solicits additional comment on this proposed rule from tribal officials.

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 corrects the description of a nonattainment area to exclude land that did not contribute to the nonattainment problem and was under a different regulatory jurisdiction and does not alter the relationship or the distribution of power and responsibilities established in the CAA. 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 NFIP enables property owners to purchase flood insurance which is generally not otherwise available. In return, communities agree to adopt and administer local floodplain management aimed at protecting lives and new construction from future flooding. Section 1315 of the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage as authorized under the National Flood Insurance Program, 42 U.S.C. 4001 et seq. ; unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed in this document no longer meet that statutory requirement for compliance with program regulations, 44 CFR part 59 et seq. Accordingly, the communities will be suspended on the effective date in the third column. As of that date, flood insurance will no longer be available in the community. However, some of these communities may adopt and submit the required documentation of legally enforceable floodplain management measures after this rule is published but prior to the actual suspension date. These communities will not be suspended and will continue their eligibility for the sale of insurance. A notice withdrawing the suspension of the communities will be published in the Federal Register .

In addition, the Federal Emergency Management Agency has identified the special flood hazard areas in these communities by publishing a Flood Insurance Rate Map (FIRM). The date of the FIRM if one has been published, is indicated in the fourth column of the table. No direct Federal financial assistance (except assistance pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act not in connection with a flood) may legally be provided for construction or acquisition of buildings in the identified special flood hazard area of communities not participating in the NFIP and identified for more than a year, on the Federal Emergency Management Agency's initial flood insurance map of the community as having flood-prone areas (section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against certain types of Federal assistance becomes effective for the communities listed on the date shown in the last column. The Administrator finds that notice and public comment under 5 U.S.C. 553(b) are impracticable and unnecessary because communities listed in this final rule have been adequately notified.

Each community receives a 6-month, 90-day, and 30-day notification letter addressed to the Chief Executive Officer that the community will be suspended unless the required floodplain management measures are met prior to the effective suspension date. Since these notifications have been made, this final rule may take effect within less than 30 days.

This rule is categorically excluded from the requirements of 44 CFR Part 10, Environmental Considerations. No environmental impact assessment has been prepared.

The Administrator has determined that this rule is exempt from the requirements of the Regulatory Flexibility Act because the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed no longer comply with the statutory requirements, and after the effective date, flood insurance will no longer be available in the communities unless they take remedial action.

This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule does not involve any collection of information for purposes of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

Executive Order 12612, Federalism

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, October 26, 1987, 3 CFR, 1987 Comp.; p. 252.

This rule meets the applicable standards of section 2(b)(2) of Executive Order 12778, October 25, 1991, 56 FR 55195, 3 CFR, 1991 Comp.; p. 309.

This is a summary of the Commission's Report and Order , and Order on Reconsideration , in WC Docket No. 02-60 released on December 17, 2004. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street, SW., Washington, DC 20554. A companion Further Notice of Proposed Rulemaking in WC Docket No. 02-60 was also released on December 17, 2004.

1. In this Report and Order and Order on Reconsideration ( Second Report and Order ), we modify our rules to improve the effectiveness of the rural health care universal service support mechanism. The mechanism provides discounts to rural health care providers to access modern telecommunications for medical and health maintenance purposes. Specifically, in this Second Report and Order , we change the Commission's definition of rural for the purposes of the rural health care support mechanism because the definition currently used by the Commission is no longer being updated with new Census Bureau data. We also revise our rules to expand funding for mobile rural health care services by subsidizing the difference between the rate for satellite service and the rate for an urban wireline service with a similar bandwidth. Furthermore, we improve our administrative process by establishing a fixed deadline for applications for support. On reconsideration, we permit rural health care providers in states that are entirely rural to receive support for advanced telecommunications and information services under section 254(h)(2)(A).

2. We conclude that the record supports the adoption of a new definition of “rural area” for the rural health care program. We received several proposals from commenters for a new definition of rural. Most of those definitions are currently used by other Federal agencies to determine eligibility for other Federal programs. As we explain in further detail below, we find that those proposals are either over-inclusive or under-inclusive for our purpose. That is, based on an evaluation of the proposals contained in the record, such definitions would allow more areas to be considered rural than is appropriate for the rural health care program or would not include areas that are appropriately rural. The Commission should neither dilute the fund by using a methodology that is too broad, nor fail to achieve the goals of the 1996 Act by using a methodology that is not broad enough. As such, the Commission has built on commenters' proposals to develop a slightly more layered approach that more accurately defines the rural areas eligible for support under the rural health care mechanism.

3. Whether an area is “rural” is determined by applying the following test. If an area is outside of any Core Based Statistical Area (CBSA), it is rural. Areas within CBSAs can be either rural or non-rural, depending on the characteristics of the CBSA. Small CBSAs—those that do not contain an urban area with populations of 25,000 or more—are rural. Within large CBSAs—those that contain urban areas with populations of 25,000 or more—census tracts can be either rural or non-rural depending on the characteristics of the particular census tract. If a census tract in a large CBSA does not contain any part of a place or urban area with a population greater than 25,000, then that tract is rural. Alternatively, if a census tract in a large CBSA contains all or part of a place or urban area with a population that exceeds 25,000, then it is not rural.

4. To eliminate any confusion regarding implementation of this definition, the Commission will identify the areas that are rural and post the list on the Universal Service Administrative Company (USAC) Web site, as is done now. The list will include counties that are rural or partially rural. As now, for those counties that are partially rural, eligible census tracts will be listed. Applicants can determine their census tract using the link on the USAC web site or by calling USAC's helpline for assistance. As such, the process for rural health care providers to determine their eligibility will be the same with the new definition as with the definition currently in use. The new definition will be effective as of Funding Year 2005, which begins July 1, 2005.

5. The new definition of rural area furthers the goals of section 254 for several reasons. Our new definition uses a methodology similar to our current definition. Just like our prior definition, all counties that are not located in a CBSA are defined as rural. For those counties located in a CBSA, as under the current definition, a further analysis is conducted for certain counties that have both urban and rural areas. The Goldsmith methodology, however, only called for such further analysis for counties comprising a larger geographic area, while our new definition expands the review to include counties of all sizes. As such, we believe our new definition improves upon the method that we previously used to determine which areas are rural by more accurately carving out the rural areas within counties that are located in a CBSA. For example, Dungannon, Virginia, which has a population of 317, is located in the northeastern corner of Scott County, Virginia. Though Scott County is part of the Kingsport-Bristol-Bristol, TN-VA Metropolitan Statistical Area, Dungannon is 28 miles—about an hour drive—from Kingsport, TN, the nearest large urban area. Under our previous definition, Dungannon was not rural because it was located in a small county that was part of an MSA. Under our new definition, however, we conduct a more granular review of Scott County at the census tract level. The census tract in which Dungannon is located does not contain any part of a place or urban area with greater than a 25,000 population. Therefore, Dungannon is rural, and any health care provider located in Dungannon is eligible for support.

6. We selected 25,000 as the population threshold for the further analysis. While choosing the threshold is not an exact science, we believe urban areas above this size possess a critical mass of population and facilities. Although this standard may mean that some current eligible providers might no longer qualify, as noted below, we permit all health care providers that have received a funding commitment from USAC since 1998 to continue to qualify for funding for the next three years under the old definition. As we noted above, our new definition also allows rural health care providers to determine their eligibility in the same manner as under the old definition. Furthermore, because the definitions are similar, rural health care providers will not have to adjust to a new application process. An approach that simplifies the application process for rural health care providers will help ensure that applicants will not be deterred from applying for support due to administrative burdens.

7. To ease the transition to the new definition, we permit all health care providers that have received a funding commitment from USAC since 1998 to continue to qualify for support under the universal service mechanism for health care providers for funding for the next three years under the old definition. Thereafter, health care providers must qualify under our new definition to receive funding. We find that this transition period is necessary to allow rural health care providers to plan for the elimination of support. In addition, the transition period will allow the Commission time to review the effect of this definition.

8. Pursuant to section 254(h)(1)(A) of the Act, telecommunications carriers must provide telecommunications services to rural health care providers at “rates that are reasonably comparable to rates charged for similar services in urban areas in that State.” Under the Commission's prior policies, the cost of rural satellite service was compared to the cost of urban satellite service. For satellite services, however, the price typically does not vary by location. Therefore rural health care providers did not receive discounts on such service under the rural health care program. In the 2003 Report and Order , 68 FR 74492, December 24, 2003, we revised this policy to allow rural health care providers to receive discounts for satellite service even where wireline services are available, but we capped the discount at the amount providers would have received if they purchased functionally similar wireline alternatives.

9. The situation of the mobile rural health care provider, however, is different. By definition, mobile rural health care providers do not stay in a fixed location. To receive telecommunications services, they would either have to install a wireline telecommunications service to every location they serve or use a satellite or other mobile service that can function in every location. In some cases, wireline services are not available because the locations are so remote. Even if a wireline service is technically available, the number of locations served results in what otherwise might be a more expensive satellite service becoming more cost-effective and more efficient. In those situations, as commenters note, for practical purposes no wireline service is available, so rural health care providers must use a satellite or other mobile telecommunications service.

10. Cost benchmark for mobile rural health care provider . Accordingly, after reviewing the record in this proceeding, we revise our rules to allow mobile rural health care providers to receive discounts for satellite services calculated by comparing the rate for the satellite service to the rate for an urban wireline service with a similar bandwidth. We will not cap the discount for the satellite service at an amount of a functionally similar wireline alternative for mobile rural health care providers. We conclude that this revision furthers the principle of competitive neutrality and recognizes the role that telecommunications services play in rural areas without unduly increasing the size of the fund. Further, consistent with section 254, it helps to provide an affordable rate for the services necessary for telemedicine in rural America, strengthens telemedicine and telehealth networks across the nation, helps improve the quality of health care services available in rural America, and better enables rural communities to rapidly diagnose, treat, and contain possible outbreaks of disease.

11. Criteria for mobile rural health care providers . Our current rules, combined with the requirement that health care providers remain responsible for a significant portion of service costs ( i.e. , the urban rate), are adequate to ensure that rural health care providers select the most cost-effective services and will ensure that rural health care providers make prudent economic decisions. We agree, however, with commenters that suggest that certain parameters or procedures should be established for determining what constitutes a “mobile” rural health care provider so that providers cannot obtain satellite services where such services are not the most cost-effective option.

12. Because we believe some threshold must be established, however, mobile rural health care providers will be required to submit to USAC the number of sites the mobile rural health care provider will serve during the year. Where a mobile rural health care provider serves eight or more different sites in a year, we will presume that satellite services are most cost-effective. We conclude that where a mobile rural health care provider serves less than eight different sites per year, the mobile health care provider will be required to document and explain why satellite services are necessary to achieve the health care delivery goals of the mobile telemedicine project. In instances where a mobile rural health care provider serves less than eight different sites per year, USAC will determine on a case-by-case basis whether the telecommunications service selected by the mobile rural health care provider is the most cost-effective option for the telemedicine project in light of the limited number of sites served per year.

13. Additionally, mobile rural health care providers seeking discounts for satellite services will be required to certify that they are serving eligible rural areas. Providers must keep annual logs indicating: (i) The date and locations of each clinic stop; and (ii) the number of patients served at each such clinic stop. Mobile rural health care providers must maintain their annual logs for a period of five years and make such logs available to the Administrator and the Commission upon request.

14. In order to receive the discount, mobile rural health care providers will be required to provide to USAC documentation of the price for bandwidth equivalent wireline services in the urban area in the state to be covered by the project. Where a telemedicine project serves locations in different states, the provider must provide the price for bandwidth equivalent wireline services in the urban area, proportional to the locations served in each state. The method of cost allocation chosen by an applicant should be based on objective criteria, and reasonably reflect the eligible usage of the mobile health clinic. Where mobile rural health care provider is also serving patients in urban areas, prorated discounts will be provided commensurate only with the time the mobile rural health care provider is serving patients in rural areas. We also direct USAC to evaluate the allocation methods selected by program participants in the course of its audit activities to ensure program integrity and to ensure that providers are complying with the program's certification requirements. Additionally, pursuant to section 54.619(a) of the commission's rules, providers providing mobile health services must maintain records for their purchases of supported services for at least five years sufficient to document their compliance with all Commission requirements.

15. In the 2002 NPRM , 67 FR 34653, May 15, 2002 and 2003 Report and Order, 68 FR 74492, December 24, 2003, we sought comment on ways to streamline the application process. We establish June 30 as the final deadline for filing FCC Forms 466 and 466-A for health care providers seeking discounts for a specific funding year under the rural health care universal service support mechanism. We conclude that providing an established deadline will provide specificity and finality to rural health care providers and will not require them to continue to check for Commission public notices. This deadline is also consistent with USAC's Rural Health Care Division (RHCD)'s efforts to provide specific guidance to health care providers when submitting applications for universal service support. Applicants have more than a year to submit the necessary documentation for their application for support. In addition, a deadline of June 30 for filing FCC Forms 466 and 466-A coincides with the end of the funding year. Under section 54.623 of our rules, USAC can still set the dates for the filing window for purposes of the annual cap.

16. We grant, to the extent indicated herein, ASTCA's Petition for Reconsideration of the 2003 Report and Order, 68 FR 74492, December 24, 2003. In light of the compelling and unique combination of circumstances facing “entirely rural” states, we believe that it is appropriate to establish a support mechanism under section 254(h)(2)(A) that will provide funding for the provision of advanced telecommunications and information services. We therefore amend our rules to provide support to health care providers in states that are “entirely rural” equal to 50 percent of the monthly cost of advanced telecommunications and information services reasonably related to the health care needs of the facility.

17. We find that the Commission has authority to amend its rules for these specific circumstances under section 254(h)(2)(A). Section 254(h)(2)(A) directs the Commission to establish competitively neutral rules to enhance access to advanced telecommunications and information services for health care providers. Section 254(h)(2)(A) gives the Commission broad authority to fulfill this statutory mandate. Unlike Congress' directive to the Commission in section 254(h)(1)(A), however, the Commission's authority under section 254(h)(2)(A) is discretionary, not mandatory. We find that there is a special need for the Commission to use its discretion to establish rules that will enhance access to advanced telecommunications and information services for health care providers in entirely rural states.

18. This support is necessary to address the unique circumstances faced by health care providers and telecommunications carriers serving American Samoa and other similarly situated geographic areas. Geographic isolation and the lack of adequate local resources in “entirely rural” states can be mitigated by the availability and use of modern technology. Facilitating access to advanced telecommunications and information services would improve health care in geographically remote areas.

19. Section 254(h)(2)(A) directs the Commission to enhance access to advanced telecommunications and information services to the extent technically feasible and economically reasonable. We find that providing universal service support to these specific health care providers is technically feasible and economically reasonable. There is no dispute that access to advanced telecommunications and information services is technically feasible in these areas. In fact, such services are currently being provided. We believe our actions to enhance access are also economically reasonable. We do not believe this discount will significantly increase distributions from the underutilized rural health care fund because the number of eligible entities is so small. The funding amount also is unlikely to significantly increase in the future because the current list of eligible entirely rural areas is not likely to change.

20. Furthermore, we do not think that section 254(h)(1)(A) prohibits us from establishing this support. In the 2003 Report and Order, 68 FR 74492, December 24, 2003 the Commission determined that section 254(h)(2)(A) was linked to section 254(h)(1)(A), such that funding for advanced telecommunications services must also be based on the urban-rural rate comparison for telecommunications services found in section 254(h)(1)(A). Upon further review, however, we conclude that the two statutory provisions are not inextricably linked. The methodology we use to calculate support under section 254(h)(2)(A), therefore, does not have to be based on the urban-rural comparison.

21. Section 254(h)(2)(A), however, does not establish a methodology for calculating universal service support. The Commission provides a flat discount for Internet access for all eligible rural health care providers pursuant to section 254(h)(2)(A). We find that it is reasonable to use a similar methodology for support for entirely rural areas because we are relying on the same statutory provision. Therefore, we establish a 50 percent discount off the commercial rate for the purchase of advanced telecommunications and information services for states that are “entirely rural.” We emphasize that the entire state must meet the definition of rural, as described above, to be eligible to receive the 50 percent discount. Consistent with the Commission's principles of competitive neutrality, eligible health care providers may receive increased discounts for any advanced telecommunications and information service, regardless of the platform.

22. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the 2003 Further Notice of Proposed Rulemaking, 68 FR 74538, December 24, 2003. The Commission sought public comments on the proposals in the Further Notice of Proposed Rulemaking, including comment on the IRFA. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

23. The Commission is required by section 254 of the Act to promulgate rules to implement the universal service provisions of section 254. On May 8, 1997, the Commission adopted rules that reformed its system of universal service support mechanisms so that universal service is preserved and advanced as markets move toward competition. Among other programs, the Commission adopted a program to provide discounted telecommunications services to public or non-profit health care providers that serve persons in rural areas. Over the last few years, important changes in the rural health community, such as technological advances and the increasing variety of needs of the rural health care community, have prompted us to review the rural health care universal service support mechanism. In this Second Report and Order, we adopt several modifications to the Commission's rules to improve the effectiveness of the rural health care universal service support mechanism and increase utilization of this mechanism by rural health care providers.

24. Specifically, in this Second Report and Order, we change the Commission's definition of rural for the purposes of the rural health care support mechanism because the definition currently used by the Commission is no longer being updated with new Census Bureau data by the Office of Rural Health Care Policy, the agency that developed the definition. Specifically, the new definition improves upon the previous method of determining which areas are rural by more accurately identifying the rural areas within counties. We also revise our rules to allow mobile rural health care providers to receive discounts for satellite services calculated by comparing the rate for the satellite service to the rate for an urban wireline service with a similar bandwidth. Mobile rural health care providers travel to remote areas of the country to deliver health care services to underserved populations for particular health conditions that may go unnoticed or untreated due to the lack of health care facilities in such areas. Thus, this approach will provide the support necessary to make mobile telemedicine economical for rural health care providers to provide health care to rural and remote areas, and to make telecommunications rates for public and non-profit rural health care providers comparable to those paid in urban areas. Furthermore, to provide specificity and finality to rural health care providers, we improve our administrative process by establishing a fixed deadline for applications for support.

25. On reconsideration, we permit rural health care providers in states that are entirely rural, such as American Samoa, to receive support for advanced telecommunications and information services under section 254(h)(2)(A). Under the Commission's current policy, health care providers in these areas do not receive universal service funding for the provision of telecommunications services because no urban-rural rate difference exists within the state or territory upon which to base the discount calculation. Telemedicine and other forms of treatment supported by advanced telecommunications services and information services eliminate the need for referrals to other locations by allowing local physicians to consult much more easily and frequently with physicians at fully equipped health care facilities. We expect this rule change will strengthen the ability of health care providers in states and territories that are entirely rural to provide critical health care services and improve health care for rural residents.

26. We believe that such actions will improve significantly the ability of rural health care providers to respond to the medical needs of their communities, provide needed aid to strengthen telemedicine and telehealth networks across the nation, help improve the quality of health care services available in rural America, and better enable rural communities to rapidly diagnose, treat, and contain possible outbreaks of disease. In addition, these changes will equalize access to quality health care between rural and urban areas and will support telemedicine networks if needed for a national emergency. Enhancing access to an integrated nationwide telecommunications network for rural health care providers will further the Commission's core responsibility to make available a rapid nationwide network for the purpose of the national defense, particularly with the increased awareness of the possibility of terrorist attacks. Finally, these changes will further the Commission's efforts to improve its oversight of the operation of the program to ensure that the statutory goals of section 254 of the Telecommunications Act of 1996 are met without waste, fraud, or abuse.

27. No petitions for reconsideration or comments were filed directly in response to the IRFA or on issues affecting small businesses.

28. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the rules. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A “small business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA).

29. Section 254(h)(5)(B) of the Act defines the term “health care provider” and sets forth seven categories of health care providers eligible to receive universal service support. Although the SBA has not developed a specific size category for small, rural health care providers, recent data indicate that there are a total of 8,297 health care providers, consisting of: (1) 625 “post-secondary educational institutions offering health care instruction, teaching hospitals, and medical schools;” (2) 866 “community health centers or health centers providing health care to migrants;” (3) 1633 “local health departments or agencies;” (4) 950 “community mental health centers;” (5) 1951 “not-for-profit hospitals;” and (6) 2,272 “rural health clinics.” We have no additional data specifying the numbers of these health care providers that are small entities nor do we know how many are located in areas we have defined as rural. In addition, non-profit entities that act as “health care providers” on a part-time basis are eligible to receive prorated support and we have no ability to quantify how many potential eligible applicants fall into this category. However, we have no data specifying the number of potential new applicants. Consequently, using the data we do have, we estimate that there are 8,297 or fewer small health care providers potentially affected by the actions proposed in this Notice.

30. As noted earlier, non-profit businesses and small governmental units are considered “small entities” within the RFA. In addition, we note that census categories and associated generic SBA small business size categories provide the following descriptions of small entities. The broad category of Ambulatory Health Care Services consists of further categories and the following SBA small business size standards. The categories of small business providers with annual receipts of $6 million or less consists of: Offices of Dentists; Offices of Chiropractors; Offices of Optometrists; Offices of Mental Health Practitioners (except Physicians); Offices of Physical, Occupational and Speech Therapists and Audiologists; Offices of Podiatrists; Offices of All Other Miscellaneous Health Practitioners; and Ambulance Services. The category of small business Ambulatory Health Care Services providers with $8.5 million or less in annual receipts consists of: Offices of Physicians; Family Planning Centers; Outpatient Mental Health and Substance Abuse Centers; Health Maintenance Organization Medical Centers; Freestanding Ambulatory Surgical and Emergency Centers; All Other Outpatient Care Centers, Blood and Organ Banks; and All Other Miscellaneous Ambulatory Health Care Services. The category of Ambulatory Health Care Services providers with $11.5 million or less in annual receipts consists of: Medical Laboratories; Diagnostic Imaging Centers; and Home Health Care Services. The category of Ambulatory Health Care Services providers with $29 million or less in annual receipts consists of Kidney Dialysis Centers. For all of these Ambulatory Health Care Service Providers, census data indicate that there is a combined total of 345,476 firms that operated in 1997. Of these, 339,911 had receipts for that year of less than $5 million. In addition, an additional 3,414 firms had annual receipts of $5 million to $9.99 million; and additional 1,475 firms had receipts of $10 million to $24.99 million; and an additional 401 had receipts of $25 million to $49.99 million. We therefore estimate that virtually all Ambulatory Health Care Services providers are small, given SBA's size categories. We note, however, that our rules affect non-profit and public healthcare providers, and many of the providers noted above would not be considered “public” or “non-profit.” In addition, we have no data specifying the numbers of these health care providers that are rural and meet other criteria of the Act.

31. The broad category of Hospitals consists of the following categories and the following small business providers with annual receipts of $29 million or less: General Medical and Surgical Hospitals, Psychiatric and Substance Abuse Hospitals; and Specialty (Except Psychiatric and Substance Abuse) Hospitals. For all of these health care providers, census data indicate that there is a combined total of 330 firms that operated in 1997, of which 237 or fewer had revenues of less than $25 million. An additional 45 firms had annual receipts of $25 million to $49.99 million. We therefore estimate that most Hospitals are small, given SBA's size categories. In addition, we have no data specifying the numbers of these health care providers that are rural and meet other criteria of the Act.

32. The broad category of Social Assistance consists of the category of Emergency and Other Relief Services and small business size standard of annual receipts of $6 million or less. For all of these health care providers, census data indicates that there are a combined total of 37,778 firms that operated in 1997. Of these, 37,649 or fewer firms had annual receipts of below $5 million. An additional 73 firms had annual receipts of $5 million to $9.99 million. We therefore estimate that virtually all Social Assistance providers are small, given SBA's size categories. In addition, we have no data specifying the numbers of these health care providers that are rural and meet other criteria of the Act.

33. We have included small incumbent local exchange carriers in this present RFA analysis. As noted above, a “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard ( e.g. , a telephone communications business having 1,500 or fewer employees), and “is not dominant in its field of operation.” The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent local exchange carriers are not dominant in their field of operation because any such dominance is not “national” in scope. We have therefore included small incumbent local exchange carriers in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts.

34. Total Number of Telephone Companies Affected. The Wireline Competition Bureau reports that, as of October 22, 2003, there were 4,748 firms engaged in providing telephone services, as defined therein. This number contains a variety of different categories of carriers, including local exchange carriers, interexchange carriers, competitive access providers, cellular carriers, mobile service carriers, operator service providers, pay telephone operators, PCS providers, covered SMR providers, and resellers. It seems certain that some of those 4,748 telephone service firms may not qualify as small entities because they are not “independently owned and operated.” For example, a PCS provider that is affiliated with an interexchange carrier having more than 1,500 employees would not meet the definition of a small business. It seems reasonable to conclude, therefore, that 4,748 or fewer telephone service firms are small entity telephone service firms that may be affected by the decisions and rules adopted in this Report and Order.

35. Local Exchange Carriers, Interexchange Carriers, Competitive Access Providers, Operator Service Providers, Payphone Providers, and Resellers. Neither the Commission nor SBA has developed a definition particular to small local exchange carriers (LECs), interexchange carriers (IXCs), competitive access providers (CAPs), operator service providers (OSPs), payphone providers or resellers. The closest applicable definition for these carrier-types under SBA rules is for Wired Telecommunications Carriers having less than 1,500 employees. The most reliable source of information regarding the number of these carriers nationwide of which we are aware appears to be the data that we collect annually on the Form 499-A. According to our most recent data, there are 1,335 incumbent LECs, 349 CAPs, 204 IXCs, 21 OSPs, 758 payphone providers and 454 resellers. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of these carriers that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 1,335 incumbent LECs, 349 CAPs, 204 IXCs, 21 OSPs, 758 payphone providers, and 541 resellers that may be affected by the decisions and rules adopted in this Report and Order.

36. Internet Service Providers. The SBA has developed a small business size standard for “On-Line Information Services,” NAICS code 518111. This category comprises establishments “primarily engaged in providing direct access through telecommunications networks to computer-held information compiled or published by others.” Under this small business size standard, a small business is one having annual receipts of $21 million or less. Based on firm size data provided by the Bureau of the Census, 3,123 firms are small under SBA's $21 million size standard for this category code. Although some of these Internet Service Providers (ISPs) might not be independently owned and operated, we are unable at this time to estimate with greater precision the number of ISPs that would qualify as small business concerns under SBA's small business size standard. Consequently, we estimate that there are 3,123 or fewer small entity ISPs that may be affected.

37. Satellite Service Carriers. The SBA has developed a definition for small businesses within the category of Satellite Telecommunications. According to SBA regulations, a small business under the category of Satellite communications is one having annual receipts of $12.5 million or less. According to SBA's most recent data, there are a total of 371 firms with annual receipts of $9,999,999 or less, and an additional 69 firms with annual receipts of $10,000,000 or more. Thus, the number of Satellite Telecommunications firms that are small under the SBA's $12 million size standard is between 371 and 440. Further, some of these Satellite Service Carriers might not be independently owned and operated. Consequently, we estimate that there are fewer than 440 small entity ISPs that may be affected by the decisions and rules of the present action.

38. Wireless Service Providers. The SBA has developed a definition for small businesses within the two separate categories of Cellular and Other Wireless Telecommunications. Under that SBA definition, such a business is small if it has 1,500 or fewer employees. According to the Commission's most recent Telephone Trends Report data, 1,495 companies reported that they were engaged in the provision of wireless service. Of these 1,495 companies, 989 reported that they have 1,500 or fewer employees and 506 reported that, alone or in combination with affiliates, they have more than 1,500 employees. We do not have data specifying the number of these carriers that are not independently owned and operated, and thus are unable at this time to estimate with greater precision the number of wireless service providers that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are 989 or fewer small wireless service providers that may be affected by the rules.

39. Vendors of Infrastructure Development or “Network Buildout.” The Commission has not developed a small business size standard specifically directed toward manufacturers of network facilities. The closest applicable definition of a small entity are the size standards under the SBA rules applicable to manufacturers of “Radio and Television Broadcasting and Communications Equipment” (RTB) and “Other Communications Equipment.” According to the SBA's regulations, manufacturers of RTB or other communications equipment must have 750 or fewer employees in order to qualify as a small business. The most recent available Census Bureau data indicates that there are 1,187 establishments with fewer than 1,000 employees in the United States that manufacture radio and television broadcasting and communications equipment, and 271 companies with less than 1,000 employees that manufacture other communications equipment. Some of these manufacturers might not be independently owned and operated. Consequently, we estimate that the majority of the 1,458 internal connections manufacturers are small.

40. Cable and Other Program Distribution. The SBA has developed a small business size standard which includes all such companies generating $12.5 million or less in revenue annually. This standard covers Cable and Other Program Distribution. Only businesses in Cable and Other Program Distribution category can be affected by the rules and policies adopted herein. This category includes cable systems operators, closed circuit television services, direct broadcast satellite services, multipoint distribution systems, satellite master antenna systems, and subscription television services. According to Census Bureau data for 1997, there were a total of 1,311 firms in this category, total, that had operated for the entire year. Of this total, 1,180 firms had annual receipts of under $10 million and an additional 52 firms had receipts of $10 million or more but less than $25 million. Consequently, the Commission estimates that the majority of providers in this service category are small businesses that may be affected by the rules and policies adopted herein.

41. This Second Report and Order adopts several modifications to the Commission's rules to improve the effectiveness of the rural health care universal service support mechanism and increase utilization of this mechanism by rural health care providers. First, as articulated above, in this Second Report and Order, we change the Commission's definition of rural for the purposes of the rural health care support mechanism. The new definition will not impact reporting or recordkeeping requirements. It does, however, change the overall pool of eligible applicants. Second, this Second Report and Order expands funding for mobile rural health care services by subsidizing the difference between the actual rate of satellite service for mobile rural health care providers and the rate for an urban wireline service with a similar bandwidth. Because mobile rural health care providers will now be eligible for support, we adopt rules requiring such providers to submit an estimated number of sites the mobile health care provider will serve during the year. Additionally, mobile rural health care providers seeking discounts for satellite services will be required to certify that they are serving eligible rural areas. Providers must keep annual logs indicating: (i) The date and locations of each clinic stop; and (ii) the number of patients served at each such clinic stop. Mobile rural health care providers must maintain their annual logs for a period of five years and make such logs available to the Administrator and the Commission upon request. Further, in order to receive the discount, mobile rural health care providers will be required to provide to USAC documentation of the price for bandwidth equivalent wireline services in the urban area in the state to be covered by the project.

42. These reporting and recordkeeping requirements will minimally impact both small and large entities. However, even though the minimal impact may be more financially burdensome for smaller entities, the minimal impact of such requirements is outweighed by the benefit of providing support necessary to make mobile telemedicine economical for rural health care providers to provide health care to rural and remote areas, and to make telecommunications rates for public and non-profit rural health care providers comparable to those paid in urban areas. Further, these requirements are necessary to ensure that the statutory goals of section 254 of the Telecommunications Act of 1996 are met without waste, fraud, or abuse.

43. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach impacting small business, which may include the following four alternatives (among others): (1) The establishment of differing compliance and reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or part thereof, for small entities.

44. In this Second Report and Order, we amend our rules to improve the program, increase participation by rural health care providers, and ensure that the benefits of the program continue to be distributed in a fair and equitable manner. The actions taken in this Second Report and Order help improve health care services available in rural America, and better enable rural communities to rapidly diagnose, treat, and contain possible outbreaks of disease. Thus, rural health care providers stand to benefit directly from the modifications to our rules and policies.

45. We have taken the following steps to minimize the impact on small entities. First, to ease the transition to the new definition, we permit all health care providers that have received a funding commitment from USAC since 1998 to continue to qualify for funding for the next three years under the old definition. Thereafter, health care providers must qualify under our new definition to receive funding. We find that this transition period is necessary to allow rural health care providers to plan for the elimination of support. The alternative of not providing for a transition period was considered but rejected because we believe a transition period is necessary to allow rural health care providers to plan for the elimination of support, thus minimizing any adverse or unfair impact on smaller entities. In addition, this transition period will allow us time to review the effect of this definition on smaller entities. Second, our new definition allows rural health care providers to determine their eligibility in the same manner as under the old definition. Because the old and new definitions are similar, rural health care providers will not have to adjust to a new application process. The alternative of not allowing rural health care providers to determine their eligibility in the same manner was also considered but rejected because we wanted to minimize confusion on the part of applicants. An approach that simplifies the application process for rural health care providers will help ensure that applicants, including small entities, will not be deterred from applying for support due to administrative burdens. Lastly, for mobile rural health care services, we have established a presumption that will minimize administrative burdens for all applicants, including smaller entities. Mobile rural health care providers will be required to submit to USAC an estimated number of sites the mobile rural health care provider will serve during the year. Where a mobile rural health care provider serves eight or more sites in a year, we will presume that satellite services are most cost-effective and we will not require a further showing from such providers.

46. The Commission will send a copy of this Report and Order and Order on Reconsideration including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the Report and Order and Order on Reconsideration including this FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of this Report and Order and Order on Reconsideration and FRFA (or summaries thereof) will also be published in the Federal Register .

47. This document contains modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies are invited to comment on the modified information collection requirements contained in this proceeding. In addition, we note that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we previously sought specific comment on how the Commission might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”

48. In this present document, we have assessed the effects of the measures adopted to protect against waste, fraud and abuse in the administration of the rural health care universal service support mechanism. We find that the modified information and record retention requirements for mobile rural health care providers and the modified certification requirements for health care providers in states that are entirely rural will not be unduly burdensome on small businesses.

49. The full text of this document is available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. This document may also be purchased from the Commission's duplicating contractor, Best Copy and Printing, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone (202) 488-5300, facsimile (202) 488-5563, or via e-mail qualexint@aol.com.

50. Alternative formats (computer diskette, large print, audio recording, and Braille) are available to persons with disabilities by contacting Brian Millin at (202) 418-7426 voice, (202) 418-7365 TTY, or bmillin@fcc.gov. This Order can also be downloaded in Microsoft Word and ASCII formats at http://www.fcc.gov/ccb/universalservice/highcost.

51. For further information, contact Regina Brown at (202) 418-0792 or Dana Bradford at (202) 418-1932, in the Telecommunications Access Policy Division, Wireline Competition Bureau.

52. Pursuant to the authority contained in sections 1, 4(i), 4(j), 201-205, 214, 254, and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 201-205, 214, 254, and 403, this Report and Order and Order on Reconsideration, is adopted.

53. Pursuant to the authority contained in section 405, of the Communications Act of 1934, as amended, 47 U.S.C. 405, and §§ 0.291 and 1.429 of the Commission's rules, 47 CFR 0.291 and 1.429, American Samoa Telecommunications Authority's Petition for Reconsideration is granted to the extent indicated herein.

54. It is further ordered that part 54 of the Commission's rules, 47 CFR part 54, except §§ 54.609 and 54.619 which will become effective upon Office of Management and Budget approval, is amended as set forth in Appendix A attached hereto, effective thirty (30) days after the publication of this Report and Order and Order on Reconsideration in the Federal Register .

55. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Report and Order and Order on Reconsideration including the Final Regulatory Flexibility Analysis to the Chief Counsel for Advocacy of the Small Business Administration.

DFARS Transformation is a major DoD initiative to dramatically change the purpose and content of the DFARS. The objective is to improve the efficiency and effectiveness of the acquisition process, while allowing the acquisition workforce the flexibility to innovate. The transformed DFARS will contain only requirements of law, DoD-wide policies, delegations of FAR authorities, deviations from FAR requirements, and policies/procedures that have a significant effect beyond the internal operating procedures of DoD or a significant cost or administrative impact on contractors or offerors. Additional information on the DFARS Transformation initiative is available at http://www.acq.osd.mil/dpap/dfars/transf.htm.

This final rule is a result of the DFARS Transformation initiative. Section 19.1007(a)(2) of the Federal Acquisition Regulation requires inclusion of a statement on the face page of each contract awarded under the Small Business Competitiveness Demonstration Program, to identify the contract as an award under the Program. To accommodate the use of automated systems, this final rule specifies that, when it is not practical to mark the face page of an award document, alternative means may be used to identify a contract as an award under the Small Business Competitiveness Demonstration Program.

DoD published a proposed rule at 69 FR 35566 on June 25, 2004. DoD received no comments on the proposed rule. Therefore, DoD has adopted the proposed rule as a final rule without change.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule only changes an administrative requirement to accommodate the use of automated contracting systems.

The Paperwork Reduction Act does not apply, because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

This final rule extends the ending date for phasing out domestic source restrictions on the acquisition of PAN carbon fiber from May 31, 2005, to May 31, 2006. The prescription for use of the clause at DFARS 252.225-7022, Restriction on Acquisition of Polyacrylonitrile (PAN) Carbon Fiber, is amended to require inclusion of the clause in solicitations and contracts for major systems issued on or before May 31, 2006, if the system is not yet in development and demonstration.

The aerospace industry requested the extension to provide U.S. companies sufficient time to maintain the industrial and technological capability to support a critical material used in advanced aerospace weapons programs. In addition, the extension is consistent with Section 832 of the National Defense Authorization Act for Fiscal Year 2005 (Pub. L. 108-375), which requires a delay in phase-out of the restriction until DoD performs an assessment of the PAN carbon fiber industry and submits the resulting report to Congress.

DoD published a proposed rule at 69 FR 35567 on June 25, 2004. DoD received no comments on the proposed rule. Therefore, DoD has adopted the proposed rule as a final rule without change.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because there are no known domestic small business manufacturers of PAN carbon fiber.

The Paperwork Reduction Act does not apply because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

DFARS Transformation is a major DoD initiative to dramatically change the purpose and content of the DFARS. The objective is to improve the efficiency and effectiveness of the acquisition process, while allowing the acquisition workforce the flexibility to innovate. The transformed DFARS will contain only requirements of law, DoD-wide policies, delegations of FAR authorities, deviations from FAR requirements, and policies/procedures that have a significant effect beyond the internal operating procedures of DoD or a significant cost or administrative impact on contractors or offerors. Additional information on the DFARS Transformation initiative is available at http://www.acq.osd.mil/dpap/dfars/transf.htm.

This final rule is a result of the DFARS Transformation initiative. The rule revises DFARS Subpart 229.70 to remove procedures that DoD contracting officers use in obtaining tax relief and duty-free import privileges for acquisitions conducted in Spain and the United Kingdom. This text has been relocated to the new DFARS companion resource, Procedures, Guidance, and Information (PGI), available at http://www.acq.osd.mil/dpap/dars/pgi.

DoD published a proposed rule at 69 FR 46129 on August 2, 2004. DoD received no comments on the proposed rule. Therefore, DoD has adopted the proposed rule as a final rule without change.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule relocates DoD procedural information related to tax relief, with no substantive change in policy.

The Paperwork Reduction Act does not apply because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.