The Standards of Ethical Conduct for Employees of the Executive Branch, 5 CFR part 2635, establish uniform rules of ethical conduct applicable to all executive branch personnel. Pursuant to 5 CFR 2635.105, an agency may, with the approval of the Office of Government Ethics, supplement those standards with additional rules that the agency determines are necessary and appropriate, in view of its programs and operations, to fulfill the purposes of part 2635. On July 30, 1996, with the concurrence and co-signature of the OGE Director, HHS published at 61 FR 39755 a final rule codified at 5 CFR part 5501 establishing supplemental standards of ethical conduct for its employees. The 1996 final rule was amended by an interim final rule with a request for comments that was published at 70 FR 5543 on February 3, 2005.

The interim final rule focused primarily on rules applicable to employees of the National Institutes of Health related to outside activities, financial holdings, and awards. Regulatory action was taken to address significant concerns about employee conduct in those areas which had been the subject of media reports and Congressional hearings. The resulting provisions generated considerable comment and prompted press coverage of employee objections, possible adverse effects on hiring and retention, and public reaction across a broad spectrum of viewpoints. The comments have been carefully considered and will be addressed more specifically below.

In addition, the Executive Branch Financial Disclosure Regulation, 5 CFR part 2634, specifies uniform rules governing the public and confidential financial disclosure systems established under the Ethics in Government Act. Pursuant to 5 CFR 2634.103, an agency may, subject to the prior written approval of the Office of Government Ethics, issue supplemental financial disclosure regulations that are necessary to address special or unique circumstances. The interim final rule amended chapter XLV of title 5 by adding new part 5502 to provide for an annual reporting by all employees of financial and other information concerning outside activities and a supplemental disclosure by all FDA and NIH employees with respect to prohibited financial interests. The latter disclosure requirement for NIH employees is being changed to correlate with revisions to the prohibited holdings rule.

Although this rulemaking confirms as final, with significant revisions, the amendments made by the interim final rule, the regulation will be reviewed within one year to evaluate its continued adequacy and effectiveness in relation to current agency responsibilities. As indicated in the preamble to the interim final rule at 70 FR 5543, those aspects of the rule governing outside activities continue to be under review for the remainder of the year indicated in that discussion.

Approximately 1200 of the more than 1400 comments timely submitted were from NIH employees, and about 70 comments were submitted by spouses and other family members of NIH employees. The remaining comments were submitted by health care professionals and scientific investigators at various universities and health care facilities, and a number of private sector entities, such as professional associations, other non-profit organizations, and corporations. The Department of Health and Human Services has considered each of the comments received. Those determined to be significant are discussed in further detail below in the context of the sections to which they pertain.

Many commenters submitted their views on more than one provision, and some provided multiple observations about a single provision. About 365 comments specifically addressed the outside activity limitations, and slightly more, about 385, focused on the prohibited holdings rule. The awards provision generated no specific reaction.

With respect to outside activities, some commenters objected to the increased paperwork and administrative burden that would be generated by the expanded prior approval requirement. They also expressed a more generalized concern that the restrictions would stifle the ability of government scientists to interact with their private sector counterparts, thus depriving them of personal and professional development opportunities and slowing the translation of scientific discoveries into tangible benefits for the public.

Regarding the prohibited holdings provision, many commenters questioned the relative fairness of the regulatory approach and its application to all NIH employees as well as their spouses and minor children. Some commenters who understood the need to divest holdings in substantially affected organizations urged a longer grace period within which to comply.

A number of intramural NIH employees, collectively known as the Assembly of Scientists, and others recommended as an alternative to the interim final rule that conduct provisions be established for each of several groups or categories of employees. The five or other number of categories recommended were intended to represent large groups of employees with relatively similar duties and authorities. Applicable rules would be tailored to each category in an effort to respond to the issues of greatest risk for each group. While the Department did not wholly accept these proposals, a number of revisions are being made in recognition of the differences between employees as to rank, duties, and their level of responsibility for matters affecting public health and clinical research protocols involving human subjects.

Comments, either of style or substance, that were generally supportive or generally critical of the interim final rule are not discussed in detail. The latter category of comments far exceeded the former, but a few commenters expressed support for the rule asserting that the provisions would reduce or eliminate financial motives that might be perceived as influencing scientific and medical research. Those submissions that offered no constructive comments, but simply inquired about the application of the interim final rule to the commenter's own situation, such as whether a particular company was a significantly affected organization or whether an aspect of the rule applied to the commenter, are not addressed. Those comments that discussed topics unrelated to government ethics, pointed to implementation issues that have been resolved, or were without substantive merit are also not discussed. Nor does this discourse specifically refer to comments that demonstrated a clear misunderstanding of the purpose or language of the interim final rule or of other applicable government ethics laws or regulations, except when such comments highlighted the need for NIH-specific standards. Among such comments were those suggesting that the Government must compensate employees for the costs of complying with regulations intended to prevent financial conflicts of interest, statements that new laws could not legally change the rules for current NIH employees, comments suggesting that it would not be appropriate for the Department to hold NIH employees to any standard that exceeds the standards applicable to employees of non-governmental entities, and comments indicating an unawareness of the exceptions to the outside activity and awards provisions applicable to NIH employees and to the financial holdings provision applicable to NIH employees and their spouses and minor children. Finally, comments regarding the administration of the ethics program at the NIH that are unrelated to substance or procedures in the interim final rule are not addressed.

Paragraph (c) is amended to provide that the terms used in part 5501, unless otherwise defined, have the same meaning as those defined in parts 2635 and 2640. The paragraph previously referred only to part 2635. The change reflects the use within § 5501.110 of several terms defined in part 2640, such as holdings, pension plan, and sector mutual fund.

The change to this section clarifies an ambiguity in § 5501.102(b)(1). The definition of “employee of a component” can be interpreted to apply the supplemental ethics rules applicable to a designated agency component to all employees of a division or region of the Office of the General Counsel if the division or region is principally responsible for advising or representing that component. This formulation does not comport with the current assignment of responsibilities within OGC. For example, regional offices have generalist, rather than component-specific responsibilities. Some divisions have multiple branches, and then only one branch within a division can be said to focus primarily on a particular component. Accordingly, § 5501.102(b)(1) is amended to focus on the regularly assigned duties and responsibilities of an individual employee rather than that person's location within the organization.

Section 5501.106(c)(3)(ii)(B) originally provided for an exception to the FDA prohibited outside activities rule to allow clerical or similar services (such as cashier or janitorial services) for retail stores, such as supermarkets, drug stores, or department stores, that might otherwise be significantly regulated organizations due to their sales of FDA-regulated products. As drafted, the exception applied only where clerical or similar services were performed for retail stores. An employee who worked on the weekends as a plumber could not respond to an emergency repair call to fix a leaky pipe at a bottling plant or a pharmaceutical manufacturing facility. Although seemingly innocuous business relationships can raise conflicts and impartiality concerns, subjecting such activities to an absolute prohibition with only a narrow exception tied to employment at retail stores does not appear to be warranted.

With respect to the parallel provision governing NIH employees at § 5501.109, several commenters urged that appropriate exceptions be adopted to accommodate activities that pose a diminished risk for potential conflicts or other ethics concerns, such as performing plumbing or electrical work, providing protective or security services, and rendering other types of personal services that are unrelated to the substantive programmatic functions of their employing agency. The Department concurs in those comments and will apply the changes urged for NIH employees to FDA employees as well. Accordingly, this final rule revises the exception to the FDA prohibited outside activity rule at § 5501.106(c)(3) to permit employment that primarily involves manual or unskilled labor or utilizes talents, skills, or interests in areas unrelated to the substantive programmatic activities of the FDA, such as clerical work, retail sales, service industry jobs, building trades, maintenance, or similar services. For example, assuming the activity would not otherwise violate a Federal statute or regulation or result in recusals that would materially impair the employee's ability to do his government job, an FDA employee covered by the rule would be permitted to work as a cashier at a retail drug store and ring up consumer purchases of soft drinks and prescription drugs, or as a truck driver who delivers such products to the retailer. However, § 5501.106(c)(3) will continue to prohibit a public or confidential filer at FDA from serving as a salesman for a beverage distributor or as a pharmaceutical company representative engaged in wholesale transactions.

Section 5501.106(d)(2)(i) as amended by the interim final rule required FDA and NIH employees to obtain prior approval for any outside employment or self-employed business activity. Prior to the interim final rule, this requirement applied only to the FDA. A number of commenters objected to extending the requirement to the NIH, citing the increased paperwork and administrative burden. They claimed that the expanded prior approval requirement would discourage participation in outside activities and lead to a decrease in civic engagement in community groups, volunteer efforts, and non-profit organizations that allegedly pose no conflict of interest for NIH employees. Other commenters questioned the need to approve outside activities with no apparent connection to agency operations such as lawn mowing, teaching music, or selling real estate.

Prior to the interim final rule, NIH employees were required only to obtain prior approval to engage in an outside activity that involved providing professional or consultative services; teaching, speaking, writing, or editing that related to an employee's official duties under the government-wide standard, 5 CFR 2635.807, or that resulted from an invitation from a prohibited source; or serving as an officer, director, or board member. The interim final rule widened the scope of activities subject to prior approval for several reasons. Prior approval at the NIH was expanded primarily as a means to implement the prohibition in § 5501.109 on outside activities with substantially affected organizations (SAO), supported research institutions (SRI), health care providers or insurers (HCPI), or related trade, professional, or similar associations (RTPSA). An approval process that focused only on professional or consultative services, teaching, speaking, writing, editing, or board service would not screen for prohibited activities with SAOs, SRIs, HCPIs, or RTPSAs that fell outside those enumerated categories. Moreover, activities considered less problematic, such as clerical work, protective services, or building maintenance, even when performed for organizations other than SAOs, SRIs, HCPIs, or RTPSAs, potentially could violate other supplemental provisions. For example, an NIH employee cannot work as a child care provider at a local Head Start agency if the employee's salary is funded by an Administration for Children and Families (ACF) grant, or moonlight as a guard for a protective services contractor providing security for an FDA facility because § 5501.106(c)(2) bars compensated employment in an HHS-funded activity. Thus, absent an expanded prior approval requirement, an employee might engage unintentionally in proscribed conduct. Prior approval also provided additional opportunities for a “teaching point” where an individual employee could receive guidance about conflicts under 18 U.S.C. 208, appearance concerns under 5 CFR 2635.502, and the use of public office for private gain addressed in 5 CFR 2635.702. The restrictions on representing outside entities before the Government under 18 U.S.C. 203 and 205 also could be stressed.

Despite the benefits of requiring prior approval for all outside activities, many commenters questioned whether requiring advance permission to paint houses, teach piano, or coach a sports team, for example, was warranted. The Department concurs that such activities generally are unlikely to pose conflicts or other ethics concerns. Consideration was given to excluding these examples and a list of similar activities from the prior approval requirement using the existing authority in § 5501.106(d)(6), now codified as paragraph (d)(7). Upon further evaluation, the Department has decided to remove entirely the requirement that FDA and NIH employees must obtain prior approval for all outside activities.

In its place, paragraph (d)(2) has been revised to require an FDA or NIH employee to obtain prior approval for any outside employment, as defined in 5 CFR 2635.603(a), with, or any self-employed business activity involving the sale or promotion of products or services of, any person or organization that is a prohibited source of the employee's agency component. The term “prohibited source” is defined in 5 CFR 2635.203(d) as any entity that seeks official action from, does business or seeks to do business with, or conducts activities regulated by the employee's agency; has interests that may be substantially affected by the performance or nonperformance of the employee's official duties; or is an organization the majority of whose members are such entities. The Department has designated separate agency components in § 5501.102 that define an “employee's agency” for purposes of outside activity prior approval. The FDA and the NIH have been so designated.

As a result of the revised prior approval requirement, if an outside activity does not involve professional or consultative services; teaching, speaking, writing, or editing that relates to official duties; or board service; an FDA or NIH employee no longer needs prior approval, unless the activity involves employment undertaken at the invitation of or performed for a prohibited source of the FDA or the NIH respectively.

For FDA or NIH employees who previously were subject to a prior approval requirement for all outside activities, this distinction aligns the prior approval requirement more closely with those types of external entities that are most likely to pose conflicts or raise appearance concerns. By tailoring the prior approval requirement in this manner, however, not all potential violations will be detected, as was previously discussed. An NIH employee who seeks to moonlight as a guard at a Head Start grantee agency or for the contractor that provides protective services for FDA at the Parklawn Building will not have to file an HHS 520 prior approval form because the grantee and contractor are prohibited sources of ACF and FDA respectively, rather than NIH. This omission necessitates extensive training regarding the existing prohibitions in §§ 5501.106(c)(1) and (2) which bar employees from receiving compensation for assisting in the preparation of documents to be submitted to HHS or working in an HHS-funded activity.

Nevertheless, this change in the prior approval requirement from that specified in the interim final rule considerably reduces the paperwork and administrative burden for FDA and NIH employees and their respective agencies, without unduly diminishing the ability of each agency to ensure compliance with applicable ethics laws and regulations. A prior approval requirement for FDA or NIH employees that focused on whether the proposed employment is to be conducted with a prohibited source of HHS, as opposed to the employee's own component, would be unnecessarily broad, given the extensive reach of the Department's operations in many sectors of the economy. Accordingly, this final rule correlates prior approval with those activities and sources of outside employment that have a more clearly demonstrable nexus to the employee's work and that of the employing agency and hence the potential for ethics concerns.

The prior approval exceptions for activities with political, religious, social, fraternal, or recreational organizations formerly contained in paragraphs (d)(1)(iii) and (d)(2)(ii) are now combined, placed in new paragraph (d)(3)(i), and made applicable to all categories within the general approval requirement in paragraph (d)(1), as well as to paragraph (d)(2). The addition of new paragraph (d)(3) necessitated the renumbering of the succeeding paragraphs.

The amended paragraphs (d)(4)(ii)(D) through (d)(4)(ii)(O) specify information to be supplied by an employee who requests prior approval to engage in an outside activity. These paragraphs were edited without substantive change, with the exception of a new paragraph (d)(4)(ii)(F), which caused the subsequent subparagraphs to be redesignated. The new subparagraph (F) elicits travel reimbursement information separately from compensation because travel reimbursement is treated differently under various ethics rules depending upon the employee's status and other circumstances. Subparagraph (I) is amended to focus solely on compensation and non-travel related cash or in-kind items.

Paragraph (e) is amended to clarify that the designated agency ethics official may grant a written waiver of the prohibited outside activity rules to either an individual or a class of similarly situated persons.

Under § 5501.109(c)(1) of the interim final rule, subject to certain exceptions, all NIH employees were prohibited from engaging in employment (which includes serving as an officer, director, or other fiduciary board member, serving on a scientific advisory board or committee, and consulting or providing professional services) and compensated teaching, speaking, writing, or editing with a substantially affected organization (SAO), a supported research institution (SRI), a health care provider or insurer (HCPI), or a related trade, professional, or similar association (RTPSA). Employees were also prohibited from engaging in any self-employed business activity that involves the sale or promotion of products or services of an SAO or HCPI.

A “substantially affected organization” was defined to include those entities, irrespective of corporate form, that are engaged in the research, development, or manufacture of biotechnological, biostatistical, pharmaceutical, or medical devices, equipment, preparations, treatments, or products. The term includes those organizations a majority of whose members are engaged in such activities, such as industry trade associations, and any other entity classified by the designated agency ethics official as a substantially affected organization.

A “supported research institution” was defined as an educational institution or a non-profit independent research institute that within the last year or currently has applied for, proposed, or received an NIH grant, cooperative agreement, research and development contract, or cooperative research and development agreement (CRADA).

A “health care provider or insurer” was defined comprehensively to include the types of entities that are eligible to receive payments under the Medicare program for the provision of health care items or services and those risk-bearing entities that offer health insurance or health benefits coverage.

A “related trade, professional, or similar association” referred to a trade, professional, consumer, advocacy, or other organization, association, society, or similar group that is significantly involved in advancing the interests of persons or entities engaged in activities related to or affected by the health, scientific, or health care research conducted or funded by the NIH.

The prohibited outside activities rules applicable to all NIH employees were intended to focus on those types of activities and external entities that may pose the most significant risk of potential conflicts. The need for prophylactic rules barring certain types of outside activities derived in part from the significant administrative burden inherent in case-by-case determinations and the difficulties encountered by non-scientific staff at NIH tasked with administering the ethics program. In order to advise whether an outside activity was related to an employee's official duties, the ethics staff often had to differentiate scientific work performed as an official duty assignment from that proposed as an outside activity, a technical task for which they lacked the requisite expertise. See the discussion in the preamble to the interim final rule at 70 FR 5548.

A number of commenters asserted that the translation of NIH discoveries into viable and available medical advances to improve the public health would be hampered by the restriction on outside consulting and other collaborations with industry. Given that the interim final rule contained no provisions limiting the ability of NIH employees to engage officially in efforts to advance NIH discoveries, or to travel in their official capacities to present and discuss research findings (at the expense of others where appropriate under NIH policy), and contained a specific exception permitting employees to engage in outside activities involving efforts to commercialize invention rights waived to them by the agency, the basis for those comments is unclear. No changes have been made in response to such comments.

Nevertheless, the Department has revised § 5501.109 to accommodate a significant number of comments from professional associations, constituent groups, university observers, employees and their families regarding the new restriction on employment, including consultation and board service, with “related trade, professional or similar associations.” Specifically, the comments expressed concern that restrictions imposed on the ability of NIH employees to participate fully as members of the greater scientific community would negatively affect the public health because NIH scientists would become isolated from their counterparts in the private and academic sectors and ultimately a reduction in recruitment and retention at NIH would result. As noted in the preamble to the interim final rule at 70 FR 5549, the Department fully appreciates that scientific exchange between professionals is a cornerstone of the scientific process, and that science is a collaborative endeavor that necessitates interaction between experts in their respective fields.

Therefore, upon further consideration, outside activities with RTPSAs do not appear to raise the same concerns that underlie the prohibition on outside activities with SAOs, SRIs, and HCPIs. Although activities with health-related trade associations, such as those that represent health care providers or insurers, may present potential conflicts, the trade associations most directly interested in NIH research activities are those that represent the pharmaceutical, biotechnology, and medical device industries. Such trade associations are already covered by the prohibition on outside activities with SAOs due to the composition of their membership. In addition, serving as an officer or board member of, or consulting for, a professional association, an advocacy group, or a consumer organization, although not devoid of potential conflicts, presents financial interests and covered relationship issues distinct from those presented by employment or consulting with SAOs, SRIs, and HCPIs, the commercial interests of which are more directly affected by NIH research and funding activities. Consequently, in order to tailor more narrowly the scope of the outside activity prohibition, RTPSAs are deleted. Outside activities with RTPSAs that involve professional or consultative services, teaching, speaking, writing, editing, or board service or that are performed for a prohibited source of the employee's agency nevertheless require prior approval and are subject to the substantive provisions governing outside activities under prior existing law.

Section 5501.109(c)(3) of the interim final rule contained several exceptions designed to facilitate professional obligations and certain academic endeavors. These exceptions partially lifted the absolute bar on outside activities with the list of organizations described in § 5501.109(c)(1), but they did not affirmatively permit an activity that would otherwise violate Federal law or regulations, including 5 CFR parts 2635, 2636, and 5501. Specifically, exceptions were provided to allow, subject to the prior approval standard and the substantive provisions governing outside activities under prior existing law, participation in pursuits that are critical to maintaining technical proficiency, professional licenses, and academic credentials and disseminating scientific information, such as teaching involving multiple presentations at academic institutions, providing individual patient care, moderating or presenting at continuing professional education programs, and writing or editing scientific articles, textbooks, and treatises that are subjected to scientific peer review or a substantially equivalent editorial review process. The rule also contained exceptions for employment with, providing professional or consultative services to, or teaching, speaking, writing, or editing for, a political, religious, social, fraternal, or recreational organization. The rule also recognized that individuals may be employed in less problematic roles with outside entities such as providing clerical assistance, janitorial services, or unskilled labor.

The exception to the outside activity prohibition in § 5501.109(c)(3)(iii) for clerical or similar services is amended to correspond with the changes to the FDA counterpart to this provision at § 5501.106(c)(3)(ii)(B).

This final rule identifies four additional activities as exceptions to the outside activity prohibition in order to promote important educational objectives and advance public health and safety. As with the existing exceptions, any outside activity excepted from the prohibition in § 5501.109(c)(1) may be prohibited nonetheless if the activity would otherwise violate Federal law or regulations, including 5 CFR parts 2635, 2636, and 5501. With this caveat understood, two changes refine the existing exceptions for teaching and continuing professional education. Two other changes permit employees to serve, under certain circumstances, on data and safety monitoring boards associated with clinical research protocols and to lend their expertise on grant and scientific review committees for external funding institutions.

First, new § 5501.109(c)(3)(i)(B) permits compensation for a single class lecture delivered by the employee as part of a regularly scheduled course taught by an individual other than the employee at an accredited academic institution. Unlike the exception in paragraph (c)(3)(i)(A) for teaching a course involving multiple presentations, a compensated guest lecture delivered on a single occasion within the context of a college course is subject to the prohibition in 5 CFR 2635.807(a)(2)(i)(B) on accepting compensated teaching and speaking invitations extended primarily because of official position and the subject matter restrictions of 5 CFR 2635.807(a)(2)(i)(E). The latter provision refers to activities the subject matter of which deals in significant part with the employee's current or recent (within the last year) work assignments or any ongoing or announced policy, program, or operation of the agency. Similarly, the new exception for single lectures will not permit compensation for activity related to the employee's official duties within the meaning of any other provisions in 5 CFR 2635.807(a)(2)(i). Class lectures that would be prohibited as outside activities for these reasons may, in appropriate circumstances, be given as part of an employee's official duties with supervisory approval. Class lectures permissible as compensated outside activities would be those that result from invitations extended primarily because of the employee's expertise, that occur at universities lacking interests affected substantially by the employee's discharge of official duties, and that convey broad knowledge about a particular scientific or clinical area, and not those that focus on the employee's own work or other cutting-edge research conducted at the NIH.

Second, the current continuing professional education exception addresses only one aspect of the instructional continuum in the medical profession, i.e. , those seminars that are open to practicing physicians. Presentations geared to an audience composed of medical students and resident physicians-in-training, commonly known as Grand Rounds, are not covered, yet the educational interaction of NIH employees with this population is as critically important as participation in continuing medical education (CME) instruction, particularly given the potential to recruit attendees to work at the NIH. Accordingly, new paragraph (c)(3)(vii) incorporates a Grand Rounds exception with appropriate limitations to preclude participation in such activities if an SAO or speakers' bureau affiliated with an SAO sponsors the program or the employee's presentation other than through an unrestricted educational grant.

As with other exceptions in paragraph (c)(3), the exception for compensated Grand Rounds presentations is subject to the limitations in 5 CFR 2635.807. Accordingly, the invitation to deliver a Grand Rounds presentation cannot have been tendered to the employee primarily because of the employee's official position or extended by an entity that has interests that may be substantially affected by the performance or nonperformance of the employee's official duties. The subject matter of the Grand Rounds presentation must not deal in significant part with the employee's recent (within the last year) or current assignments or any ongoing or announced policy, program, or operation of the NIH. The information conveyed may not draw substantially on ideas or official data that are nonpublic information.

Third, NIH employees often have played a critical role in serving on data and safety monitoring boards (DSMB) for clinical trials conducted at universities and medical research institutes. These boards monitor incoming statistical and other data on patient outcomes and adverse events that may be associated with a drug, biologic, or an intervention under review in a clinical trial. The DSMB members are experts in relevant disciplines, such as trial design, biostatistics, and bioethics, who are not directly involved in conducting the study. Although the DSMB members generally are considered a group separate from the sponsor (entity that funds the trial), the organizer (entity that selects the members), or the investigators (lead scientific staff that conducts the clinical research), DSMBs follow various models with respect to the degree of independence from the sponsor. See Arthur S. Slutsky et al. , Data Safety and Monitoring Boards , 350 N. Eng. J. Med. 1143 (2004); Food and Drug Administration, Guidance for Clinical Trial Sponsors on the Establishment and Operation of Clinical Trial Data Monitoring Committees (2001), draft guidance available at http://www.fda.gov/cber/gdlns/clindatmon.pdf ; National Institutes of Health, Further Guidance on Data and Safety Monitoring for Phase I and Phase II Trials (2000), available at http://grants.nih.gov/grants/guide/notice-files/NOT-OD-00-038.html ; and National Institutes of Health, NIH Policy for Data and Safety Monitoring (1998), available at http://grants.nih.gov/grants/guide/notice-files/not98-084.html .

The exception is intended to facilitate DSMB service, while maintaining the restrictions if a substantially affected organization selects the members of the DSMB or pays for their service, or if the protocol is funded by the NIH. The exception is also unavailable if the activity would violate the HHS-wide prohibitions in 5 CFR 5501.106(c)(1) and (2) relating to the compensated preparation of documents intended for submission to HHS and working for pay on an HHS-funded activity.

Fourth, NIH employees also have served on grant and scientific review committees for private foundations and other grant-making entities to assist those institutions in awarding their own funds to qualified applicants. NIH employees lend their considerable expertise in judging scientific merit, project feasibility, and other factors. As a result of the interim final rule, private foundations that funded scientific research activities would have been considered an RTPSA inasmuch as they are organizations that are “significantly involved in advancing the interests of persons or entities engaged in activities related to or affected by the health, scientific, or health care research conducted or funded by the NIH.” 70 FR 5560. Serving on grant and scientific review committees for private foundations and other grant-making entities is in the public interest, even where done in a personal capacity. Accordingly, the rule is amended to provide an appropriate exception.

For the most part, permitting this activity has been accomplished by removing RTPSAs from the list of organizations described in § 5501.109(c)(1); however, because an SRI or an HCPI can also make grant awards, an exception in new paragraph (c)(3)(viii) is added. For example, a private foundation that makes research grants might itself receive a training or conference grant from the NIH and thus may be considered an SRI. Absent the exception, an employee might be precluded from serving on a body that assists the private foundation in awarding research grants. Similarly, a university or hospital within the SRI and HCPI categories might receive a donation or bequest intended for the purpose of making research grants. Those entities also may convene groups to advise on the selection of grantees.

The exception does not permit an employee to serve on a grant or scientific review committee for a grant award or program funded by the NIH. In addition, if the employee is paid to serve on a grant or scientific review committee, such service cannot involve the preparation of documents intended for submission to HHS within the meaning of § 5501.106(c)(1), and the grant award or program about which the committee provides input cannot be an HHS-funded activity as described in § 5501.106(c)(2). A further caveat is that a substantially affected organization cannot select the members of the grant or scientific review committee or pay them for their service. Provided that the funding institution retains control of member selection and payment, this caveat is not intended to preclude such service if a substantially affected organization provides an unrestricted grant to the funding institution.

Paragraphs (c)(4) and (c)(5), which provided a transitional grace period with an opportunity for an extension of time for terminating outside activities prohibited by paragraph (c)(1), are removed. The time periods calculated from the date of publication of the interim final rule, February 3, 2005, have passed, and such activities should now have ceased.

Section 5501.110 of the interim final rule prohibited employees of the NIH who file either a public or confidential financial disclosure report, and their spouses and minor children, from owning stock and having other financial interests in substantially affected organizations, subject to certain exceptions. All other NIH employees (as well as those confidential filers excluded from coverage by the rule) were subject to a $15,000 limit on the holding or acquisition of such interests and certain other restrictions. All NIH employees were permitted to invest freely in widely diversified, publicly traded mutual funds, even if those funds owned shares in substantially affected organizations. The rule also allowed spouses, and employees who came from industry, to retain financial interests derived from industry employment, such as stock options distributed as compensation, provided any resulting conflicts were managed appropriately.

Although these provisions were no more onerous than existing financial holdings restrictions that have applied to FDA employees since 1972, the commenters urged the Department to treat NIH employees differently than their counterparts at FDA because the NIH is not primarily a regulatory agency. They also criticized the application of the prohibited holdings rule to all NIH employees regardless of their relative seniority within the organization or the nature of their official duties. Some commented on the focus on substantially affected organizations for all employees rather than on office supplies, computer equipment, and travel-related businesses with which certain employees may have conflicts under pre-existing government-wide rules. A number of commenters asked why the rules applied to spouses and minor children who have no impact on the pharmaceutical and biotechnology industries, and questioned more generally the exclusion of an entire economic sector from family investment and retirement portfolios.

Many comments demonstrated that the existing law governing conflicts of interest is not well understood. In arguing for elimination of the prohibited holdings rule, a number of commenters assumed incorrectly that a return to the status quo existing prior to the interim final rule invariably would preserve their ability to hold financial interests in substantially affected organizations, without realizing that each employee's situation would still be subject to a case-by-case analysis that could result in a directed divestiture. Others believed incorrectly that potential conflicts can be managed with full disclosure or that no violation can occur as long as the employee's actions do not actually move stock prices. Apparently unaware that those who give advice, conduct research, or recommend action in a government matter can be fully culpable, others saw no need to limit stock holding because they believed erroneously that only decision makers would have financial conflicts. Other commenters criticized a mechanistic or legalistic approach to conflicts without fully comprehending that Federal law prescribes very specific standards.

In implementing those standards, the interim final rule imposed a significantly changed environment for handling potential conflicts of interest arising from financial interests in substantially affected organizations. Congressional oversight and media reports included references to situations in which the connection to industry derived from financial holdings, and not solely from outside consulting. The new rule replaced a case-by-case evaluation of an employee's duties and financial interests with a bright-line rule designed to eliminate financial conflicts altogether. The rule encompassed the holdings of a spouse and minor children because their interests are imputed to the employee under the criminal conflict of interest statute, 18 U.S.C. 208. The changes wrought by the interim final rule were intended to protect both the employee and the agency more effectively.

Regulations governing the conduct of the employees of any agency must reflect the agency's effect on its constituents and stakeholders. The pharmaceutical, biotechnology, and health care industries have changed substantially over the past two decades, and continue to evolve at a rapid pace. The NIH does not exist or work in a vacuum. Every day, the NIH announces findings or results, scientific priorities, or strategic relationships or plans that impact companies in those fields. Any agency that has this power must hold itself and its employees to an appropriate standard. Given the complexity of the financial interests in those industries, monitoring and identifying conflict of interest situations on a case-by-case basis was no longer considered feasible for the NIH.

The interim final rule recognized no difference between “regulatory” and “non-regulatory” agencies because the legal standards applicable to employee conduct do not make such distinctions. Government agencies, without regard to how their functions may be characterized, exercise significant influence over the activities of non-Federal entities. A core mission of the NIH is to provide the basic science that forms the foundation upon which non-Federal research and development may proceed. Moreover, the potential to affect the financial interests of pharmaceutical and biotechnology companies through clinical trials can be significant. Most importantly, the rule was intended to assure the public in general, and human subjects enrolled in NIH trials in particular, that public health decisions would be made without even the appearance of influence from extraneous financial interests.

Prohibited holdings regulations similar to those applicable to the NIH have been considered an appropriate means to manage potential conflicts and address appearance concerns at various government agencies or agency subcomponents. The prohibitions at those agencies also apply to the financial interests of the employee, spouse, and minor children, and are enforced without regard to the nature of the individual employee's duties. For example, the Department of Housing and Urban Development (HUD) prohibits employee ownership of financial interests in housing and other real estate projects that HUD subsidizes and bars investments in Fannie Mae stock or the securities of other companies that are collateralized by Fannie Mae securities. 5 CFR 7501.104. At the Department of the Treasury, the Office of the Comptroller of the Currency bans investments in the banking industry. 5 CFR 3101.108. Various components of the Environmental Protection Agency (EPA) preclude investments in the automotive, pesticide, and mining industries, and EPA information resources management employees cannot own stock in data management, computer, or information processing firms. 5 CFR 6401.102. At the Department of Transportation, Federal Railroad Administration employees cannot invest in railroads, and Federal Aviation Administration employees are barred from owning stock in an airline or aircraft manufacturing company, or in their suppliers of components or parts. 5 CFR 6001.104.

Against this background, retaining a prohibited holdings regulation at the NIH is amply justified, and comments urging the elimination of the provision have not been adopted. Some commenters recommended retargeting the prohibition toward various subsets of the employee population. These suggestions have received serious consideration, although a number of concerns remain. Retargeting the financial holdings prohibition will require most employees to acquire a more detailed understanding of the law and assume a greater degree of personal responsibility for their actions.

Under the criminal conflict of interest statute, 18 U.S.C. 208, and OGE regulations in 5 CFR parts 2635 and 2640, employees, as well as their spouses and minor children, generally are not able to own stock valued above certain limits if the employees' official duties require them to be involved in particular matters that either involve a company in which they, their spouse, or minor children own stock or that would affect the financial interests of such a company or industry. Absent a waiver under § 208(b), conflicting assets worth more than these limits can be retained only if the employee, without materially impairing his ability to perform the duties of his position, can recuse from working on a matter that would affect the company, and provided that the arrangement does not adversely affect the agency's ability to accomplish its mission.

The task of monitoring investments and recusing appropriately is particularly challenging in an era where mergers, acquisitions, joint ventures, licensing agreements, and corporate name changes are common in the biomedical industry. One of the goals of the prohibited holdings rule was to avoid putting employees into a position where, in a fast paced work environment, they might participate in a government matter at their peril. Further, it had become increasingly difficult to sort through, on a case-by-case basis, these individual circumstances and police such situations to the degree required to maintain public confidence. These concerns remain, but there are other means to attain the desired objective, including increased staffing and resources to address the problem, a massive and continuous effort at training employees, and holding employees personally accountable for knowing their holdings and recognizing the financial consequences of agency actions in which they may participate. The majority of commenters encouraged the agency to retarget the prohibited holdings rule. Many expressed their belief that stricter enforcement of prior rules would have avoided the problems. They observed that the public perception of the NIH is dependent largely upon the actions of its leadership and of those who are most directly involved in making key decisions that affect human subjects enrolled in clinical trials. A regulatory scheme that insulated senior employees from financial ties to industry was urged as a more measured response to the ethics concerns at the NIH.

The NIH has committed additional staff and resources to ethics program administration. Detailed training development is underway, and a renewed commitment to enforce the rules and to pursue appropriate corrective actions is evident. In this context, the Department has decided to adopt the recommendation that the prohibited holdings rule be limited to senior employees.

For this purpose, “senior employee” will include the NIH Director and the NIH Deputy Director; members of the senior staff within the Office of the Director who report directly to the NIH Director; the Directors, the Deputy Directors, Scientific Directors, and Clinical Directors of each NIH institute and center (IC); extramural program officials who report directly to an IC Director; and any employee of equivalent levels of decision-making responsibility who is designated as a senior employee by the designated agency ethics official or the NIH Director, in consultation with the designated agency ethics official.

Senior employees, their spouses, and minor children will be barred from having financial interests in substantially affected organizations, subject to the exceptions for pensions and other employee benefits, diversified mutual funds, and exceptional circumstances that existed under the interim final rule. In addition, because the OGE regulatory exemptions in 5 CFR 2640.201 and 2640.202 allow an employee to participate in certain types of matters depending upon the value of sector mutual fund interests and publicly traded securities within the investment portfolio of the employee, spouse, and minor children, § 5501.110 has been amended to allow senior employees to take advantage of the OGE exemptions. Under current de minimis thresholds, and subject to certain limitations, senior employees, their spouses, and minor children will be permitted to retain investments in SAOs capped at $15,000 in any one company. Although they may own multiple $15,000 holdings in SAOs, provided their cumulative interests in SAOs and SAO sector funds are less than 50 percent of their total investments, senior employees will be required, through broker instructions or otherwise, to monitor capital appreciation and divest any portion that exceeds $15,000. Similarly, total investments in sector funds that state in a prospectus the objective or practice of concentrating their investments in the securities of substantially affected organizations will be capped at $50,000. In calculating the fair market value of any holdings, including stock options, that are subject to these exemption limits, guidance issued by OGE for reporting asset values for financial disclosure purposes will apply. Other generally accepted valuation principles, not inconsistent with OGE guidance, also may be utilized.

The $15,000 cap will adjust automatically to any change in the exemption limit for matters involving parties at 5 CFR 2640.202(a), and the $50,000 cap will change in tandem with the sector fund monetary limit at 5 CFR 2640.201(b). As was the case in the interim final rule, although the dollar amounts are linked, an NIH exception and an OGE exemption may not be identical. For example, not all financial interests valued at $15,000 or less will be covered by the OGE regulatory exemption. Although the NIH exception permits a senior employee to hold a financial interest in a non-publicly traded company (assuming all the other criteria in the section are also satisfied), the OGE regulatory exemption only applies to securities in publicly traded companies or long-term Federal Government or municipal securities. Similarly, the NIH exception would permit ownership of stock options valued at $15,000 or less, but the OGE regulatory exemption for interests in securities would not apply. Accordingly, senior employees are reminded that even though § 5501.110 may allow retention of certain assets that would otherwise be prohibited, the financial interest may nevertheless be problematic under 18 U.S.C. 208. Absent a regulatory exemption that specifically addresses the financial interest, a recusal, a divestiture, or an individual waiver may be required.

The exceptional circumstances exception to the prohibited holdings rule, formerly found in paragraph (d)(3) of the interim final rule and now codified in the final rule as paragraph (d)(4), is amended to clarify that an exception may be granted to a class of individuals. Although the prohibition in § 5501.110(c) has been significantly narrowed in its application only to senior employees, their spouses and minor children, class exceptions may be appropriate where the identified class shares a common factual pattern and the requisite reasons for an exception are similarly evident. An example might be an exception for financial interests held by minor children of new entrant senior employees where the minors are within a certain number of months of attaining the age of majority, and the conflict arising from the retention of the financial interests can be managed through appropriate recusals for a time-limited period. Another example might address the inheritance by a senior employee of a prohibited financial interest a few months before retirement.

Section 5501.111, as added by the interim final rule, mandated that a senior NIH employee would not be permitted to accept a gift with an aggregate market value of more than $200, or cash or an investment interest, that constituted an award or incident to an award given because of the employee's official position or from a prohibited source. (Although often referred to as an award, an honor or other recognition that entailed only the receipt of a plaque or other item of little intrinsic value presented at a gathering of interested persons could be accepted if the presentation item satisfied the criteria for exclusion from the gift definition in 5 CFR 2635.203(b), and the free attendance, including food, refreshments, and entertainment, at the event met the exception requirements for widely attended gatherings and other events in 5 CFR 2635.204(g)).

Section 5501.111 prohibited non-senior employees from accepting awards from a person, organization, or other donor that: is seeking official action from the employee, any subordinate of the employee, or any agency component or subcomponent under the employee's official responsibility; does business or seeks to do business with any agency component or subcomponent under the employee's official responsibility; conducts activities substantially affected by any agency component or subcomponent under the employee's official responsibility; or is an organization a majority of whose members fall into one of the above categories. In other words, such NIH employees could not accept a cash award or one valued at more than $200 that was tendered by a donor that had matters pending under the employee's official responsibility, either individually or before subordinates in the employee's chain of command, irrespective of whether the matter would ever reach the employee for advice or decision.

Upon further consideration, given that the official position and prohibited source criteria for precluding awards to senior employees added little to the official responsibility test applicable to every other employee, section 5501.111 is amended to apply one uniform rule for all employees based on whether the award donor has matters pending under the employee's official responsibility. The section incorporates the definition of “official responsibility” contained in 18 U.S.C. 202(b): “the direct administrative or operating authority, whether intermediate or final, and either exercisable alone or with others, and either personally or through subordinates, to approve, disapprove, or otherwise direct Government action.”

The provision governing reporting procedures is amended to codify the authority of the designated agency ethics official or separate agency components, with the concurrence of the designated agency ethics official, to prescribe standard forms for the collection of information deemed necessary or appropriate to implement part 5502.

Section 5502.106, as added by the interim final rule, required FDA and NIH employees to report prohibited financial interests, including those interests that are covered by an applicable exception, within 30 days of joining the agency, being reassigned from another part of HHS, or acquiring such interests, for example, through marriage, gift, or inheritance. This final rule specifies that the value of such interests must be reported. It also removes from § 5502.106 those provisions applicable to NIH employees and places them in a new § 5502.107 in order to correlate with the changes made to the NIH prohibited holdings regulation.

New § 5502.107 carries forward the same reporting obligations previously contained in § 5502.106, and clarifies that the value of the reported interests must be disclosed, but revises the class of NIH employees subject to the reporting requirement. With the changes made to 5 CFR 5501.110, subjecting every employee to an extensive and burdensome disclosure obligation is no longer required. Although only senior NIH employees are now subject to a prohibited holdings rule, § 5502.107 will require disclosure of financial interests in substantially affected organizations by filers of public and confidential financial disclosure reports and those employees who are not filers but who serve as clinical investigators designated in an NIH clinical research protocol approved by an institutional review board. The term “clinical investigator” means the principal investigator, accountable investigator, lead associate investigator, medical advisory investigator, associate investigators, and other subinvestigators who make direct and significant contributions to the NIH clinical study, and may include registered nurses and allied health professionals so designated. Those employees who file public or confidential financial disclosure reports or who serve as clinical investigators possess budgetary, grant-making, or research authority, exercise discretion at higher levels within the agency, or are in positions with the potential to affect significantly the life and safety of human subjects. Because holdings in substantially affected organizations may continue to pose conflicts for this cohort of employees, and divestiture on a case-by-case basis may be required, disclosure continues to play a critical role in ethics program administration. Accordingly, depending on the number of clinical research protocols approved each year, approximately one-third to one-half of the NIH employee population will remain subject to the disclosure requirement specified in § 5502.107.

New § 5502.107 also restarts the initial reporting date for on-duty employees subject to the revised disclosure rule. Public filers, confidential filers, and clinical investigators on duty at the NIH on the effective date of this final rule must report in writing on or before October 31, 2005, their holdings in substantially affected organizations held on the date the report is filed. Under the prior regulation, the initial report presented a snapshot of an employee's holdings as of the effective date of the rule. As a result of filing extensions, a considerable gap in time could make the information on the filed report out-of-date. Accordingly, under new § 5502.107, the initial disclosure report must be current as of the date of filing.

The Department of Health and Human Services has determined under the Regulatory Flexibility Act, 5 U.S.C. chapter 6, that this rule will not have a significant economic impact on a substantial number of small entities because the rule prescribes personnel provisions that primarily affect HHS employees.

The Paperwork Reduction Act, 44 U.S.C. chapter 35, does not apply to these final rule amendments because they do not contain information collection requirements that are subject to approval by the Office of Management and Budget.

The Department of Health and Human Services has determined that this rulemaking is not a rule as defined in 5 U.S.C. 804, and, thus, does not require review by Congress.

Because this rule relates to HHS personnel, it is exempt from the provisions of Executive Orders 12866 and 12988.

This rule is issued under Marketing Agreement and Order No. 906, as amended (7 CFR part 906), regulating the handling of oranges and grapefruit grown in the Lower Rio Grande Valley in Texas, hereinafter referred to as the “order.” The marketing agreement and order are 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. 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. A 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 rule revises container and pack requirements currently prescribed under the Texas orange and grapefruit order and makes several conforming and formatting changes. The rule revises the rules and regulations and container requirements by adding eight new containers to the list of authorized containers for use by Texas citrus handlers, removing one obsolete container, combining all of the requirements on authorized bags into one grouping for easier reference. Other changes include revising incorrect references to the U.S. grade standards for oranges and grapefruit grown in Texas and States other than Florida, California, and Arizona (7 CFR 51.680 through 51.714 for oranges, and 7 CFR 51.620 through 51.653 for grapefruit). See 68 FR 46433, August 6, 2003; and 66 FR 48785, September 24, 2001, for information on changes in the grade standards that necessitate changes to the Texas citrus handling regulations.

These changes are expected to help handlers compete more effectively in the marketplace, better meet the needs of buyers, and to improve producer returns by lessening the chances of confusion in the marketplace. In addition, this rule is needed to bring the administrative rules and regulations into conformance with amendments to the U.S. grade standards. These changes were unanimously recommended by the Committee on May 26, 2005.

The Committee's Container Subcommittee met on May 26, 2005, and discussed in detail possible changes to the order's container requirements. The Subcommittee recommended and the Committee unanimously approved the following changes to the orange and grapefruit container requirements and conforming changes to the rules and regulations to bring them into conformity with current industry marketing practices:

(1) The addition of eight new containers to the list of approved containers for use by Texas citrus handlers;

(2) Elimination of one obsolete wire crib from the container list, combining five approved bags currently listed separately into one paragraph for easier reference, and removal of some obsolete language in one container listing;

(3) Removal of references no longer needed in the Texas citrus regulations because of changes made to the U.S. grade standards for Texas oranges and grapefruit; and

(4) Correction of references to legal citations in the regulations.

Under the terms of the order, fresh market shipments of oranges and grapefruit grown in the Lower Rio Grande Valley in Texas are required to be inspected and meet grade, size, container, and pack requirements. Section 906.40 of the citrus marketing order authorizes the issuance of container and pack regulations. Section 906.340(a)(1) of the order's rules and regulations outlines container requirements for fresh shipments of Texas oranges and grapefruit. Container standardization helps prevent marketing confusion and helps foster orderly marketing.

Section 906.340 of the rules and regulations currently specifies 12 containers authorized for use by Texas citrus handlers in paragraphs (a)(1)(i) through (xi). Paragraph (a)(1)(xi) of § 906.340 also authorizes the Committee to approve other types of containers for testing purposes. Such test containers are subject to prior approval and their use by handlers is supervised by the Committee.

Over the years, the Committee has approved experimental containers for use by the Texas citrus industry. The need for experimental containers is reviewed by the Committee at the beginning of each season. Because buyers, including retailers, have continued to request an increasing array of containers to meet their various display objectives, the number of Committee approved experimental containers has increased to 11.

The Committee recently reviewed its experimental container list and decided to convert those being used by handlers to permanent status and to eliminate those that are no longer in use to lessen the chances of confusion and to reflect current industry practices. The Committee, therefore, recommended converting to permanent status 8 experimental containers which are now widely used by the Texas citrus industry. The following containers are being added from the experimental to the permanent container list:

(1) A fiberboard box holding two layers of fruit, with approximate dimensions of 23 inches in length, 15 1/2 inches in width, and 7 inches in depth;

(2) A fiberboard box with approximate dimensions of 15 inches in length, 11 inches in width, and 7 1/4 inches in depth;

(3) A fiberboard box with approximate dimensions of 25 3/4 inches in length, 15 inches in width, and 8 3/8 to 10 1/2 inches in depth;

(4) A reusable collapsible plastic container with approximate dimensions of 23 inches in length, 15 inches in width, and 7 to 11 inches in depth;

(5) A reusable collapsible plastic container with approximate dimensions of 14 1/4 x 10 3/4 x 6 3/4 inches;

(6) A reusable collapsible plastic bin with approximate dimensions of 36 3/4 x 44 3/4 x 27 inches;

(7) An octagonal bulk triple wall fiberboard crib with approximate dimensions of 37 3/4 inches in length, 25 inches in width, and 25 inches in height: Provided, That the container has a Mullen or Cady test of at least 1,100 pounds: And Provided further, That the container may be used to pack any poly or mesh bags authorized in this section, or bulk fruit; and

(8) A closed fiberboard carton with approximate dimensions of 16 1/2 inches in length, 10 3/4 inches in width, and 6 15/16 inches in height: Provided, That the container has a Mullen or Cady test of at least 200 pounds.

Retail buyers are highly competitive and experiment frequently with various in-store displays utilizing many container shapes and sizes. This on-going experimentation is influenced by European container development, consumer preferences, evolving handling/racking systems, and other variables. These forces have combined to demand an ever-increasing number of containers on the experimental list. The intent of this action is to reduce the experimental container list to those which truly are still experimental. The Committee believes that the permanent container list should include all the containers that the Texas citrus industry is now using. Adding the widely used containers to the permanent list and eliminating the unused containers will bring the requirements into conformity with current industry operating practices. This change does not preclude additional containers being put on the experimental list, when necessary.

The Committee also recommended eliminating one wire crib on the permanent list with dimensions of 46 1/2 by 37 by 30 inches, which is no longer being used by the industry. In addition, the Committee recommended combining five separate bag requirements into one paragraph to allow for easier reference. Currently, paragraph (a)(1) of § 906.340 lists bags with a capacity of five, eight, ten, or 18 pounds of fruit, and four-pound poly or vexar bags for oranges only, in paragraphs (iv), (v), (x), and (xi). This action combines all the bag requirements into one paragraph so all of the authorized bags can be more easily identified. In addition, the Committee indicated that a reference to Freight Container Tariff 2G currently in § 906.340(a)(1)(ii) is obsolete and recommended that it be removed.

The U.S. grade standards for Texas oranges and grapefruit were revised in 2003 to reflect current cultural and marketing practices and give the industry greater flexibility in marketing and packaging using developing technologies. The major changes revised the standard pack sections of the grapefruit and orange standards, and the standard sizing section of the orange standard by redefining the requirements in each section. To bring the order regulations into conformity with the revised grade standards, in paragraphs (c)(3)(iii) and (e) of § 906.120, the words “which are packed level full,” and “the term level full means that the fruit is level with the top edge of the bottom section of the carton;”, respectively, are removed. In addition, in the introductory text of paragraph (a)(2)(i)(A) of § 906.340, the comma after “and” and the words “when place packed in cartons or other containers,” are removed. Also, in the introductory text of paragraph (a)(2)(ii)(A) of § 906.340, the words “when place packed in cartons or other containers” and “and otherwise meet the requirements of standard sizing”, when referring to grapefruit only, are removed.

Furthermore, this rule revises several references to the U.S. standards for grapefruit and oranges for Texas and States other than Florida, California, and Arizona in paragraph (b) of § 906.137 in the regulations to correctly identify applicable sections of the U.S. grade standards. A reference to “51.685” of the U.S. grade standards for grapefruit is incorrect and is revised to “51.653” to accurately reflect sections of the grapefruit standard. Also, an incorrect reference to “51.712” of the U.S. grade standards for oranges is revised to “51.714”. In addition, a reference to “51.652” in paragraph (c) of § 906.340 is revised to “51.653”.

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 initial 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 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 18 handlers of oranges and grapefruit who are subject to regulation under the order and approximately 212 producers in the production area. Small agricultural service firms are defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts of less than $6,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000. The majority of Texas orange and grapefruit handlers and producers may be classified as small entities.

Last year, 6 of the 18 handlers (33 percent) each shipped over 545,951 7/10 bushel cartons of oranges and grapefruit. Using an average f.o.b. price of $10.99 per carton, these handlers could be considered large businesses by the SBA, and the remaining 12 handlers (67 percent) could be considered small businesses. Of the approximately 212 producers within the production area, few have sufficient acreage to generate sales in excess of $750,000; therefore, a majority of producers of Texas oranges and grapefruit may be classified as small entities.

This rule revises container and pack requirements currently prescribed under the Texas orange and grapefruit order and makes several conforming and formatting changes. The rule revises the rules and regulations and container requirements by adding eight new containers to the list of authorized containers for use by Texas citrus handlers, removing one obsolete container, combining all of the requirements on authorized bags into one grouping for easier reference. Other changes include revising incorrect references to the U.S. grade standards for oranges and grapefruit grown in Texas and States other than Florida, California, and Arizona (7 CFR 51.680 through 51.714 for oranges, and 7 CFR 51.620 through 51.653 for grapefruit). See 68 FR 46433, August 6, 2003; and 66 FR 48785, September 24, 2001, for information on changes to the grade standards that necessitate changes in the Texas citrus handling regulations.

These changes are expected to help handlers compete more effectively in the marketplace, better meet the needs of buyers, and to improve producer returns by lessening the chances of confusion in the marketplace. In addition, this rule is needed to bring the order's rules and regulations into conformance with amendments to the U.S. grade standards. These changes were unanimously recommended by the Committee on May 26, 2005.

The Committee's Container Subcommittee met on May 26, 2005, and discussed in detail possible changes to the order's container requirements. The Subcommittee recommended and the Committee unanimously approved the following changes to the orange and grapefruit container requirements and conforming changes to the rules and regulations to bring them into conformity with current industry marketing practices: (1) The addition of eight new containers to the list of approved containers for use by Texas citrus handlers; (2) Elimination of one obsolete wire crib from the container list, combining the requirements of five approved bags currently listed separately into one paragraph for easier reference, and removing obsolete language in one container listing; (3) Removing references no longer needed in the Texas citrus regulations because of changes made to the U.S. grade standards for Texas oranges and grapefruit; and (4) Correcting references to legal citations in the regulations.

Under the terms of the order, fresh market shipments of oranges and grapefruit grown in the Lower Rio Grande Valley in Texas are required to be inspected and meet grade, size, container, and pack requirements. Section 906.40 of the citrus marketing order authorizes the issuance of container and pack regulations. Section 906.340(a)(1) of the order's rules and regulations outlines container requirements for fresh shipments of Texas oranges and grapefruit. Container standardization helps prevent marketing confusion.

Section 906.340 of the rules and regulations currently specifies 12 containers authorized for use by Texas citrus handlers in paragraphs (a)(1)(i) through (xi). Paragraph (a)(1)(xi) of § 906.340 also authorizes the Committee to approve other types of containers for testing purposes. Such test containers are subject to prior approval and under the supervision of the Committee.

Over the years, the Committee has approved experimental containers for use by the Texas citrus industry. The need for experimental containers is reviewed by the Committee at the beginning of each season. Because buyers, including retailers, have continued to request an increasing array of containers to meet their various display objectives, the number of Committee approved experimental containers has increased to 11.

The Committee recently reviewed its experimental container list and decided to convert those being used by handlers to permanent status and to eliminate those that are no longer in use to lessen the chances of confusion and to reflect current industry practices. The Committee, therefore, recommended converting to permanent status 8 experimental containers which are now widely used by the Texas citrus industry. The following containers are being added from the experimental container list to the permanent container list:

(1) A fiberboard box holding two layers of fruit, with approximate dimensions of 23 inches in length, 15 1/2 inches in width, and 7 inches in depth;

(2) A fiberboard box with approximate dimensions of 15 inches in length, 11 inches in width, and 7 1/4 inches in depth;

(3) A fiberboard box with approximate dimensions of 25 3/4 inches in length, 15 inches in width, and 8 3/8 to 10 1/2 inches in depth;

(4) A reusable collapsible plastic container with approximate dimensions of 23 inches in length, 15 inches in width, and 7 to 11 inches in depth;

(5) a reusable collapsible plastic container with approximate dimensions of 14 1/4 x 10 3/4 x 6 3/4 inches;

(6) A reusable collapsible plastic bin with approximate dimensions of 36 3/4 x 44 3/4 x 27 inches;

(7) An octagonal bulk triple wall fiberboard crib with approximate dimensions of 37 3/4 inches in length, 25 inches in width, and 25 inches in height: Provided , That the container has a Mullen or Cady test of at least 1,100 pounds: And Provided further , That the container may be used to pack any poly or mesh bags authorized in this section, or bulk fruit; and

(8) A closed fiberboard carton with approximate dimensions of 16 1/2 inches in length, 10 3/4 inches in width, and 6 15/16 inches in height: Provided , That the container has a Mullen or Cady test of at least 200 pounds.

Retail buyers are highly competitive and experiment frequently with various in-store displays utilizing many container shapes and sizes. This on-going experimentation is influenced by European container development, consumer preferences, evolving handling/racking systems, and other variables. These forces have combined to demand an ever-increasing number of containers on the experimental list. The intent of this action is to reduce the experimental container list to those which truly are still experimental. The Committee believes that the permanent container list should include all the containers the Texas citrus industry is now using. Moving the widely used containers from the experimental list to the permanent list and eliminating unused containers will bring the container requirements into conformity with industry operating practices. This change does not preclude additional containers being put on the experimental list, when necessary.

The Committee also recommended eliminating one wire crib on the permanent list with dimensions of 46 1/2 by 37 by 30 inches, which is no longer being used by the industry. In addition, the Committee recommended combining five separate bag requirements into one paragraph to allow for easier reference. Currently, paragraph (a)(1) of § 906.340 lists bags with a capacity of five, eight, ten, or 18 pounds of fruit, and four-pound poly or vexar bags for oranges only, in paragraphs (iv), (v), (x), and (xi). This rule combines all the bag requirements into one paragraph so all authorized bags can be more easily identified. In addition, the Committee indicated that a reference to Freight Container Tariff 2G currently in § 906.340(a)(1)(ii), is obsolete and recommended that it be removed.

The U.S. grade standards for Texas oranges and grapefruit were revised in 2003 to reflect current cultural and marketing practices and give the industry greater flexibility in marketing and packaging using developing technologies. The major changes revised the standard pack sections of the grapefruit and orange standards, and the standard sizing section of the orange standard by redefining the requirements in each section. To bring the order regulations into conformity with the revised grade standards, in paragraphs (c)(3)(iii) and (e) of § 906.120, the words “which are packed level full,” and “the term level full means that the fruit is level with the top edge of the bottom section of the carton;”, respectively, are removed. In addition, in the introductory text of paragraph (a)(2)(i)(A) of § 906.340, the comma after “and” and the words “when place packed in cartons or other containers,” are removed. Also, in the introductory text of paragraph (a)(2)(ii)(A) of § 906.340, the words “when place packed in cartons or other containers” and “and otherwise meet the requirements of standard sizing”, when referring to grapefruit only, are removed.

Furthermore, this rule revises several references to the U.S. standards for grapefruit and oranges for Texas and States other than Florida, California, and Arizona in paragraph (b) of § 906.137 in the regulations to correctly identify applicable sections of the U.S. grade standards. A reference to “51.685” of the U.S. grade standards for grapefruit is incorrect and is revised to “51.653” to accurately reflect sections of the grapefruit standard. Also, an incorrect reference to “51.712” of the U.S. grade standards for oranges is revised to “51.714”. In addition, a reference to “51.652” in paragraph (c) of § 906.340 is revised to “51.653”.

The benefits of these changes are expected to be equally available to all Texas citrus producers and handlers regardless of their size of operation. The recommended changes offer benefits to the entire Texas citrus industry. These changes will enable handlers to compete more effectively in the marketplace by lessening the chances of marketing confusion. These changes also will contribute to the industry's long-term objective of marketing as much citrus as possible.

These regulation changes are expected to lead to market expansion. The alternative of leaving the regulations unchanged would not bring the regulations into conformity with industry operating practices. Accordingly, in assessing alternatives to the changes provided in this interim final rule, this action provides the most beneficial results.

This rule will not impose any additional reporting or recordkeeping requirements on either small or large Texas orange and grapefruit 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.

In addition, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

Further, the Committee's meeting was widely publicized throughout the Texas orange and grapefruit industry and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the May 26, 2005, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue.

Also, the Committee has a number of appointed subcommittees to review certain issues and make recommendations to the Committee. The Committee's Container Subcommittee met on May 26, 2005, and discussed this issue in detail. That meeting was also a public meeting and both large and small entities were able to participate and express their views. Finally, interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.

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.

This rule invites comments on changes to the rules and regulations and container requirements currently prescribed under the Texas citrus marketing order. Any comments received will be considered prior to finalization of this rule.

After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is found that this interim final rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect and that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because: (1) This rule relaxes container requirements for oranges and grapefruit; (2) the regulatory period begins September 1 and this action should be in effect promptly so handlers can plan accordingly; (3) the Committee unanimously recommended these changes at a public meeting and interested parties had an opportunity to provide input; and (4) this rule provides a 60-day comment period and any comments received will be considered prior to finalization of this rule.

This rule is issued under Marketing Agreement No. 130 and Marketing Order No. 958, both as amended (7 CFR part 958), regulating the handling of onions grown in designated counties in Idaho, and Malheur County, Oregon, 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.”

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, Idaho-Eastern Oregon onion handlers are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate as issued herein will be applicable to all assessable onions beginning July 1, 2005, 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 rule continues in effect the action that decreased the assessment rate established for the Committee for the 2005-2006 and subsequent fiscal periods from $0.105 per hundredweight to $0.10 per hundredweight of onions handled.

The Idaho-Eastern Oregon onion marketing order provides 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 Idaho-Eastern Oregon onions. They are familiar with the Committee's needs and with the costs for 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.

For the 2004-2005 and subsequent fiscal periods, the Committee recommended, and USDA approved, an assessment rate that would continue in effect from fiscal period to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other information available to USDA.

The Committee met on April 14, 2005, and unanimously recommended 2005-2006 expenditures of $956,001 and an assessment rate of $0.10 per hundredweight of onions. In comparison, last year's budgeted expenditures were $997,442. The assessment rate of $0.10 is $0.005 lower than the previous rate. The decreased assessment rate recommended by the Committee reflects the reduction in anticipated expenditures.

Both producers and handlers in the regulated production area expressed a need to decrease the assessment rate to help offset the lower prices received by handlers. The National Agricultural Statistics Service (NASS) reported in the Vegetables 2004 Summary, published in January 2005, that the 2004 average F.O.B. price for the Idaho-Eastern Oregon onions was $8.14 per hundredweight. That price is $1.42 below the three year average F.O.B. price of $9.56 per hundredweight for this production area. The Committee considered assessment rates lower than $0.10 per hundredweight; however, it determined that the lower rates would not generate the income necessary to sustain the current level of programs desired by the industry.

The major expenditures recommended by the Committee for the 2005-2006 year include $10,000 for committee expenses, $104,371 for salary expenses, $81,160 for travel/office expenses, $62,470 for production research expenses, $32,000 for export market development expenses, $616,000 for promotion expenses, and $50,000 for unforeseen marketing order contingencies. Budgeted expenses for these items in 2004-2005 were $10,000 $13,482, $81,960, $60,000, $32,000, $600,000, and $50,000, respectively.

The Committee based its recommended assessment rate decrease on the 2005-2006 crop estimate, the 2005-2006 program expenditure needs, and the current and projected size of its monetary reserve. The Committee estimated onion shipments for 2005-2006 at 8,464,000 hundredweight which should provide $846,400 in assessment income. Income derived from handler assessments, along with contributions ($73,600), interest income ($7,400), other income ($2,000), and funds from the Committee's authorized reserve ($26,601), should be adequate to cover budgeted expenses. The Committee estimates that its operating reserve will be approximately $596,074 at the end of the 2005-2006 fiscal period. Funds in the reserve will be kept within the maximum permitted by the order of approximately one fiscal year's operational expenses (§ 958.44).

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

Although this assessment rate is effective for an indefinite period, the Committee will continue to meet prior to or during each fiscal period 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 2005-2006 budget and those for subsequent fiscal periods 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 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 in order 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 233 producers of onions in the production area and approximately 37 handlers subject to regulation under the marketing order. Small agricultural producers are defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts of less than $750,000, and small agricultural service firms are defined as those whose annual receipts are less than $6,000,000.

According to the NASS Vegetables 2004 Summary, the total F.O.B. value of onions in the regulated production area for 2004 was $110,355,000. Therefore, based on an industry of 233 producers and 37 handlers, it can be concluded that the majority of handlers and producers of Idaho-Eastern Oregon onions may be classified as small entities.

This rule continues in effect the action that decreased the assessment rate established for the Committee and collected from handlers for the 2005-2006 and subsequent fiscal periods from $0.105 to $0.10 per hundredweight of onions. The Committee unanimously recommended 2005-2006 expenditures of $956,001 and an assessment rate of $0.10 per hundredweight. The assessment rate of $0.10 is $0.005 lower than the rate in effect during the 2004-2005 fiscal period. The quantity of assessable onions for the 2005-2006 year is estimated at 8,464,000 hundredweight which should provide $846,400 in assessment income. Income derived from handler assessments, along with contributions ($73,600), interest income ($7,400), other income ($2,000), and funds from the Committee's authorized reserve ($26,601), should be adequate to cover budgeted expenses. The decreased assessment rate recommended by the Committee reflects the reduction in anticipated expenditures from $997,442 to $956,001.

Both producers and handlers in the regulated production area expressed a need to decrease the assessment rate to help offset the lower prices received by handlers. The NASS reported in the Vegetables 2004 Summary, which was published in January 2005, that the 2004 average F.O.B. price for the Idaho-Eastern Oregon onions was $8.14 per hundredweight. That price is $1.42 below the three-year average F.O.B. price of $9.56 per hundredweight for this production area. The Committee considered lower assessment rates; however, it determined that lower rates would not generate the income necessary to sustain the current level of programs desired by the industry.

The major expenditures recommended by the Committee for the 2005-2006 year include $10,000 for committee expenses, $104,371 for salary expenses, $81,160 for travel/office expenses, $62,470 for production research expenses, $32,000 for export market development expenses, $616,000 for promotion expenses, and $50,000 for unforeseen marketing order contingencies. Budgeted expenses for these items in 2004-2005 were $10,000, $163,482, $81,960, $60,000, $32,000, $600,000, and $50,000, respectively.

The Committee reviewed and unanimously recommended 2005-2006 expenditures of $956,001 which includes decreases in salary expenses and travel/office expenses, as well as increases in production research expenses and promotion expenses. Prior to arriving at this budget, the Committee considered information from various sources, such as the Committee's Executive, Promotion, Research, and Export subcommittees. These subcommittees discussed alternative expenditure levels, based upon the relative value of various research and promotion projects to the onion industry. The assessment rate of $0.10 per hundredweight of assessable onions was then determined by taking into consideration the estimated level of assessable shipments, the market situation, program expenditure needs, and the desire to sustain a monetary reserve at a viable level.

A review of historical information and preliminary information pertaining to the upcoming year indicates that the producer price for the 2005-2006 season could range between $5.50 and $8.00 per hundredweight of onions. Therefore, the estimated assessment revenue for the 2005-2006 year as a percentage of total producer revenue could range between 1.82 and 1.25 percent.

This action continues in effect the action that decreased the assessment obligation imposed on handlers. Assessments are applied uniformly on all handlers, and some of the costs may be passed on to producers. However, decreasing the assessment rate reduces the burden on handlers, and may reduce the burden on producers. In addition, the Committee's meeting was widely publicized throughout the Idaho-Eastern Oregon onion industry and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the April 14, 2005, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

This action imposes no additional reporting or recordkeeping requirements on either small or large Idaho-Eastern Oregon onion 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.

USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

An interim final rule concerning this action was published in the Federal Register on June 3, 2005 (70 FR 32481). Copies of that rule were made available by the Committee's staff to all producers, handlers, and interested persons. In addition, the rule was made available through the internet by USDA and the Office of the Federal Register. A 60-day comment period was provided for interested persons to respond to the interim final rule. The comment period ended on August 2, 2005. One response was received, but it was not relevant to the assessment rate decrease.

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 information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

The President of the United States signed the Energy Policy Act of 2005 on August 8, 2005. The provisions of the Act became effective immediately, unless another effective date was expressly provided. Since no effective date was stated for the provisions of section 651(e) of the Act, section 651(e) became effective immediately, and brought byproduct material, as defined in paragraphs (3) and (4) of section 11 e. of the Atomic Energy Act of 1954 (42 U.S.C. 2201 et seq. ), as added by section 651(e)(1), under the immediate regulatory authority of the Nuclear Regulatory Commission.

Section 11 e.(3) of the Atomic Energy Act of 1954 now includes as byproduct material: (i) any discrete source of radium-226 that is produced, extracted, or converted after extraction (before, on, or after the date of enactment of section 651(e) of the Energy Policy Act of 2005), for use for a commercial, medical, or research activity; and (ii) any material that has been made radioactive by use of a particle accelerator and is produced, extracted, or converted after extraction (before, on, or after the date of enactment of section 651(e) of the Energy Policy Act of 2005), for use for a commercial, medical, or research activity. Section 11 e.(4) expands the definition to include any discrete source of naturally occurring radioactive material, other than source material, if certain conditions are met. Section 11 e.(4) is considered to be a place-holder and NRC staff does not anticipate a need for active regulation of the latter material at this time.

Prior to enactment of the Energy Policy Act of 2005, the NRC did not have authority over the newly covered byproduct material, and it fell under the authority of the States. Therefore, the NRC does not currently have regulations in place that would specifically apply to the material. With the enactment of the Energy Policy Act of 2005, the States may no longer assert the authority to regulate the newly covered byproduct material, except as authorized to do so by the Act.

The Energy Policy Act of 2005 allows the Commission up to 18 months after the date of enactment to issue final regulations for the newly covered byproduct material. To facilitate an orderly transition of regulatory authority with respect to the newly defined byproduct material, the Act also provides for preparation and publication of a transition plan for States that have not previously entered into an Agreement with the Commission under section 274 b of the Atomic Energy Act and for those States that have entered into such an Agreement. However, neither the regulations nor the transition plan have yet been developed. Until such time as the regulations and transition plan have been completed and are in place, persons that engage in activities involving the material will want to continue with their activities.

To ease the transition period from individualized State programs to a more uniform regulatory program developed under the Atomic Energy Act and its section 274b Agreement State Program, section 651(e) of the Energy Policy Act of 2005 authorizes the Commission to issue waivers of its authority. Waivers of the Commission's jurisdiction will permit existing State authorities to continue. Ultimate transition from NRC to State authority for those States with an existing Agreement State program is expected to proceed easily. For States without such programs currently, that want to enter into an agreement with the NRC, this waiver period will permit them to go through the processes necessary to establish and carry out an Agreement State program to regulate this material after the waiver period expires.

Section 651(e)(5) authorizes the Commission to grant a waiver to any entity of any requirement under section 651(e) with respect to a matter relating to the newly defined byproduct material, except as required by section 651(e)(5)(B)(i)(l). Thus, such a waiver can also be granted to entities that engage in activities involving the material. Without the waiver, States that seek to continue regulation of the material would be, and persons that carry on activities involving the newly defined byproduct material could be, in technical violation of the Atomic Energy Act of 1954, as amended by section 651(e) of the Energy Policy Act of 2005.

The authorization to grant waivers is subject to the Commission's determination that the waiver is in accordance with the protection of the public health and safety and the promotion of the common defense and security. The Commission has determined that there is no basis on which to conclude that these materials will not continue to be used in a manner that ensures that the public health and safety will be protected while this waiver is in effect. The Energy Policy Act of 2005 also specifically requires the Commission to consider, in promulgating regulations, the impact on the availability of radiopharmaceuticals to physicians and to patients the medical treatment of which relies on radiopharmaceuticals. The Commission believes that it is in the best interests of the country to allow continued use of the newly defined byproduct material in radiopharmaceuticals for medical purposes, and to allow the States to continue to regulate the newly defined byproduct material until the Commission can codify new regulations for these materials.

In sum, the Commission currently does not have in place a specific set of regulations to oversee the use of byproduct material as defined in paragraphs (3) and (4) of section 11 e. of the Atomic Energy Act of 1954, as added by section 651(e) of the Energy Policy Act of 2005. Granting of the waiver set forth at the end of this document will allow, for the applicable waiver period, States to continue with their programs, persons engaged in activities involving the newly defined Atomic Energy Act byproduct material to continue their operations in a safe manner, and continued access to medical radiopharmaceuticals. This will also permit the Commission and States that currently do not have § 274i Agreement State regulatory programs, but wish to enter into an agreement with the NRC, to appropriately address the newly defined byproduct material. The Commission has determined that issuance of this waiver is in accordance with the protection of the public health and safety and the promotion of the common defense and security.

Except as required by section 651(e)(5)(B)(i)(I), the Commission hereby grants a waiver from the requirements of section 651(e) of the Energy Policy Act of 2005, titled, “Treatment of Accelerator-Produced and Other Radioactive Material as Byproduct Material”, as follows:

(1) To all persons engaged in export from or import into the United States of byproduct material as defined in section 11 e.(3) and (4) of the Atomic Energy Act 1954, through August 7, 2006, unless terminated sooner if the Commission determines that an earlier termination is warranted; except that the requirements of the Department of Commerce relating to export of such material will continue to apply to such material during the waiver period;

(2) To all persons that acquire, deliver, receive, possess, own, use, or transfer byproduct material as defined in section 11 e.(3) and (4) of the Atomic Energy Act 1954, through August 7, 2009, unless terminated sooner if the Commission determines that an earlier termination is warranted; and

(3) To all States that have entered into an agreement with the Commission under section 274 b. of the Atomic Energy Act of 1954 (42 U.S.C. 2014(e)) and to States that have not entered into such an Agreement, through August 7, 2009, unless terminated sooner if the Commission determines that an earlier termination is warranted; except that such a waiver for an Agreement State will be terminated by the Commission, if the Commission makes the determinations required by section 651(e)(5)(B)(ii) of the Energy Policy Act of 2005.

In 2003, OTS and the other federal banking agencies began a joint effort to review their rules and identify outdated or otherwise unnecessary regulatory requirements. This review is required by section 2222 of EGRPRA, which directs the banking agencies to jointly or individually categorize their regulations by type, provide notice and solicit public comment on the categories, request commenters to identify areas of the regulations that are outdated, unnecessary, or unduly burdensome, and eliminate unnecessary regulations to the extent that such action is appropriate. 12 U.S.C. 3311. As part of this EGRPRA process, OTS, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency published a notice seeking comment on unnecessary regulatory burden in their rules governing application and reporting requirements. 1

Based on the comments submitted in response to the notice and additional comments voiced at EGRPRA outreach meetings, OTS issued an interim final rule on November 24, 2004 making various changes to its application and reporting requirements. 69 FR 68257. The interim final rule: (1) Modified the branch office and agency office application and notice requirements, (2) harmonized publication and public comment procedures for various applications and notices, and (3) revised the informal and formal meeting procedures used in application processing. The interim final rule also eliminated various obsolete rules. These changes were designed to reduce burden to the extent consistent with the safe and sound supervision of the industry. The changes furthered the burden reduction efforts in various recent OTS rulemakings. 2

OTS received numerous comments on the interim final rule from savings associations, trade associations, community organizations, and individuals. Many commenters filed joint comments on this interim final rule and a simultaneously published proposed rule on CRA.

Commenters were divided regarding the changes to the informal and formal meeting procedures used in application processing. Otherwise, commenters generally supported the interim final rule. Commenters noted that the changes simplified and streamlined regulatory requirements and processes without compromising the safe and sound regulation of the industry. They commended the rule as a serious effort at regulatory burden reduction that was responsive to comments made in connection with the EGRPRA initiative. Commenters also observed that the changes in the interim final rule permit savings associations to conduct their business more flexibly, to compete more efficiently, and to focus their resources more effectively. Comments on specific aspects of the rule are discussed below.

As part of the EGRPRA initiative, OTS reviewed the application requirements that apply to branch and home offices operated by federal savings associations. The interim final rule made various changes to OTS rules to ease the regulatory burden of these applications and notices. Specifically, the interim final rule:

• Eliminated application and notice requirements for re-designations of home and branch offices.

• Eliminated application and notice requirements for certain highly-rated federal savings associations.

• Eliminated notice requirements for short-distance relocations of branches of federal savings associations.

• Permitted federal savings associations incorporated under the laws of, organized in, or doing business in the District of Columbia to relocate home or branch offices and to establish branch offices under the same application and notice procedures applicable to other federal savings associations. 3

• Eliminated the requirement that a federal savings association must file an application before it may open a drive-in or pedestrian office near an existing branch or home office where a public entrance of another SAIF-insured institution is located closer to the drive-in or pedestrian office than the public entrance to the thrift's branch or home office.

Commenters addressed various aspects of the interim final rule, but generally supported OTS changes. These comments are discussed below.

Several commenters addressed the elimination of the application and notice requirements for highly-rated federal savings associations. To qualify for this treatment, a federal savings association must meet certain standards designed to ensure that it is operated in a safe and sound manner and fulfills the CRA and other compliance requirements. 4 In addition, the association must solicit comment by publishing a newspaper notice indicating that it intends to re-locate its home or branch office or establish a new branch office. If a comment opposing the application is filed, the association is required to file an application or notice unless OTS determines that the comment raises issues that are not relevant to the branch and home office approval standards or determines that OTS action in response to the comment is not required.

One commenter highlighted the importance of the newspaper notice requirement and the requirement for filing an application upon receipt of public comment in response to the newspaper notice. The commenter urged OTS to retain these requirements of the interim final rule. These requirements are retained in the final rule. 5

The preamble to the interim final rule observed that branch offices can be costly to build and operate and that excessive growth can present supervisory issues. Accordingly, OTS specifically requested comment on whether it should require a highly-rated federal savings association to file an application or notice where its investment in branch and home offices exceeds a specified limit, or where the association is engaged in multiple branch expansions. Commenters generally opposed such a requirement.

OTS has not included this limit in the final rule. Upon review, OTS has concluded that the proposed limitation is inconsistent with its objective of enhancing the flexibility and competitiveness of savings associations and the goal of focusing regulatory resources where they have the greatest impact on safety and soundness. OTS believes that the supervisory process, in conjunction with the existing investment limits in real estate, are sufficient to address safety and soundness issues raised by business expansion. 6

One commenter was concerned that OTS might not be fully aware of new branches where applications and notices are no longer required. To address this concern, the commenter suggested that OTS require a federal savings association to notify the appropriate regional office after a branch is opened.

This requirement is unnecessary. OTS has revised its internal examination procedures to ensure that its branch and home office location information is accurate and that associations comply with all branching restrictions contained in the HOLA and OTS regulations. In addition, OTS continues to encourage all federal savings associations to consult with their appropriate regional office before they open or relocate any office for which a branch application or notice is not required. 7 While federal savings associations are not required to file applications and notices for many branch office changes, OTS and others will continue to have access to information on branch offices. All savings associations annually must send branch office data to OTS. This data may be accessed on the OTS home page under Data and Research>Corporate Directories>Summary of Deposits ( www.ots.treas.gov/pagehtml.cfm?catNumber=25 ). Internet users may search for office deposits by institution, state, county or city. As a result, the general public, regulators, and bankers may: (1) Find the branches nearest to their home or office; (2) Evaluate an institution's share of the deposits in a particular market area; and (3) Analyze deposit information on existing branches in a particular market.

In addition to the burden-reducing changes described above, the interim final rule rewrote and substantially reorganized the branch and home office rules to provide greater clarity. The interim final rule restated the approval standards in the prior rule.

The preamble noted that OTS considers other issues in its review of branch and home office applications, including compliance with the National Environmental Policy Act (NEPA) (42 U.S.C. 3421 et seq. ) and the National Historic Preservation Act (NHPA) (16 U.S.C. 470). OTS requested comment on whether the final rule should cite these factors. Commenters urged OTS to include references to these laws in the final rule. These commenters observed that a comprehensive rule would enable savings associations to address all issues appropriately in their initial applications and to avoid processing delays. OTS has revised the final rule to state specifically that OTS will review branch and home office applications and notices under the NEPA and NHPA.

One commenter suggested that the final rule should set out the standards that OTS will consider in determining whether an application has sufficiently addressed NEPA. OTS declines to put this level of detail into its rules because most branch and home office changes have little impact on the environment and because guidance on these matters is provided in OTS Handbooks and in other agencies' rules. 8

The interim final rule also revised OTS agency office rules. Under the prior rule, a federal savings association could establish or maintain an agency office to service and originate (but not approve) loans and contracts; to manage or sell real estate owned by the federal savings association; and to conduct fiduciary activities or activities ancillary to the association's fiduciary business. See 12 CFR 545.96 (2004). All other activities at agency offices, however, required prior OTS approval.

Before the interim final rule, most requests for additional activities at agency offices involved the approval of loans and contracts. Because these requests did not present any supervisory concerns and imposed an unnecessary burden on federal savings associations, the interim final rule permitted savings associations to conduct these activities without prior OTS approval. Commenters generally supported this rule change, and OTS has adopted it as final.

The interim final rule asked whether there were other activities that should be added to the list of permissible agency office activities. One commenter observed that deposit marketing activities and other activities that support the deposit business (but do not involve the taking of deposits), do not present safety and soundness concerns and should be added to the list of permissible agency office activities.

The final rule does not include the suggested change. It is unclear what activities are encompassed within the phrase “deposit marketing and other activities in support of deposit business.” In light of this ambiguity and because taking deposits is an integral part of a savings association's branch activities, OTS will continue to consider these activities on a case-by-case basis. OTS notes, however, that a federal savings association that wants to make advertising materials or deposit applications available in an existing agency office would generally not be required to file an additional agency notice.

12 CFR part 516 contains OTS procedures for processing applications, notices, and other filings. While the rules in part 516 are applicable to most applications, regulations for specific types of applications may prescribe different processing procedures and timeframes. 9 OTS reviewed the various processing procedures and timeframes, and amended the rules to synchronize and harmonize these procedures and to reduce confusion. These changes included:

• Conforming the timing requirements for publications of newspaper notices under the mutual to stock conversion rules and the change of control rules to those applicable to other applications.

• Establishing a uniform public comment period for all applications. This comment period extends for 30 days after the date of publication of the initial public notice.

• Providing OTS with discretion to consider or reject late-filed comments.

• Eliminating duplicative or unnecessarily burdensome rules in the OTS acquisition of control regulations and mutual holding company reorganization procedures, and clarifying the scope of application of certain procedures under the Bank Merger Act rules.

Commenters generally supported these amendments. Accordingly, OTS adopts the interim rule without change. 10

OTS rules at 12 CFR part 516, subpart D provide for meetings in connection with OTS applications. Under the prior rule, OTS was generally required to arrange an informal meeting to discuss issues raised in an application if any commenter on the application requested the meeting. Following that informal meeting, OTS was generally required to arrange a formal meeting, if an informal meeting participant requested the meeting. 11

The interim final rule eliminated the requirement that OTS must hold formal and informal meetings whenever a commenter requests the meeting. Under the interim final rule, OTS will grant meeting requests only when it finds that written submissions are insufficient to address facts or issues raised by an application, or it otherwise determines that a meeting will benefit its decision-making process. OTS may limit the issues to be considered at the meeting to issues that OTS decides are relevant or material.

Savings association and trade association commenters generally supported this rule change. Community groups and individual commenters, however, opposed this change. These commenters argued that the informal and formal meeting process provided an opportunity for community groups and thrifts to meet with the agency to discuss CRA and anti-predatory lending matters. They asserted that written comments or one meeting did not ensure that these issues are adequately vetted.

The interim final rule appropriately balanced the interests of applicants and public commenters by providing OTS with the discretion to conduct a meeting whenever it finds that written submissions are insufficient to address facts or issues raised by an application, or it otherwise determines that a meeting will benefit its decision-making process. The rule preserves the ability of community groups and others to communicate their concerns to the agency. The interim final rule specifically permits commenters to file written comments, to request a meeting, to submit a written description of the nature of the issues or facts they wish to discuss at the meeting, and to explain the reasons why written submissions are insufficient to adequately address these issues and facts. Based on these submissions, OTS will be able to consider the circumstances of each application and determine whether a meeting is necessary to further explore CRA, fair lending compliance, and other issues. This process conforms closely to the procedures used by the other banking agencies in their application proceedings. OTS believes that the interim final rule appropriately addressed the needs of all parties and adopts it as final without change.

OTS's former rule at 12 CFR 528.4 (2004) required savings associations to include facsimiles of the equal housing lender logotype and legend in all advertising “other than for savings.” Because this requirement required a logotype in advertising for lending unrelated to housing, such as credit card loans, commercial loans, and educational loans, the interim final rule amended § 528.4 to require displays of the equal housing logotype and legend only in advertisements for loans for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling or loans secured by a dwelling.

Several commenters supported this change. One, however, noted that the equal housing logotype is an important symbol regarding the commitment to non-discrimination. This commenter argued that the logotype should be displayed on advertisements for all lending.

The equal housing lender logotype does not provide relevant information to individuals shopping for loans unrelated to housing. As a result, the former rule imposed an unnecessary burden on thrifts who must provide the information, and on consumers who must process this information in addition to the volume of other data that they receive in connection with consumer and commercial loan applications. Accordingly, OTS continues to believe that the former rule was too broad, imposed unnecessary burdens, and should be eliminated. OTS notes that this rule is consistent with related rules issued by the other banking agencies, which require the display of the equal housing lender logotype and legend only with respect to advertisements for housing-related loans. 12

In addition to the burden-reducing changes discussed above, the interim final rule eliminated the following regulations:

• 12 CFR 545.74 (2004). This rule imposed various requirements on securities brokerage activities of service corporations. The requirements were obsolete, conflicted with the current law and guidance, and were confusing to the industry.

• 12 CFR 563.181 (2004). This rule required mutual savings associations to report changes in control. It implemented section 407 of the National Housing Act, which was repealed in 1989. 13

• 12 CFR 563.183 (2004). This rule required savings associations and savings and loan holding companies to report changes of chief executive officers and directors that occur within stated time periods before or after a change of control. This rule implemented 12 U.S.C. 1817(j)(12), which requires notices under more limited circumstances. 14 OTS will rely on the more limited statutory requirements.

• 12 CFR 567.13 (2004). This rule addressed capital maintenance agreements and was obsolete in light of other statutory and regulatory protections. 15

No commenter objected to these deletions and revisions. Accordingly, OTS adopts these rule changes as final.

The information collection requirements contained in the final rule are virtually identical to those included in the November 24, 2004 interim final rule. While OTS has modified the requirements in minor ways, the burden on respondents remains unchanged from those in the earlier rule. The Office of Management and Budget (OMB) approved these collections of information on November 18, 2004 under OMB Control No. 1550-0005; on January 7, 2005 under OMB Control No. 1550-0014; and on January 19, 2005 under OMB Control Nos. 1550-0006, 1550-0011, 1550-0013, 1550-0015, 1550-0016, 1550-0018, 1550-0056 and 1550-0072. Respondents/recordkeepers are not required to respond to any collection of information unless it displays a currently valid OMB control number.

Pursuant to section 605(b) of the Regulatory Flexibility Act, OTS certifies that this final rule will not have a significant economic impact on a substantial number of small entities. The rule makes various changes to OTS application and reporting requirements that reduce regulatory burdens on all savings associations, including small savings associations. These changes will not have a significant impact on small institutions. Accordingly, OTS has determined that regulatory flexibility analysis is not required.

The Director of OTS has determined that this final rule does not constitute a “significant regulatory action” for purposes of Executive Order 12866.

Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4 (Unfunded Mandates Act) requires an agency to prepare a budgetary impact statement before promulgating a rule that includes a federal mandate that may result in expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. The final rule makes various changes that should reduce regulatory burdens on all savings associations. Accordingly, OTS has determined that this rule will not result in expenditures by State, local, and tribal governments, or by the private sector, of $100 million or more and that a budgetary impact statement is not required.

The objectives of this rule are to:

• Ensure Farm Credit banks have adequate liquidity in the case of market disruption or other extraordinary situations;

• Improve the flexibility of Farm Credit banks to meet liquidity reserve requirements;

• Strengthen the safety and soundness of Farm Credit banks; and

• Enhance the ability of the System to supply credit to agriculture and rural America in all economic conditions.

Congress created the System as a government-sponsored enterprise (GSE) to provide a permanent, stable, and reliable source of credit and related services to American agriculture and aquatic producers. Farm Credit banks obtain funds to provide this financing through System-wide debt securities. 1 If access to the debt market becomes temporarily impeded, Farm Credit banks must have enough liquidity to continue operations and pay maturing obligations.

In 1993, we issued § 615.5134 requiring each Farm Credit bank to maintain a liquidity reserve sufficient to fund operations for approximately 15 days. 2 We also issued § 615.5132 restricting eligible investments of Farm Credit banks to 30 percent of total outstanding loans. The investment limit authorizes Farm Credit banks to hold eligible investments for the purposes of (1) Maintaining a liquidity reserve (2) managing surplus short-term funds, and (3) managing interest rate risk. The liquidity reserve provision ensures the safety and soundness of Farm Credit banks, protecting the System from potential market disruptions, and the investment limit prevents Farm Credit banks from using their GSE status to borrow favorably from the capital markets and accumulate large investment portfolios for arbitrage activities. To supplement the regulatory minimum liquidity reserve, and to respond to market conditions and expectations, the Farm Credit banks entered into a voluntary Common Minimum Liquidity Standard (CMLS) agreement to maintain at least 90 days of liquidity. All Farm Credit banks currently exceed the voluntary minimum liquidity reserve requirement. 3

On November 16, 2004, we published a proposed rule (69 FR 67070) to increase the minimum liquidity reserve requirement to 90 days and raise the maximum eligible investment limit to 35 percent of total outstanding loans. We also proposed that Farm Credit banks develop and maintain contingency plans to ensure the most effective use of the liquidity reserve and to address potential liquidity shortfalls in the event of market disruptions. This final rule addresses the comments received on the proposed rule.

We received 5 comments on our proposed rule from three Farm Credit banks, the Farm Credit Council (FCC) representing its membership, and the American Bankers Association (ABA). We also received one comment from a Farm Credit bank as part of our regulatory burden initiative. All commenters supported increasing the liquidity reserve requirement. However, the ABA objected to raising the investment limit, while System commenters asked us to further increase or remove the limit. System commenters also asked us to clarify other aspects of our proposed rule.

We discuss those aspects, along with the individual comments associated with our proposed changes, and our response below. Commenters also responded to our request for comments on the existing rule for disposing of ineligible investments, which we discuss separately below.

Those areas of the proposed rule that did not receive comments are finalized as proposed.

The FCC and Farm Credit banks generally agreed with increasing the eligible investment limit, but also urged us to remove the limit. One Farm Credit bank stated that the investment limit was arbitrary and does not provide the System with adequate flexibility. Another argued that the limit constrains the bank's ability to achieve a higher level of liquidity if necessary. The FCC commented that investment limits should be set by the bank's board of directors and not by regulation. The FCC argued that an effective risk management program provides a better framework for controlling risk and a regulatory investment limit places an artificial and unnecessary burden on the System with no resulting benefit. Three Farm Credit banks alternatively suggested investment limits of 40 and 50 percent of total outstanding loans if the limit is not removed. One Farm Credit bank further recommended, as an alternative to a 40-percent investment limit, to include unused commitments with total outstanding loans when calculating the percentage of investments.

The ABA opposed increasing the investment limit. The ABA argued that the Farm Credit banks have been able to successfully fund their individual liquidity reserves under the current investment limit. The ABA commented that the increase would allow the System to accumulate larger investment portfolios to further arbitrage profits, thereby diverting financial resources away from farmers, ranchers, and rural homeowners. The ABA also commented that a higher investment limit is unnecessary because the System is a GSE and, during times of systemic stress, investors generally flock to safer investments, including GSE debt securities.

We disagree that an eligible investment limit is unnecessary or that the increase is inappropriate. We believe an investment limit ensures agricultural loans comprise the greatest portion of the System's assets, thereby fulfilling its mission of financing agriculture and rural America. We limit total eligible investments to prevent Farm Credit banks from engaging in inappropriate investment activities that are incompatible with their GSE status. Additionally, we disagree that a higher investment limit is unnecessary. The combination of an increased minimum liquidity reserve requirement and investment limit is designed to address situations where the System's access to the debt market becomes temporarily impeded. We recognize the Farm Credit banks have been successful at maintaining appropriate levels of liquidity and managing their balance sheets under the existing investment limit and current, favorable market conditions. However, a larger liquidity reserve requirement, without a corresponding increase in the investment limit, could constrain the ability of Farm Credit banks to manage operations under different market conditions. Under more adverse market conditions, Farm Credit banks may not be able to increase their days of liquidity through extending the duration of debt without incurring substantial cost. The higher investment limit provides each Farm Credit bank additional flexibility to meet the larger liquidity reserve requirement and to effectively manage their balance sheets in all economic conditions.

Similarly, we reject the suggestions for a higher investment limit than the one proposed. 4 Increasing the eligible investment limit to 35 percent is appropriate given the six-fold increase in the minimum liquidity reserve requirement. We believe a 5-percent higher investment limit addresses the 90-day minimum liquidity reserve requirement without compromising the System's responsibility to finance agriculture. Should an emergency situation arise when greater investments are necessary, Farm Credit banks may request FCA approval to temporarily increase the investment limit under § 615.5136(a).

The ABA commented that increasing the investment limit allows Farm Credit banks more room to engage in risky on-balance sheet maturity mismatching. The ABA stated that FCA should take steps to reduce the System's dependence on hedge counterparties. Specifically, the ABA noted that the System, by using derivative instruments, has been transforming longer-term debt in the 1-to-5 year repricing interval into shorter-term debt in the 0-to-6 month repricing interval. The ABA argues that an investment limit increase allows even more room to engage in extreme maturity mismatching, creating the potential for gambling on interest-rate swings.

We do not agree with the commenter that the Farm Credit banks have used their investment authority to engage in inappropriate activity. The transformation of longer-term debt into shorter-term debt using interest rate swaps correlates with the Farm Credit banks' voluntary initiative to increase liquidity reserves. The Farm Credit banks have collectively increased total earning assets and decreased interest-bearing liabilities in the 0-to-6 month bucket to increase days of liquidity. The System has also increased the issuance of synthetic variable rate-debt to compensate for the mismatch.

We have previously stated that any speculative use of derivatives would be considered an unsafe and unsound banking practice. 5 We recognize that derivative financial instruments are useful risk management tools to hedge against interest rate and liquidity risk and are an essential part of any interest rate risk management program. Each Farm Credit bank is required to establish and maintain investment policies that limit counterparty risk in investments and financial derivatives. We require each Farm Credit bank to establish interest rate risk exposure limits, to determine criteria to comply with the limits, to identify and analyze causes of risk, and to conduct interest rate shock tests. Our examination staff reviews these policies and monitors interest rate risk in Farm Credit banks, including counterparty risk in financial derivatives. We have the appropriate safeguards in place to effectively regulate Farm Credit banks without inhibiting their ability to successfully serve agriculture and rural America.

For the reasons discussed above, this section of the rule is adopted as proposed. In so doing, we emphasize that the original purpose of our investment limit remains unchanged.

All commenters supported increasing the minimum liquidity reserve requirement from approximately 15 days to 90 days, adding a rating element to investments used to fund the liquidity reserve, and the method of discounting those investments to reflect market value in the event of liquidation. One Farm Credit bank asked that all investment grade securities be included in the liquidity reserve, not just highly rated investments. This same commenter asked for clarification on the eligibility of Federal Agricultural Mortgage Corporation (FAMC) agricultural mortgage-backed securities for liquidity purposes.

We believe a regulatory minimum liquidity reserve should be funded with highly rated investments, which are generally more liquid, less volatile, and can be quickly converted to cash without significant loss. We therefore finalize investment rating requirements as proposed. FAMC securities may not be used to fund a Farm Credit bank's liquidity reserve. FAMC securities, while not listed in § 615.5140, are identified as eligible investments under § 615.5174. However, § 615.5174(c)(3) specifically states that FAMC securities may not be used to maintain a Farm Credit bank's liquidity reserve. This prohibition addresses the concern of concentration risk. If the System had real or perceived credit problems due to a crisis in the agricultural economy and could not access the market at reasonable rates, those same economic factors may also adversely affect the price and liquidity of FAMC securities.

System commenters additionally requested clarification of the meaning of the regulatory language “maturing obligations and other borrowings of the bank.” They also asked whether proceeds from System debt issuances are applied to the liquidity reserve on the trade date or settlement date.

In response to these requests, we are adding clarifying language to the final rule. The final rule clarifies that “maturing obligations and other borrowings of the bank” excludes both interest receivable and interest payable, since interest received generally offsets interest due. The liquidity reserve calculation should be a simple procedure that excludes both interest receivable and interest payable. The final rule also clarifies that proceeds from debt issuances are to be applied to the liquidity reserve on the contractual trade date. While many longer-term System debt issuances do not trade and settle on the same date, the risk of settlement default is extremely low. The Funding Corporation enters into a contractual agreement with selling group members on the trade date with the firm expectation of receiving cash from System debt issuances on the settlement date. As trades are made, the selling group members are contractually obligated to deliver cash to the Funding Corporation on the settlement date. In the event of a systemic market disruption, cash proceeds from debt issuances are as likely to be delayed as are payments of maturing obligations.

The FCC further requested we explain what the maturity date would be for obligations that have embedded “put” and “call” options, which give an investor or a Farm Credit bank the option to redeem an obligation before the contractual maturity date. We expect Farm Credit banks to use, for liquidity reserve calculations, the earlier of: the obligation's contractual maturity date, the “call date” for which the call option has been executed, or the “put date” for securities.

Although we received no comments on the frequency of calculating the liquidity reserve, we are adding language to the final rule to clarify that Farm Credit banks must satisfy the 90-day minimum liquidity reserve requirement on a daily basis. Farm Credit banks are expected to calculate the liquidity reserve on a daily basis to ensure compliance.

The ABA supported discounting assets used to fund the liquidity reserve. The FCC asked us to clarify how floating rate debt securities, which exceed contractual cap rates, are discounted. The Farm Credit banks made no individual comments on the discounts.

We are adding language to the final rule to clarify that floating rate debt security coupons meeting or exceeding a contractual cap rate are treated as a fixed rate debt security and discounted at 90 percent. Any floating rate debt security that is below the contractual cap rate is discounted at 95 percent.

Our proposed rule addressed the liquidity of Farm Credit banks; it did not address the eligible investment categories used to fund the liquidity reserve. However, we received comments from the FCC and two Farm Credit banks on existing eligible investments under § 615.5140. The commenters recommended changes to individual investment limits and the inclusion of additional investment authorities. The FCC and one Farm Credit bank specifically recommended allowing loans supported by GSE-issued long-term standby purchase commitments (LTSPCs) to fund the liquidity reserve. The FCC explained that they consider loans supported by GSE-issued LTSPCs as liquid assets suitable for the liquidity reserve.

This final rulemaking does not change § 615.5140, nor add loans that are credit enhanced by GSE LTSPCs to the list of items that may be used to fund the liquidity reserve. However, we intend to reconsider the issue of loans covered by GSE-issued LTSPCs, as well as the § 615.5140 list of eligible investments, in future rulemaking.

The System commenters also recommended changing the requirements for independently verifying the purchase and sale of investments under § 615.5133(f); obligor limits under § 615.5140(d)(1); and stress testing under § 615.5141. The FCC and a Farm Credit bank commented that § 615.5133(f) adds an unnecessary cost with no resulting benefit. One Farm Credit bank recommended modifying the stress-testing requirements of mortgage-backed securities under § 615.5141 to allow testing on a portfolio basis instead of on individual securities. This same commenter suggested specific obligor limits under § 615.5140(d)(1). We are not addressing these comments in this final rulemaking, but intend to address them in future rulemakings.

Only the ABA commented on the proposed requirement that each Farm Credit bank develop a contingency plan to ensure the most effective use of the liquidity reserve. The ABA supported establishment of such a plan. We adopt this section of the rule as proposed.

We asked for comments on whether we should change our existing divestiture regulation for those situations when general economic conditions cause investments to become ineligible or when eligibility may be restored. The ABA commented that the existing requirements are sufficient, pointing out that Farm Credit banks may submit individualized plans to divest themselves of investments that become ineligible after acquisition. The FCC commented that mandatory divestiture should be eliminated when investments become ineligible due to credit downgrades or failed stress tests. The FCC recommended replacing the existing rule with a requirement that banks develop a plan to deal with investments that become ineligible. Three Farm Credit banks recommended the mandatory divestiture provision be eliminated and replaced with a general requirement that Farm Credit banks develop their own procedures for handling ineligible investments. One bank recommended the rule distinguish between investments that are ineligible when acquired and those that later become ineligible.

We reviewed the comments submitted and appreciate the perspectives shared. We are taking the comments under advisement and may propose changes to this area of our regulations in the future.

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

VA's regulation addressing the date of receipt for purposes of benefit entitlement is located at 38 CFR 3.1(r), which implements the provisions of 38 U.S.C. 5110, the statutory provision regarding effective dates of awards. On July 19, 2004 (69 FR 42879), an interim final rule was published amending § 3.1(r) to provide that the Under Secretary for Benefits may establish exceptions to the rule governing date of receipt in circumstances when he or she determines that a natural or man-made disruption in the normal channels of communication results in one or more VBA offices experiencing extended delays in the receipt of correspondence.

We provided a 60-day comment period that ended September 17, 2004. We received no comments. Based on the rationale set forth in the interim final rule we now affirm as a final rule the changes made by the interim final rule.

This document contains no provisions constituting a collection of information under the Paperwork Reduction Act (44 U.S.C. 3501-3520).

This document without any changes affirms amendments made by an interim final rule that is already in effect. Accordingly, we have concluded under 5 U.S.C. 553 that there is good cause for dispensing with a delayed effective date based on the conclusion that such procedure is impracticable, unnecessary, and contrary to the public interest.

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before developing any rule that may result in an expenditure by State, local, or tribal governments, in the aggregate, or by the private sector of $100 million or more (adjusted annually for inflation) in any given year. This final rule would have no such effect on State, local, or tribal governments, or the private sector.

The Secretary hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612. Only VA beneficiaries could be directly affected. Therefore, pursuant to 5 U.S.C. 605(b), this final rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

The Catalog of Federal Domestic Assistance numbers and titles for the programs affected by this document are 64.109, Veterans Compensation for Service-Connected Disability; and 64.110, Veterans Dependency and Indemnity Compensation for Service-Connected Death.

This action responds only to comments related to the stay of effectiveness of Phase II of the NO X SIP Call in the State of Georgia. Comments that we consider out of the scope of the proposed rulemaking or not directly related to the reconsideration proceedings are not addressed in this action, but will be addressed later in the final action on the petition for reconsideration.

On October 27, 1998, EPA found that emissions of NO X from 22 States and the District of Columbia (23 States) were significantly contributing to downwind areas' nonattainment of the 1-hour ozone national ambient air quality standard (NAAQS). [Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone, 63 FR 57354; October 27, 1998 (NO X SIP Call Rule)]. More specifically, EPA found that the State of Georgia was significantly contributing to 1-hour ozone nonattainment in Birmingham, Alabama and Memphis, Tennessee. (63 FR 57394). The EPA set forth requirements for each of the affected upwind States, including Georgia, to submit SIP revisions prohibiting those amounts of NO X emissions which significantly contribute to downwind nonattainment. The EPA further required that each State SIP provide for NO X reductions in amounts that any remaining emissions would not exceed the level specified in EPA's NO X SIP Call regulations for that State in 2007.

A number of parties, including certain States as well as industry and labor groups, challenged the NO X SIP Call Rule. More specifically, Georgia and Missouri industry petitioners citing to the Ozone Transport Assessment Group (OTAG), modeling and recommendations, maintained that EPA had record support only for the inclusion of eastern Missouri and northern Georgia, as significantly contributing to downwind nonattainment. In Michigan v. EPA, 213 F. 3d 663 (D.C. Cir., 2000), cert. denied, 121 S. Ct. 1225 (2001) ( Michigan ), the D.C. Circuit Court vacated and remanded EPA's inclusion of the entire States of Georgia and Missouri, on grounds that OTAG had recommended NO X controls to reduce transport for areas within the fine grid parts of its modeling but recommended no additional controls for areas within the coarse grid of its modeling. Eastern Missouri and northern Georgia lie within the fine grid. The Court, however, did not question EPA's proposition that eastern Missouri and northern Georgia should be considered as significantly contributing to downwind nonattainment.

On February 22, 2002, EPA proposed the inclusion of only the fine grid parts of Georgia and Missouri in the NO X SIP Call. (Response to Court Decisions on the NO X SIP Call, NO X SIP Call Technical Amendments, and Section 126 Rules, 67 FR 8396; February 22, 2002) (Phase II). The EPA also proposed revised NO X budgets for Georgia and Missouri that included only these portions of each State.

On April 21, 2004, EPA finalized, as proposed, the inclusion of eastern Missouri and northern Georgia in the NO X SIP Call Rule, allocated revised NO X budgets that reflected the inclusion of sources located in only these areas and set revised SIP submittal and full compliance dates of April 1, 2005 and May 1, 2007, respectively. (69 FR 21604).

On June 16, 2004, the GCSEP filed a petition for reconsideration of the inclusion of the State of Georgia in the NO X SIP Call, under section 307(d) of the CAA (or the Act). Petitioners maintained that grounds that were of central relevance had occurred after the close of the notice-and-comment period for the February 22, 2002 proposal. More specifically, Petitioners cited our March 12, 2004, 1-hour ozone attainment redesignation of Birmingham, Alabama (69 FR 11798; March 12, 2004). Additionally, GCSEP cited our earlier January 17, 1995 Memphis, Tennessee, 1-hour ozone attainment redesignation (60 FR 3352), and maintained that the State of Georgia should not be subject to the NO X SIP Call Rule because it was no longer significantly contributing to 1-hour ozone nonattainment in any downwind areas. Petitioners also raised other issues such as the effect of EPA's approval and the State of Georgia's implementation, beginning since May 1, 2003, of the Atlanta, Georgia attainment demonstration SIP. Petitioners further requested a stay of the effectiveness of the April 21, 2004, rule as it relates to the State of Georgia, under section 307(d)(7)(B). Finally, GCSEP filed a challenge in the Court of Appeals for the 11th Circuit, which has since been transferred to the D.C. Circuit. Additionally, EPA and GCSEP have requested and the Court has granted the joint request to hold the challenge in abeyance pending completion of the reconsideration proceedings.

In today's action we are amending the Phase II rule by staying the effectiveness of the rule as it relates to the State of Georgia, only, during notice-and-comment rulemaking proceedings for the reconsideration petition. As explained in the proposed rule, EPA expects to provide notice-and-comment opportunity to the general public on the issues raised by GCSEP and several other issues as they relate to the continued applicability of the NO X SIP Call Rule to the State of Georgia. Additionally, we currently anticipate that we will most likely be proposing to withdraw or rescind our findings that sources in the State of Georgia emit NO X in amounts that significantly contribute to nonattainment of the 1-hour ozone NAAQS in both the former Birmingham, Alabama and Memphis, Tennessee nonattainment areas. This is a consequence of our redesignation of these downwind receptor areas to attainment. Thus, we expect that after EPA completes notice-and-comment rulemaking, the State of Georgia will likely no longer be subject to the NO X SIP Call requirements. Given this, we believe that the State of Georgia should not continue implementation efforts for the NO X SIP Call Rule while EPA initiates notice-and-comment rulemaking that will address the issues raised by GCSEP. Accordingly, in this action, EPA is staying the effectiveness of the April 21, 2004 rule with respect to the State of Georgia only, during the pendency of the notice-and-comment rulemaking proceedings that will address the petition for reconsideration. The effect of this stay would be that the State of Georgia, would have no obligation during the pendency of the stay to regulate NO X emissions under the NO X SIP Call Rule for purposes of addressing downwind nonattainment of the 1-hour ozone NAAQS.

Four commenters submitted comments on our March 1, 2005 proposal. The comments are summarized herein below along with EPA's responses. We believe that the comments set forth in section III, D-F, below, are beyond the scope of the proposed rulemaking, which was to stay the effectiveness of Phase II in the State of Georgia, only, in order to address a Petition for reconsideration. We believe that these comments raise more substantive issues that are directly related to the reconsideration proceedings, which we anticipate will be proposed very shortly. Therefore, in today's action, we are not addressing or responding to any of them. Rather, we intend to address them in full in the context of that rulemaking action.

Comment: One commenter raised the issue of our authority or lack thereof, under the CAA, to stay the effectiveness of our April 21, 2004 rule. The commenter argued that a proposal to stay the effectiveness of a rule during reconsideration proceedings is not authorized under the Act and maintained that our failure to indicate the section of the Act that allows for the proposed stay resulted in “obscuring the legal justification,” for the stay. The commenter claimed we had provided “absolutely no justification for the stay,” and argued that our action, to stay the rule, must neither be arbitrary nor capricious but based on reasoned explanation of the basis for the stay. The commenter further asserted that we had provided no discussion of the likelihood of success of the petition for reconsideration or the benefits and burdens of granting a stay. The commenter, citing to various decisions by the U.S. Court of Appeals for the District of Columbia, then argued that we should not grant the stay unless the proponent could demonstrate a likelihood of success on the merits. Another commenter argued in contrast that our authority to subject the State of Georgia to the NO X SIP Call was now questionable, in light of our redesignation of the downwind nonattainment areas, and a failure to stay the effectiveness of our April 21, 2004, rule during the reconsideration proceeding would be unreasonable, an abuse of discretion, and unlawful. The commenter further maintained that staying the rule pending the reconsideration proceedings would not only be proper but also prevent the State of Georgia from expending scarce resources and time on implementing the requirements especially because “the validity” of the rule was “in such significant doubt.”

Response: We are taking this action under Section 553 of the Administrative Proceedings Act (APA), and not under section 307(d)(7)(B) of the CAA, which is clearly inapplicable. We had duly informed petitioners of our authority in our letter of October 22, 2004, from Jeffrey Holmstead, Assistant Administrator for Office of Air and Radiation to Margaret C. Campbell, Troutman Sanders LLP, Counsel for Georgia Coalition for Sound Environmental Policy, granting the request for reconsideration. (A copy of this letter is in the Docket for this rulemaking). Further, as a general matter, the public is charged with knowledge of applicable laws. We also believe that we have the authority to stay the effectiveness of Phase II in the State of Georgia during the pendency of the reconsideration proceedings and that our failure to clearly cite our authority to do so in the proposal has no effect on the outcome of the proposed action.

It is also incorrect to state that Petitioners have failed to show a likelihood of success on the merits. To the contrary, as stated in the proposed rule, Petitioners have alleged that our prior basis for including the State of Georgia in the NO X SIP Call Rule evanesced with the attainment redesignation of the downwind receptor areas, Memphis, Tennessee and Birmingham, Alabama. 1 Thus, in response to the Petition for reconsideration, we now expect to propose a rescission or withdrawal of our findings that sources and emitting activities in the State of Georgia emit NO X in amounts that significantly contribute to nonattainment of the 1-hour ozone standard in both Birmingham, Alabama and Memphis, Tennessee, both of which are now in attainment of the 1-hour standard. If we ultimately finalize, the rescission or withdrawal of the NO X SIP Call findings, we anticipate that the State of Georgia would no longer have an obligation to reduce NO X emissions under the NO X SIP Call Rule, for purposes of addressing downwind nonattainment of the 1-hour ozone NAAQS. Therefore, it is now most likely that after notice-and-comment rulemaking the State of Georgia will not be subject to the NO X SIP Call requirements. Given this position, it would appear counterproductive and inappropriate to require the State of Georgia to continue implementation efforts for the NO X SIP Call requirements, during the pendency of the reconsideration petition. In fact, we agree with the comment that such an action on our part would be unreasonable. It could also be construed as both arbitrary and capricious.

Comment: A commenter argued that our proposal was of “indeterminate length [because] [i]f EPA fails to complete the reconsideration process, the stay will last indefinitely.”

Response: Although we are only obligated to give “[p]rompt notice” of the denial of a petition for reconsideration, under Section 555(e) of the APA, our failure over time to respond to this petition may be subject to judicial review under Section 706(1) of the APA. See for example, In re: American Rivers and Idaho Rivers United, 372 F.3d 413 (D.C. Cir., 2004); In re: Int'l Chemical Workers Union, 958 F.2d 1144 (D.C. Cir., 1992). Therefore, EPA does not agree that the stay could be of infinite length.

Comment: A commenter viewed our redesignation of the downwind receptors as an inadequate justification for staying this rule. The commenter also stated that our redesignation of Birmingham, Alabama nonattainment area “did not take effect until after the Phase II Rule was finalized.” (Emphasis in original). The commenter further argued that the stay was arbitrary and capricious and therefore unlawful “because it does not treat similarly situated sources similarly.” According to the commenter, the stay will result in sources in the State of Georgia not being subject to the NO X SIP Call requirements, even though we found that these sources contribute significantly to ozone nonattainment, while similar sources have been subject to the NO X SIP Call requirements since May 31, 2004.

Response: In the NO X SIP Call, we determined that a downwind area should be considered

We also determined at that time that sources in the State of Georgia were significantly contributing to the 1-hour standard nonattainment in Birmingham, Alabama and Memphis, Tennessee (63 FR 57394). Thus, as earlier explained, given that we have redesignated both Memphis, Tennessee and the Birmingham, Alabama nonattainment areas, we anticipate proposing to rescind or withdraw our finding that sources and emitting activities in the State of Georgia emit NO X in amounts that significantly contribute to nonattainment of the 1-hour ozone standard in both Birmingham, Alabama and Memphis, Tennessee. Therefore, we believe that our redesignation of the downwind receptors is sufficient justification for staying the effectiveness of our April 21, 2004, rule with regard to the State of Georgia. For the same reason, we also do not believe that this stay results in not treating “similarly situated sources similarly.” All other areas subject to the NO X SIP Call are currently contributing significantly to downwind nonattainment.

As to the comment that our Birmingham, Alabama redesignation became effective after our finalization of the Phase II rule, this is also incorrect. The effective dates of regulations appear in the “effective date” section of the Federal Register document. 1 CFR 18.17 (2004). See also, Safety-Kleen Corp. v. EPA , No. 92-1629 (D.C. Cir., Jan. 1996). The effective dates for the redesignation of Birmingham, Alabama and Phase II of the NO X SIP Call were April 12, 2004, and June 21, 2004, respectively.

Comment: Two commenters claimed that our delay in finalizing the April 21, 2004, rule resulted in the redesignation of the Birmingham, Alabama nonattainment area. These commenters maintained that other partial States, similar to Georgia, and for example, the State of Alabama, have fully complied with the NO X SIP Call requirements. And one commenter argued that despite the fact that the same argument, made by Petitioners, could be made for other southeastern States with already adopted and approved NO X SIP Call SIPs, we would be requiring these States to continue with full implementation. Other commenters also contended that our delay in finalizing Phase II resulted in detrimental air quality for several downwind areas and therefore, urged us not to further delay implementation by the proposed stay.

Response: None of the States, southeastern or otherwise, subject to the NO X SIP Call are similarly situated with the State of Georgia. All other States subject to the NO X SIP Call do contribute to nonattainment in downwind States. Further, although we first proposed the Phase II rule on February 21, 2002, and ultimately finalized it on April 21, 2004, during the intervening period, we had to juggle competing rulemaking demands on our limited scientific and legal staff. Any delay in finalizing Phase II did not contribute to adverse air quality in Birmingham or Memphis since these areas were able to attain the 1-hour ozone standard and be redesignated during that time.

Comment: One commenter argued that any decision to stay Phase II in the State of Georgia should factor in our finding that sources in the State of Georgia were significantly contributing to the 8-hour ozone standard nonattainment areas in the States of Alabama, Illinois, Indiana, Kentucky, Michigan, Missouri, North Carolina, South Carolina, Tennessee and Virginia. 2 The commenter further argued that a stay would be prejudicial to other downwind States, and primarily the State of North Carolina, because we have required this State to adopt a SIP to achieve attainment of the 8-hour ozone standard by 2009. According to the commenter, under our proposed schedule, sources in the State of Georgia would have been subject to controls on May 31, 2004, which would have assisted the downwind nonattainment areas in meeting their various statutory deadlines. The commenter also argued that our exclusion of the State of Georgia from the NO X SIP Call requirements would “punish downwind areas,” and further result in their not attaining the 8-hour standard “as expeditiously as practicable,” under section 7502(a)(2) of the Act. Another commenter urged us to finalize the stay as proposed because we had determined that emissions from the State of Georgia were not impacting any downwind 8-hour ozone nonattainment areas in the recently promulgated Clean Air Interstate Rule, [70 FR 25162; May 12, 2005 (CAIR)].

Response: In the NO X SIP Call Rule, we had also found that sources in the State of Georgia were significantly contributing to the 8-hour ozone standard nonattainment areas in the States of Alabama, Illinois, Indiana, Kentucky, Michigan, Missouri, North Carolina, South Carolina, Tennessee and Virginia. (63 FR 57395). But because of the various legal challenges to our promulgation of the 8-hour ozone NAAQS (62 FR 38856; July 18, 1997), American Trucking Ass'ns, Inc. v. EPA, 175 F. 3d 1027 (D.C. Cir., 1999), reh'g granted in part, denied in part, 195 F.3d 4 (D.C. Cir., 1999), aff'd in part, rev'd in part and remanded sub nom., Whitman v. EPA, 531 U.S. 457 (2001), we requested and the Court, in Michigan v. EPA, 213 F. 3d 663, 670-671 (D.C. Cir., 2000), cert. denied, 121 S. Ct. 1225 (2001) ( Michigan ), granted our motion to stay consideration of issues regarding the 8-hour basis for the NO X SIP Call. Additionally, in a separate rulemaking action, we stayed the 8-hour basis for the NO X SIP Call indefinitely. (65 FR 56245; September 18, 2000). See, also 40 CFR 51.121(q). Thus, at this time all of the affected States, which include the States of Georgia and North Carolina, remain under no obligation to comply with the 8-hour basis for the NO X SIP Call. Also, we would need to lift the stay through notice-and-comment rulemaking. Further, we note that, in the recently promulgated CAIR, we found that sources and emitting activities in the entire State of Georgia do not significantly contribute to 8-hour nonattainment in any downwind State (70 FR 25249).

Therefore, today's action only stays the requirements of Phase II of the NO X SIP Call, which relate to the 1-hour basis for the NO X SIP Call, in the State of Georgia. Additionally, in the soon-to-be proposed Petition for Reconsideration rule, we expect to solicit comments on the impact of the continued stay of the 8-hour NO X SIP Call basis on the Petitioners request that we not subject the State of Georgia to the NO X SIP Call Rule.

Comment: Three commenters also opposed the stay on grounds that the exclusion of the State of Georgia would compromise the integrity of the NO X SIP Call trading program. They claimed that the sources in the State of Georgia, although now regulated by the State, are not subject to a cap on NO X emissions, unlike similar sources that are covered by the NO X SIP Call requirements. According to the commenters, one consequence of the absence of a cap is that these sources are under no requirement to purchase allowances for exceedances of NO X SIP Call emissions levels and they argued that this, lack of a cap, could result in future exceedances of the 1-hour standard and hinder maintenance of the standard in downwind areas. One commenter noted that it was unclear whether NO X emissions from these sources were restricted either through the State SIP or permit conditions.

Response: As stated earlier, we believe that this comment and the comments set forth in section III, E-F below, are beyond the scope of the proposed rulemaking. We believe that these comments raise more substantive issues that are directly related to the reconsideration proceedings, which we anticipate will be proposed very shortly. Therefore, we are not addressing these comments at this time, rather we intend to address them in full in the context of that rulemaking action.

Comment: One commenter noted that the modeling studies conducted in the southeastern States and nationwide, such as CAIR and the Gulf Coast Ozone Study, assumed the full implementation of the NO X SIP Call in all affected States, including northern Georgia. The commenter then pointed out that the various assumptions would be rendered incorrect by excluding the State of Georgia from NO X SIP Call requirements.

Response: As stated earlier above, we believe that this comment and the comments set forth in section III. D and F are beyond the scope of the proposed rulemaking. We believe that these comments raise more substantive issues that are directly related to the reconsideration proceedings, which we anticipate will be proposed very shortly. Therefore, we are not addressing these comments at this time, rather we intend to address them in full in the context of that rulemaking action.

Comment: Another commenter argued that there were several compelling reasons to stay the effectiveness of our April 21, 2004 rule, such as our June 15, 2005, revocation date for the 1-hour ozone standard, and the revisions and implementation of the Atlanta, Georgia SIP, which requires NO X and volatile organic compounds emissions from both stationary and mobile sources.

Response: As stated earlier above, we believe that this comment and the comments set forth in section III, D-E above, are beyond the scope of the proposed rulemaking. We believe that these comments raise more substantive issues that are directly related to the reconsideration proceedings, which we anticipate will be proposed very shortly. Therefore, we are not addressing these comments at this time, rather we intend to address them in full in the context of that rulemaking action.

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 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.

The OMB has exempted this regulatory action from Executive Order 12866 review. This action stays EPA's finding in Phase II of the NO X SIP Call related to Georgia and does not impose any additional control requirements or costs.

Today's action does not add any information collection requirements or increase burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ), and therefore is not subject to these requirements.

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedures Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of today's rule on small entities, small entity is defined as: (1) A small business as defined in the Small Business Administration's (SBA) regulations at 13 CFR 12.201; (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 rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives “which minimize any significant economic impact of the rule on small entities.” 5 U.S.C. 603 and 604. Thus, an agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule.

This final action neither imposes requirements on small entities nor will there be impacts on small entities beyond those, if any, required by or resulting from the NO X SIP Call and the Section 126 Rules. We have therefore concluded that today's rule will relieve regulatory burden for all small entities affected by this rule. We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts.

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, EPA generally must prepare a written statement, including a cost-benefit analysis, for any proposed or final rules with “Federal mandates” that may result in the expenditure to State, local, and Tribal governments, in the aggregate, or by the private sector, of $100 million or more in any 1 year. Before promulgating a rule for which a written statement is needed, section 205 of the UMRA generally requires 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 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 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, enabling officials of 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.

Today's rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local, or Tribal governments or the private sector. The EPA prepared a statement for the final NO X SIP Call that would be required by UMRA if its statutory provisions applied. Today's action does not create any additional requirements beyond those of the final NO X SIP Call, therefore, no further UMRA analysis is needed. This rule stays the portion of the NO X SIP Call that would require the State of Georgia to implement NO X emissions controls requirements.

Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires 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” is defined in the Executive Order to include regulations that 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.”

This rule does not have federalism implications. It 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. Today's action does not impose an enforceable duty on these entities. This action to stay the NO X SIP Call requirements as they relate to Georgia, imposes no additional burdens beyond those imposed by the final NO X SIP Call. Thus, Executive Order 13132 does not apply to this rule.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 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.” This rule does not have Tribal implications, as specified in Executive Order 13175. It will not have substantial direct effects on Tribal governments, 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 in Executive Order 13175. Today's action does not significantly or uniquely affect the communities of Indian Tribal governments. The EPA stated in the final NO X SIP Call Rule that Executive Order 13084 did not apply because that final rule does not significantly or uniquely affect the communities of Indian Tribal governments or call on States to regulate NO X sources located on Tribal lands. The same is true of today's action. Thus, Executive Order 13175 does not apply to this rule.

Executive Order 13045: “Protection of Children from Environmental Health Risks and Safety Risks” (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 an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency 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 Agency.

This rule is not subject to the Executive Order because it is not economically significant as defined in Executive Order 12866, and because the Agency does not have reason to believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. This action does not impose requirements beyond those, if any, required by or resulting from the NO X SIP Call and Section 126 Rules.

This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355; May 22, 2001) because it is 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 104-113, 12(d) (15 U.S.C. 272 note) directs 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 EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This rulemaking does not involve technical standards, therefore, EPA is not considering the use of any voluntary consensus standards.

This action does not involve special consideration of environmental justice related issues as required by Executive Order 12898 (59 FR 7629, February 16, 1994). For the final NO X SIP Call, the Agency conducted a general analysis of the potential changes in ozone and particulate matter levels that may be experienced by minority and low-income populations as a result of the requirements of that rule. These findings were presented in the regulatory impact analysis for the NO X SIP Call. Today's action does not affect this analysis.

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 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). This rule will be effective September 30, 2005.

Section 307(b)(1) of the Act specifies which Federal Courts of Appeal have venue for petitions of review of final actions by EPA. This section provides, in pertinent part, that petitions must be filed in the Court of Appeals for the District of Columbia Circuit if the agency action consists of “nationally applicable regulations promulgated, or final action taken, by the Administrator,” or (ii) such action is locally or regionally applicable if “such action is based on a determination of nationwide scope or effect and if in taking such action the Administrator finds and publishes that such action is based on such a determination.”

Any final action related to the NO X SIP Call is “nationally applicable within the meaning of section 307(b)(1).” The Administrator has also determined that any final action regarding the NO X SIP Call is of nationwide scope and effect for purposes of section 307(b)(1). See, 63 FR 57480. Thus, any petition for review of today's final action must be filed in the Court of Appeals for the District of Columbia Circuit within 60 days from the date this final action is published in the Federal Register .

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

• Crop production (NAICS code 111)

• Animal production (NAICS code 112)

• Food manufacturing (NAICS code 311)

• Pesticide manufacturing (NAICS code 32532)

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

In addition to using EDOCKET (http://www.epa.gov/edocket/) , you may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/ . A frequently updated electronic version of 40 CFR part 180 is available on E-CFR Beta Site Two at http://www.gpoaccess.gov/ecfr/ .

EPA, on its own initiative, in accordance with sections 408(e) and 408 (l)(6) of the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a, is establishing tolerances for residues of the insecticide methoxyfenozide, benzoic acid, 3-methoxy-2-methyl-2-(3,5-dimethylbenzoyl)-2-(1,1-dimethylethyl)hydrazide, in or on sorghum grain at 0.05 parts per million (ppm), sorghum grain forage at 15 ppm, and sorghum grain stover at 125 ppm. These tolerances will expire and are revoked on December 31, 2007. EPA will publish a document in the Federal Register to remove the revoked tolerances from the Code of Federal Regulations.

Section 408(l)(6) of the FFDCA requires EPA to establish time-limited tolerances or exemptions from the requirement of a tolerance for pesticide chemical residues in food that will result from the use of a pesticide under an emergency exemption granted by EPA under section 18 of FIFRA. Such tolerances can be established without providing notice or period for public comment. EPA does not intend for its actions on section 18 related tolerances to set binding precedents for the application of section 408 of the FFDCA and the new safety standard to other tolerances and exemptions. Section 408(e) of the FFDCA allows EPA to establish a tolerance or an exemption from the requirement of a tolerance on its own initiative, i.e., without having received any petition from an outside party.

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

Section 18 of the FIFRA authorizes EPA to exempt any Federal or State agency from any provision of FIFRA, if EPA determines that “emergency conditions exist which require such exemption.” This provision was not amended by the Food Quality Protection Act of 1996 (FQPA). EPA has established regulations governing such emergency exemptions in 40 CFR part 166.

The southwestern corn borer is a major pest on corn, but has become problematic for Louisiana sorghum producers in recent years. The southwestern corn borer is known to infest grain sorghum and had not been documented as an important pest of this crop until 2002, when heavy moth infestations developed in corn and migrated to late planted sorghum fields. Grain sorghum is usually planted in the spring, but adverse weather conditions and planting conflicts ensure that a significant amount of acreage will be planted late. These conditions can provide a susceptible host for heavy southwestern corn borer moth flight during late summer. This unexpected heavy migration into grain sorghum has left many growers without adequate technology to control this pest.

The sugarcane borer is a major pest of corn grown in the vicinity of sugarcane. The sugarcane borer recently became an important pest of corn in parts of Louisiana where no sugarcane is produced. This northern shift in the infestation range of the sugarcane borer is likely the result of mild winters and an increase in reduced tillage crop production, which has allowed this pest to become established outside of its normal range. Heavy populations of sugarcane borer moth infestations have migrated to late planted sorghum fields and growers have been ill-prepared in handling this disease.

The Louisiana State AgCenter recommends the following two insecticides: Cypermethrin and lambda-cyhalothrin for control of the southwestern corn borer when they are applied before the larvae bore into the stalk. However, the short-lived residual effectiveness of both pyrethroids requires an effective scouting program to carefully time applications. This practice is not available in Louisiana and there are currently no insecticides registered for control of the sugarcane borer on grain sorghum. Methoxyfenozide is a suitable alternative because of its moderate residual life and low risk to humans and most non-target organisms.

Planting grain sorghum early is an important management practice against both the southwestern corn borer and the sugarcane borer. Early planted sorghum usually matures before southwestern corn borer and sugarcane borer populations reach their peak migration from their host plants. However, this practice is limited by weather conditions, which often delay planting sorghum acreage until late spring and early summer. Shredding the crop stubble followed by tillage is no longer feasible since most sorghum is now grown under reduced tillage conditions. Natural enemies destroy large numbers of the southwestern corn borer, but not at levels necessary to prevent significant loss. EPA has authorized under FIFRA section 18 the use of methoxyfenozide on grain sorghum to control southwestern corn borer and sugarcane borer for use on grain sorghum in Louisiana. After having reviewed the submission, EPA concurs that emergency conditions exist for this State.

As part of its assessment of this emergency exemption, EPA assessed the potential risks presented by residues of methoxyfenozide in or on sorghum grain, sorghum grain forage, and sorghum grain stover. In doing so, EPA considered the safety standard in section 408(b)(2) of the FFDCA, and EPA decided that the necessary tolerances under section 408(l)(6) of the FFDCA would be consistent with the safety standard and with FIFRA section 18. Consistent with the need to move quickly on the emergency exemption in order to address an urgent non-routine situation and to ensure that the resulting food is safe and lawful, EPA is issuing these tolerances without notice and opportunity for public comment as provided in section 408(l)(6) of the FFDCA. Although these tolerances will expire and are revoked on December 31, 2007, under section 408(l)(5) of the FFDCA, residues of the pesticide not in excess of the amounts specified in the tolerance remaining in or on sorghum grain, sorghum grain forage, sorghum grain stover after that date will not be unlawful, provided the pesticide is applied in a manner that was lawful under FIFRA, and the residues do not exceed a level that was authorized by these tolerances at the time of that application. EPA will take action to revoke these tolerances earlier if any experience with, scientific data on, or other relevant information on this pesticide indicate that the residues are not safe.

Because these tolerances are being approved under emergency conditions, EPA has not made any decisions about whether methoxyfenozide meets EPA's registration requirements for use on sorghum grain, sorghum grain forage, sorghum grain stover or whether permanent tolerances for this use would be appropriate. Under these circumstances, EPA does not believe that these tolerances serves as a basis for registration of methoxyfenozide by a State for special local needs under FIFRA section 24(c). Nor do these tolerances serve as the basis for any State other than Louisiana to use this pesticide on this crop under section 18 of FIFRA without following all provisions of EPA's regulations implementing FIFRA section 18 as identified in 40 CFR part 166. For additional information regarding the emergency exemption for methoxyfenozide, contact the Agency's Registration Division at the address provided under FOR FURTHER INFORMATION CONTACT .

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

Consistent with section 408(b)(2)(D) of the FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of methoxyfenozide and to make a determination on aggregate exposure, consistent with section 408(b)(2) of the FFDCA, for time-limited tolerances for residues of methoxyfenozide in or on sorghum grain at 0.05 ppm, sorghum grain forage at 15 ppm, and sorghum grain stover at 125 ppm. EPA's assessment of the dietary exposures and risks associated with establishing these tolerances follows.

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

• Crop production (NAICS 111), e.g., agricultural workers; greenhouse, nursery, and floriculture workers; farmers.

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

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

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

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

In addition to using EDOCKET (http://www.epa.gov/edocket/) , you may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/ . A frequently updated electronic version of 40 CFR part 180 is available at E-CFR Beta Site Two at http://www.gpoaccess.gov/ecfr/ . To access the OPPTS Harmonized Guidelines referenced in this document, go directly to the guidelines at http://www.epa.gpo/opptsfrs/home/guidelin.htm/.

In the Federal Register of May 23, 2003 (68 FR 28218) (FRL-7307-5), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 3F6552) by ISK Biosciences, 7470 Auburn Road, suite A, Concord, Ohio 44077. The petition requested that 40 CFR part 180 be amended by establishing a tolerance for the combined residues of the insecticide flonicamid, [ N -(cyanomethyl)-4-trifluoromethylnicotinamide] and its metabolites, TFNA, (4-trifluoromethylnicotinic acid), TFNA-AM, (4-trifluoromethylnicotinamide) and TFNG, [ N -(4-trifluoromethylnicotinoyl)glycine] in or on the raw agricultural commodities: Celery, at 1.2 parts per million (ppm); cotton, at 0.5 ppm; cotton, gin trash, at 6.0 ppm; cotton, hulls, at 1.0 ppm; cotton, meal, at 1.0 ppm; fruit, pome, group 11, at 0.2 ppm; fruit, stone, group 12, except plum and fresh prune plum, at 0.7 ppm; lettuce, head, at 1.0 ppm; lettuce, leaf, at 4.0 ppm; plum, at 0.1 ppm; potato, at 0.2 ppm; potato, flakes, at 0.4 ppm; prune, fresh, at 0.1; spinach, at 9.0 ppm; tomato, paste, at 2.0 ppm; tomato, puree, at 0.5 ppm; vegetable, cucurbit, group 9, at 0.4 ppm; vegetable, fruiting, group 8, at 0.4 ppm; by establishing tolerances for the combined residues of the insecticide flonicamid, [ N -(cyanomethyl)-4-trifluoromethylnicotinamide] and its metabolite TFNA-AM, (4-trifluoromethylnicotinamide) in animal tissues and poultry meat byproducts:Cattle, fat, at 0.01 ppm; cattle, meat, at 0.04 ppm; eggs, at 0.02 ppm; goat, fat, at 0.01 ppm; goat, meat, at 0.04 ppm; hog, fat, at 0.01; hog, meat, at 0.01 ppm; horse, fat, at 0.01 ppm; horse, meat, at 0.04 ppm; milk, at 0.02 ppm; poultry, fat, at 0.01 ppm; poultry, meat, at 0.01 ppm; poultry, meat byproducts, at 0.01 ppm; sheep, fat, at 0.01 ppm; sheep, meat, at 0.04 ppm; by establishing tolerances for the combined residues of the insecticide flonicamid [ N -(cyanomethyl)-4-trifluoromethylnicotinamide] and its metabolites TFNA, (4-trifluoromethylnicotinic acid) and TFNA-AM, (4- trifluoromethylnicotinamide) in the animal meat byproducts: cattle, meat byproducts, at 0.06 ppm; goat, meat byproducts, at 0.06 ppm; hog, meat byproducts, at 0.01 ppm; horse, meat byproducts, at 0.06 ppm; and sheep, meat byproducts, at 0.06 ppm. That notice included a summary of the petition prepared by ISK Biosciences, the registrant. One comment was received on the notice of filing. EPA's response to this comment is discussed in Unit IV.C.

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

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

Consistent with section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure, consistent with section 408(b)(2) of FFDCA, for a tolerance for combined residues of flonicamid and its metabolites on various crop and livestock commodities at levels set forth in the list below.

Tolerances for combined residues of flonicamid and its metabolites in/on crops and livestock commodities .

1. Recommended tolerances for combined residues of flonicamid and its metabolites TFNA, TFNG and TFNA-AM in/on crops.

Cotton, undelinted seed at 0.50 ppm

Cotton, gin byproducts at 6.0 ppm

Cotton, hulls at 2.0 ppm

Cotton, meal at 1.0 ppm

Fruit, pome, group 11 at 0.20 ppm

Fruit, stone, group at 12 0.60 ppm

Potato 0.20 at ppm

Potato, granular/flakes at 0.40 ppm

Spinach at 9.0 ppm

Tomato, paste at 2.0 ppm

Tomato, puree at 0.50 ppm

Vegetable, cucurbit, group at 0.40 ppm

Vegetable, fruiting, group at 0.40 ppm

Vegetable, leafy except Brassica group 4, except spinach at 4.0 ppm

2. Recommended tolerances for combined residues of flonicamid and its metabolites TFNA and TFNA-AM in/on livestock commodities.

Cattle, fat at 0.02 ppm

Cattle, meat at 0.05 ppm

Egg at 0.03 ppm

Goat, fat at 0.02 ppm

Goat, meat at 0.05 ppm

Horse, fat at 0.02 ppm

Horse, meat at 0.05 ppm

Milk at 0.02 ppm

Poultry, fat at 0.02 ppm

Poultry, meat at 0.02 ppm

Poultry, meat byproducts at 0.02 ppm

Sheep, fat at 0.02 ppm

Sheep, meat at 0.05 ppm

Cattle, meat byproducts at 0.08 ppm

Goat, meat byproducts at 0.08 ppm

Horse, meat byproducts at 0.08 ppm

Sheep, meat byproducts at 0.08 ppm

EPA's assessment of exposures and risks associated with establishing the tolerance follows.

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

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

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

In addition to using EDOCKET ( http://www.epa.gov/edocket/ ), you may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/ . A frequently updated electronic version of 40 CFR part 180 is available on E-CFR Beta Site Two at http://www.gpoaccess.gov/ecfr/ .

EPA, on its own initiative, in accordance with sections 408(e) and 408(l)(6) of the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a, is establishing a tolerance for residues of the herbicide halosulfuron-methyl, in or on sweet potatoes at 1.0 parts per million (ppm). This tolerance will expire and is revoked on December 31, 2008. EPA will publish a document in the Federal Register to remove the revoked tolerance from the Code of Federal Regulations (CFR).

Section 408(l)(6) of FFDCA requires EPA to establish a time-limited tolerance or exemption from the requirement for a tolerance for pesticide chemical residues in food that will result from the use of a pesticide under an emergency exemption granted by EPA under section 18 of FIFRA. Such tolerances can be established without providing notice or period for public comment. EPA does not intend for its actions on FIFRA section 18 related tolerances to set binding precedents for the application of section 408 of FFDCA and the new safety standard to other tolerances and exemptions. Section 408(e) of FFDCA allows EPA to establish a tolerance or an exemption from the requirement of a tolerance on its own initiative, i.e., without having received any petition from an outside party.

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

Section 18 of FIFRA authorizes EPA to exempt any Federal or State agency from any provision of FIFRA, if EPA determines that “emergency conditions exist which require such exemption.” This provision was not amended by the Food Quality Protection Act of 1996 (FQPA). EPA has established regulations governing such emergency exemptions in 40 CFR part 166.

Several sweet potato growing States requested the use of halosulfuron-methyl due to resistance to pesticides registered for the control of the weed purple nutsedge in sweet potato fields. EPA has authorized under section 18 of FIFRA the use of halosulfuron-methyl on sweet potatoes for control of purple nutsedge in Louisiana, Mississippi, and North Carolina. After having reviewed the submissions, EPA concurs that emergency conditions exist for these States.

As part of its assessment of this emergency exemption, EPA assessed the potential risks presented by residues of halosulfuron-methyl in or on sweet potatoes. In doing so, EPA considered the safety standard in section 408(b)(2) of FFDCA, and EPA decided that the necessary tolerance under section 408(l)(6) of FFDCA would be consistent with the safety standard and with section 18 of FIFRA. Consistent with the need to move quickly on the emergency exemption in order to address an urgent non-routine situation and to ensure that the resulting food is safe and lawful, EPA is issuing this tolerance without notice and opportunity for public comment as provided in section 408(l)(6) of FFDCA. Although this tolerance will expire and is revoked on December 31, 2008, under section 408(l)(5) of FFDCA, residues of the pesticide not in excess of the amounts specified in the tolerance remaining in or on sweet potatoes after that date will not be unlawful, provided the pesticide is applied in a manner that was lawful under FIFRA, and the residues do not exceed a level that was authorized by this tolerance at the time of that application. EPA will take action to revoke this tolerance earlier if any experience with, scientific data on, or other relevant information on this pesticide indicate that the residues are not safe.

Because this tolerance is being approved under emergency conditions, EPA has not made any decisions about whether halosulfuron-methyl meets EPA's registration requirements for use on sweet potatoes or whether a permanent tolerance for this use would be appropriate. Under these circumstances, EPA does not believe that this tolerance serves as a basis for registration of halosulfuron-methyl by a State for special local needs under section 24(c) of FIFRA. Nor does this tolerance serve as the basis for any State other than Louisiana, Mississippi, and North Carolina to use this pesticide on this crop under section 18 of FIFRA without following all provisions of EPA's regulations implementing section 18 of FIFRA as identified in 40 CFR part 166. For additional information regarding the emergency exemption for halosulfuron-methyl, contact the Agency's Registration Division at the address provided under FOR FURTHER INFORMATION CONTACT .

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

Consistent with section 408(b)(2)(D) of FFDCA , EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of halosulfuron-methyl and to make a determination on aggregate exposure, consistent with section 408(b)(2) of FFDCA, for a time-limited tolerance for residues of halosulfuron-methyl in or on sweet potatoes at 1.0 ppm. EPA's assessment of the dietary exposures and risks associated with establishing the tolerance follows.

The dose at which no adverse effects are observed (the NOAEL) from the toxicology study identified as appropriate for use in risk assessment is used to estimate the toxicological endpoint. However, the lowest dose at which adverse effects of concern are identified (the LOAEL) is sometimes used for risk assessment if no NOAEL was achieved in the toxicology study selected. An uncertainty factor (UF) is applied to reflect uncertainties inherent in the extrapolation from laboratory animal data to humans and in the variations in sensitivity among members of the human population as well as other unknowns. An UF of 100 is routinely used, 10X to account for interspecies differences and 10X for intra species differences. For halosulfuron-methyl, the Agency identified the need for a developmental neurotoxicity (DNT) study. In the absence of a DNT study, EPA concluded that an additional database UF of 3X is needed for all dietary and residential (non-dietary) exposure scenarios until the data are received and evaluated. An UF of 3X (as opposed to a higher value) was viewed to be adequate because the NOAEL of 50 mg/kg/day (used for acute dietary, short-term incidental oral and inhalation risk assessments) and the NOAEL of 10 mg/kg/day (used for chronic dietary and intermediate-term incidental oral, dermal, and inhalation risk assessments) are 5X and 25X lower, respectively, than the NOAEL of 250 mg/kg/day in the rat developmental study where alterations of the fetal nervous system were seen at 750 mg/kg/day (LOAEL). Consequently, based on the available data it is unlikely the results of the DNT would impact the overall risk assessment.

For dietary risk assessment (other than cancer) the Agency uses the UF to calculate an acute or chronic reference dose (acute RfD or chronic RfD) where the RfD is equal to the NOAEL divided by the appropriate UF (RfD = NOAEL/UF). Where an additional safety factor is retained due to concerns unique to the FQPA, this additional factor is applied to the RfD by dividing the RfD by such additional factor. The acute or chronic population adjusted dose (aPAD or cPAD) is a modification of the RfD to accommodate this type of FQPA Safety Factor (SF).

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

The linear default risk methodology (Q*) is the primary method currently used by the Agency to quantify carcinogenic risk. The Q* approach assumes that any amount of exposure will lead to some degree of cancer risk. A Q* is calculated and used to estimate risk which represents a probability of occurrence of additional cancer cases (e.g., risk is expressed as 1 x10 - 6 or one in a million). Under certain specific circumstances, MOE calculations will be used for the carcinogenic risk assessment. In this non-linear approach, a “point of departure” is identified below which carcinogenic effects are not expected. The point of departure is typically a NOAEL based on an endpoint related to cancer effects though it may be a different value derived from the dose response curve. To estimate risk, a ratio of the point of departure to exposure (MOE cancer = point of departure/exposures) is calculated. A summary of the toxicological endpoints for halosulfuron-methyl used for human risk assessment is shown in Table 1 of this unit:

1. Dietary exposure from food, feed uses, and drinking water . Tolerances have been previously established (40 CFR 180.479) for the residues of halosulfuron-methyl, in or on a variety of raw agricultural commodities. The established tolerances include almond hulls; corn (sweet, kernel+cob with husks removed, field grain, fodder, forage, pop); cotton (gin by-products and undelinted seed); pistachio nutmeat; sugarcane; rice (grain, straw); and tree nuts (crop group 14). Additionally, tolerances are established (40 CFR 180.479 (a)(1)) for residues of halosulfuron-methyl and its metabolites determined as 3-chloro-1-methyl-5-sulfamoylpyrazole-4-carboxylic acid (also referred to as CSA, expressed as parent equivalents) at 0.1 ppm in or on meat by-products of cattle, goats, hogs, horses, and sheep.

In conducting the acute and chronic dietary risk assessments, EPA used the Dietary Exposure Evaluation Model (DEEM TM ) software. Modeled estimates of drinking water concentrations were directly entered into the exposure model to assess the contribution from drinking water. Risk assessments were conducted by EPA to assess dietary exposures from halosulfuron-methyl in food as follows:

i. Acute exposure . Acute dietary risk assessments are performed for a food-use pesticide if a toxicological study has indicated the possibility of an effect of concern occurring as a result of a one day or single exposure. The DEEM TM analysis evaluated the individual food consumption as reported by respondents in the U.S. Department of Agriculture (USDA) 1994-1996 and 1998 nationwide Continuing Surveys of Food Intake by Individuals (CSFII) and accumulated exposure to the chemical for each commodity. The following assumptions were made for the acute exposure assessments: Tolerance level residues and 100 percent crop treated (PCT) for all commodities for which halosulfuron-methyl tolerances are established and for the crop. Aggregate acute food and water exposure was determined by including modeled estimates of drinking water concentrations in the dietary model. The Agency used the acute water concentration (105 parts per billion (ppb)) derived from surface water modeling results, which was significantly higher than the modeled ground water concentration, and therefore protective of potential exposures via ground water sources of drinking water.

ii. Chronic exposure . In conducting this chronic dietary risk assessment the DEEM TM analysis evaluated the individual food consumption as reported by respondents in the USDA 1994-1996 and 1998 nationwide CSFII and accumulated exposure to the chemical for each commodity. The following assumptions were made for the acute exposure assessments: tolerance level residues and 100 PCT for all commodities for which halosulfuron-methyl tolerances are established and for sweet potatoes. Aggregate chronic food and water exposure was determined by including modeled estimates of drinking water concentrations in the dietary model. The Agency used the chronic water concentration (105 ppb) derived from surface water modeling results, which was significantly higher than the modeled ground water concentration, and therefore protective of potential exposures via ground water sources of drinking water.

iii. Cancer . Halosulfuron-methyl is classified as a “Not Likely” human carcinogen. Therefore, risk assessments to assess cancer risk were not conducted.

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

The Agency uses the First Index Reservoir Screening Tool (FIRST) or the Pesticide Root Zone/Exposure Analysis Modeling System (PRZM/EXAMS) to produce estimates of pesticide concentrations in an index reservoir. The Screening Concentration in Ground Water Modeling System (SCI-GROW) model is used to predict pesticide concentrations in shallow ground water. For a screening-level assessment for surface water EPA will generally use FIRST (a tier 1 model) before using PRZM/EXAMS (a tier 2 model). The FIRST model is a subset of the PRZM/EXAMS model that uses a specific high-end runoff scenario for pesticides. While both FIRST and PRZM/EXAMS incorporate an index reservoir environment, the PRZM/EXAMS model includes a percent crop area factor as an adjustment to account for the maximum percent crop coverage within a watershed or drainage basin.

None of these models include consideration of the impact processing (mixing, dilution, or treatment) of raw water for distribution as drinking water would likely have on the removal of pesticides from the source water.

Based on the FIRST and SCI-GROW models the estimated environmental concentrations (EECs) of halosulfuron-methyl for acute exposures are estimated to be 105 ppb for surface water and 0.065 ppb for ground water. The EECs for chronic exposures are estimated to be 105 ppb for surface water and 0.065 ppb for ground water.

3. From non-dietary exposure . The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure (e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Halosulfuron-methyl is currently registered for use on the following residential non-dietary sites: Residential turfgrass and landscaped areas.

The short-term aggregate risk assessment estimates risks likely to result from 1- to 30-day exposure to halosulfuron-methyl residues. A short-term risk assessment is required for adults because there are both residential handler and post-application exposure scenarios. In addition, a short-term risk assessment is required for infants and children because there is a residential post-application exposure scenario. Since the same effect was identified as the endpoint across all routes of exposure (decreased body-weight gain), MOEs are combined to result in an aggregate MOE (using the “1/MOE Approach”). The Agency's level of concern for short-term exposure is an MOE of 300 or lower. Results from the short-term risk assessment indicate that all short-term aggregate MOEs are 3,100 or higher. Therefore, estimated aggregate (food + water + residential) exposure to halosulfuron-methyl are not of concern for short-term aggregate exposure.

The intermediate-term aggregate risk assessment estimates risks likely to result from 1 to 6 months of exposure to halosulfuron-methyl residues from food, drinking water, and residential pesticide uses. An intermediate-term risk assessment is not required for adults because residential handler scenarios are not expected to occur for longer than a short-term time frame. However, an intermediate-term risk assessment is required for infants and children because there is a residential post-application oral exposure scenario. Since the same effect was identified as the endpoint across all routes of exposure (decreased body weight gain), MOEs are combined to result in an aggregate MOE (using the “1/MOE Approach”). High-end estimates of residential exposure are used in the intermediate-term assessment, while average values are used for food and drinking water exposure. The Agency's level of concern for intermediate-term exposure is an MOE of 300 or lower. Results from the intermediate-term risk assessment indicate that the intermediate-term aggregate MOE is 819 for the most highly exposed child subgroup. Therefore, estimated aggregate (food + water + residential) exposure to halosulfuron-methyl are not of concern for intermediate-term aggregate exposure.

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

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

1. In general . Section 408 of FFDCA provides that EPA shall apply an additional tenfold margin of safety for infants and children in the case of threshold effects to account for pre-natal and post-natal toxicity and the completeness of the database on toxicity and exposure unless EPA determines that a different margin of safety will be safe for infants and children. Margins of safety are incorporated into EPA risk assessments either directly through use of a MOE analysis or through using UFs in calculating a dose level that poses no appreciable risk to humans.

2. Conclusion . The Agency concludes that no special FQPA SF is necessary to protect the safety of infants and children in assessing halosulfuron-methyl exposure and risks because:

i. There is no evidence of increased susceptibility of young rats in the reproduction study with halosulfuron-methyl. Although there is qualitative evidence of increased susceptibility in the prenatal developmental studies in rats and rabbits the Agency is regulating at the NOAEL of 50 mg/kg/day for acute dietary, short-term incidental oral and inhalation risk assessments and the NOAEL of 10 mg/kg/day for chronic dietary and intermediate-term incidental oral, dermal, and inhalation risk assessments. These endpoints are 5X and 25X lower, respectively, than the NOAEL of 250 mg/kg/day in the rat developmental study where alterations of the fetal nervous system were seen at 750 mg/kg/day (LOAEL).

ii. There are no residual uncertainties identified in the exposure databases. The dietary food exposure assessments may be refined using anticipated residues calculated from field trial data with any PCT information. Conservative ground and surface water modeling estimates have been used. The Agency's residential standard operating procedures (SOPs) are used to assess post-application exposure to children as well as incidental oral exposure of toddlers. These assessments will not underestimate the exposure and risks posed by halosulfuron-methyl.

However, a 3X additional database UF will be used to address the data deficiency for the developmental neurotoxicity study. The 3X safety factor should be applied to all dietary and residential non-dietary exposure scenarios. No FQPA SF is appropriate for halosulfuron-methyl.

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

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

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

More recently the Agency has used another approach to estimate aggregate exposure through food, residential, and drinking water pathways. In this approach, modeled surface and ground water EECs are directly incorporated into the dietary exposure analysis, along with food. This provides a more realistic estimate of exposure because actual body weights and water consumption from the CSFII are used. The combined food and water exposures are then added to estimated exposure from residential sources to calculate aggregate risks. The resulting exposure and risk estimates are still considered to be high end, due to the assumptions used in developing drinking water modeling inputs. This risk assessment for halosulfuron-methyl was conducted using this approach.

1. Acute risk . Using the exposure assumptions discussed in this unit for acute exposure, the acute dietary exposure from food and water to halosulfuron-methyl will occupy 14% for females 13-50 years of age, the population subgroup of concern. EPA does not expect the aggregate exposure to exceed 100% of the aPAD, as shown in Table 2 of this unit:

2. Chronic risk . Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that exposure to halosulfuron-methyl from food and water will utilize 2% or less of the cPAD for all population subgroups in DEEM TM including the U.S. population, infants and children. There are no residential uses for halosulfuron-methyl that result in chronic residential exposure to halosulfuron-methyl. Based on the use pattern, chronic residential exposure to residues of halosulfuron-methyl is not expected. EPA does not expect the aggregate exposure to exceed 100% of the cPAD, as shown in Table 3 of this unit:

3. Short-term risk . Short-term aggregate exposure takes into account residential exposure plus chronic exposure to food and water (considered to be a background exposure level). Halosulfuron-methyl is currently registered for use(s) that could result in short-term residential exposure and the Agency has determined that it is appropriate to aggregate chronic food and water and short-term exposures for halosulfuron-methyl.

Using the exposure assumptions described in this unit for short-term exposures, EPA has concluded that food, water and residential exposures aggregated result in aggregate MOEs of 5,800 for the general U.S. population and 3,200 for children 3-5 years old for dermal, incidental oral, and inhalation exposures. These aggregate MOEs do not exceed the Agency's level of concern for aggregate exposure to food and residential uses. EPA does not expect short-term aggregate exposure to exceed the Agency's level of concern, as shown in Table 4 of this unit:

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

• Crop production (NAICS code 111)

• Animal production (NAICS code 112)

• Food manufacturing (NAICS code 311)

• Pesticide manufacturing (NAICS code 32532)

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

In addition to using EDOCKET at (http://www.epa.gov/edocket/) , you may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/ . A frequently updated electronic version of 40 CFR part 180 is available at E-CFR Beta Site Two at http://www.gpoaccess.gov/ecfr/ .

In the Federal Register of July 11, 2003 (68 FR 41349) (FRL-7316-1), EPA issued a notice pursuant to section 408 of the FFDCA, 21 U.S.C. 346a, as amended by the FQPA (Public Law 104-170), announcing the filing of a pesticide petition (PP 0F6179) by Purac America, Inc., 111 Barclay Boulevard, Lincolnshire, IL 60069. The petition requested that 40 CFR 180.950 be amended by establishing an exemption from the requirement of a tolerance for residues of the (S) isomer of lactic acid, 2-ethylhexyl ester, also known as lactic acid, 2-ethylhexyl ester, (2S)- or 2-ethylhexyl lactate (CAS Reg. No. 186817-80-1) when used as a solvent, an inert ingredient, in pesticide products. That notice included a summary of the petition prepared by the petitioner. There were no comments received in response to the notice of filing.

PURAC's petition requested only the establishment of a tolerance exemption for the (S) isomer of lactic acid, 2-ethylhexyl ester. However, according to information on the PURAC website, there is also a general CAS Reg. No. for lactic acid, 2-ethylhexyl ester (CAS Reg. No. 6283-86-9). In the simplest terms an isomer can be defined as a substance which has the same molecular formula as another, but the individual elements of the molecule—the links from one element to another within the molecule—are arranged differently. A stereochemical isomer differs in the 3-D spatial arrangement of the elements. In certain cases, this is sometimes referred to as “mirror images.” An example of such a mirror image arrangement is a person's right and left hand. A person holding his hands out, both palms up, cannot make the presentation of four fingers and the thumb of the right hand match the orientation of the left hand. They can be viewed as if there is a mirror between the two. The chemical and physical properties of two isomeric chemicals are essentially the same. There can be some differences in the biological properties of the two isomers. The Agency has determined that both of the names are appropriate for this chemical and is therefore establishing tolerance exemptions using the (S) isomer and the general nomenclature of lactic acid, 2-ethylhexyl ester.

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

EPA performs a number of analyses to determine the risks from aggregate exposure to pesticide residues. First, EPA determines the toxicity of pesticides. Second, EPA examines exposure to the pesticide through food, drinking water, and through other exposures that occur as a result of pesticide use in residential settings.

Inert ingredients are all ingredients that are not active ingredients as defined in 40 CFR 153.125 and include, but are not limited to, the following types of ingredients (except when they have a pesticidal efficacy of their own): Solvents such as alcohols and hydrocarbons; surfactants such as polyoxyethylene polymers and fatty acids; carriers such as clay and diatomaceous earth; thickeners such as carrageenan and modified cellulose; wetting, spreading, and dispersing agents; propellants in aerosol dispensers; microencapsulating agents; and emulsifiers. The term “inert” is not intended to imply nontoxicity; the ingredient may or may not be chemically active. Generally, EPA has exempted inert ingredients from the requirement of a tolerance based on the low toxicity of the individual inert ingredients.

Consistent with section 408(b)(2)(D) of the FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action and considered its validity, completeness and reliability and the relationship of this information to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. The nature of the toxic effects caused by lactic acid, 2-ethylhexyl ester are discussed in this unit.

The Agency's review of the following two acute toxicity studies and the toxicity category classification, are shown in the following Table. The Agency uses a scale of I to IV to rate the toxicity of acute studies. Toxicity Category I is indicative of very high acute toxicity. Toxicity Category IV is the Agency's lowest rating of acute toxicity.

In a 28-day inhalation toxicity study, rats received 6-hour/day nose only exposure, for 5 days/week over a 4-week period. The target concentrations of lactic acid, 2-ethylhexyl ester were 0 (control), 75, 200, 600, or 1,800 mg/cubic meter ( mg/m 3 ). A NOEL (no-observed effect level) was not defined as microscopic effects in the respiratory tract were noted even at 75 mg/m 3 . The Agency's reviewer noted that effects seen at 600 mg/m 3 (decreased absolute spleen weight in males), and 1,800 mg/m 3 (gross pathology changes of the lungs, significantly decreased body weight in males, increases in relative liver weight in both sexes, increases in lung weight in males, decreases in absolute spleen weights in both sexes, and in relative spleen weight in females) would be more consistent with consideration of an adverse effect.

Pregnant rats were exposed to lactic acid, 2-ethylhexyl ester at target concentrations of 0 (control), 200 or 600 mg/m 3 for 6 hours/day nose only exposure from gestation days 6 to 15. Both the 200 and 600 mg/m 3 concentration groups experienced an increased breathing rate. Body weight gains were slightly depressed in both groups. There was also a reduced food consumption relative to controls. A maternal NOAEL (no observed adverse effect level) was not determined. The maternal LOAEL (lowest observed adverse effect level) is 200 mg/m 3 .

Mean fetal body weight values for the 600 mg/m 3 group were below those of controls. The only effect at 200 mg/m 3 , a slight retardation in fetal ossification, was considered to be equivocal and probably secondary to maternal toxicity. The developmental NOAEL is 200 mg/m 3 and the developmental LOAEL is 600 mg/m 3 based on reduced mean fetal body weights.

Lactic acid, 2-ethylhexyl ester is formed by combining lactic acid and 2-ethylhexanol. In mammalian metabolism, this process is reversed. Simple esters such as the lactic acid esters undergo hydrolysis yielding lactic acid and the corresponding alcohol. The human body has well-understood pathways for metabolizing ingested lactic acid. Humans also produce lactic acid as an intermediate product of carbohydrate or glucose metabolism. The Food and Drug Administration (FDA) has estimated the lactate turnover rate in man to be of the order of 2 grams/kg/day. The Agency's evaluation of lactic acid has been placed as a support document in the EDOCKET for this final rule.

In the hydrolysis of lactic acid, 2-ethylhexyl ester, the corresponding alcohol would be 2-ethylhexanol. The mammalian body would metabolize 2-ethylhexanol to the corresponding aldehyde, which would then be metabolized to the corresponding carboxylic acid. The mammalian body has well-understood pathways for metabolism of carboxylic acids to carbon dioxide and water.

Since 2-ethylhexanol (CAS Reg. No. 104-76-7) is the alcohol formed via hydrolysis, toxicity studies performed using 2-ethylhexanol as the test substance can be used to further understand the toxicity of lactic acid, 2-ethylhexyl ester. Three sources of data are available: Data submitted to the Agency under a Toxic Substances Control Act (TSCA) test rule, the conclusions and recommendations of the Organization for Economic Cooperation and Development (OECD), and the International Uniform Chemical Information Database (IUCLID) submitted by industry to the European Chemicals Bureau. Taken together these three data sources supply more than adequate information to evaluate the toxicity of 2-ethylhexanol.

Under a TSCA test rule, toxicity studies performed using 2-ethylhexanol were submitted to the Agency's Office of Pollution Prevention and Toxics (OPPT). Reviews of two carcinogenicity studies (mouse and rat) and a dermal developmental toxicity study are posted on the Agency's website (see http://www.epa.gov/opptintr/chemtest/ethylhex.htm ). The conclusions of the Agency's reviewers were that 2-ethylhexanol is not carcinogenic in the mouse under the conditions of the study, and that there is no evidence of carcinogenicity in the rat at any dose level tested. In the developmental toxicity study there was no evidence of developmental toxicity at any dose level. The dermal developmental NOAEL is therefore equal to or greater than the highest dose tested (HDT), 3.0 milliliter (mL)/kg/day or 2,520 milligram/kilogram/day (mg/kg/day). Maternal effects (reduced weight gain) were noted at the 3.0 mL/kg/day dose level. Exfoliation occurred at the application site at the 1.0 mL/kg/day dose level. The maternal NOAEL is 0.3 mL/kg/day or 252 mg/kg/day.

The agreed upon conclusions and recommendations of the OECD Screening Information Dataset Initial Assessment Profile (SIAP) are available via the internet (see http://cs3-hq.oecd.org/scripts/hpv/Home.asp ). The SIAP contains summarized results of OECD's review of several 90-day toxicity studies, two carcinogenicity studies, and several developmental toxicity studies. The IUCLID for 2-ethylhexanol was obtained from the European Chemicals Bureau website (see http://ecb.jrc.it.esis/ ). The IUCLID dataset is a compilation of data submitted by the manufacturers of 2-ethylhexanol and is posted as received. By combining these two sources, the Agency was able to obtain more details on certain of the toxicity studies than available in the SIAP.

Results of three 90-day oral toxicity studies are available:

• In a rat feed study, the NOAEL is 57 mg/kg/day and the LOAEL is 282 mg/kg/day based on swelling of the liver and kidney.

• In a rat gavage study the NOAEL is 125 mg/kg/day and the LOAEL is 250 mg/kg/day based on clinical effects: Cyanide insensitive palmitoyl CoA-oxidation in the liver.

• In a mouse gavage study the NOAEL is 125 (male) and 250 (female) mg/kg/day. The LOAEL is 250(M) and 500(F) based on stomach effects.

These results are consistent (the 57 mg/kg/day is an artifact of dose spacing) and indicate that the target organs were the liver, stomach, and kidney.

2-Ethylhexanol was negative in numerous mutagenicity studies. Both the SIAP and the IUCLID indicated that 2-ethylhexanol is not carcinogenic in the rat or mouse.

Results of developmental toxicity studies via the oral and inhalation routes of exposure performed using 2-ethylhexanol were reported in the SIAP and IUCLID.

• For the rat oral (gavage) study the maternal NOAEL is 130 mg/kg/day and the maternal LOAEL is 650 mg/kg/day. The developmental NOAEL is 130 mg/kg/day, and the developmental LOAEL is 650 mg/kg/day based on slightly reduced mean fetal body weights and increased frequency of fetuses with skeletal variations and retardations.

• In a mouse oral (gavage) developmental toxicity study both the maternal and the developmental NOAEL are equal to or greater than 191 mg/kg/day, the HDT.

• In a single dose rat developmental inhalation toxicity study, maternal feed consumption was reduced, but no fetal malformations were noted. The maternal NOAEL would be less than or equal to 0.850 mg/m 3 . The developmental LOAEL would be equal to or greater than 0.850 mg/m 3 .

Metabolism studies performed using 2-ethylhexanol indicate that after oral administration, 2-ethylhexanol is rapidly excreted in respiratory carbon dioxide, feces, and urine. Elimination is essentially complete by 28 hours after administration. Only 3% of the administered 2-ethylhexanol is excreted unchanged.

The SIAP conclusions called for additional testing with the metabolite of 2-ethylhexanol, which is 2-ethylhexanoic acid. The rationale for this conclusion was based on the results of several oral studies conducted at time-frames of less than two weeks duration. The IUCLID indicated that these studies were conducted at high dose levels ranging from over 300 to 1,500 mg/kg/day. Alterations in testicular weights were consistently noted at 1,000 and 1,500 mg/kg/day. Alterations in testicular weights were not consistent at dose levels in the 300's mg/kg/day. However, the testicular effects were not noted in the 90-day oral toxicity studies even at dose levels up to 500 mg/kg/day.

Acute toxicity studies indicate that lactic acid, 2-ethylhexyl ester is of low to moderate acute oral toxicity, and is irritating to the eye. The database supplied by the petitioner, most specifically the 28-day study, indicate that lactic acid, 2-ethylhexyl ester is irritating to the lung and respiratory tract. Irritation effects such as these are handled through the use of personal protective equipment as determined by the end-product acute toxicity testing not through the establishment of tolerance exemptions.

Of significant note for dietary exposure, chemical substances such as lactic acid esters hydrolyze in the mammalian body to lactic acid and the corresponding alcohol (2-ethylhexanol). The human body has well-understood pathways for metabolizing such chemicals. Given the relationship of 2-ethylhexanol as a metabolite of the mammalian body's metabolism of lactic acid, 2-ethylhexyl ester, data on 2-ethylhexanol is useful for understanding the toxicity of lactic acid, 2-ethylhexyl ester. Data on 2-ethylhexanol can be used to judge that lactic acid, 2-ethylhexyl ester is not a carcinogen.

The Office of Pesticide Programs has reviewed and evaluated a developmental inhalation toxicity study conducted with lactic acid, 2-ethylhexyl ester. OPPT has reviewed and evaluated a dermal developmental toxicity study conducted with 2-ethylhexanol. The SIAP and IUCLID provided information on another developmental inhalation toxicity study conducted with 2-ethylhexanol. None of these studies are the route of exposure most appropriate for evaluating dietary exposure; however, there are in these studies no indications of any increased susceptibility.

For evaluating dietary exposure the oral developmental and 90-day studies conducted using 2-ethylhexanol provide the most appropriate information for assessing the toxicity of lactic acid, 2-ethylhexyl ester. These studies consistently demonstrate NOAELs greater than 100 mg/kg/day.

In examining aggregate exposure, section 408 of the FFDCA directs EPA to consider available information concerning exposures from the pesticide residue in food and all other non-occupational exposures, including drinking water from ground water or surface water and exposure through pesticide use in gardens, lawns, or buildings (residential and other indoor uses).

EPA establishes exemptions from the requirement of a tolerance only in those cases where it can be clearly demonstrated that the risks from aggregate exposure to pesticide chemical residues under reasonably foreseeable circumstances will pose no appreciable risks to human health. In order to determine the risks from aggregate exposure to pesticide inert ingredients, the Agency considers the toxicity of the inert in conjunction with possible exposure to residues of the inert ingredient through food, drinking water, and through other exposures that occur as a result of pesticide use in residential settings. If EPA is able to determine that a finite tolerance is not necessary to ensure that there is a reasonable certainty that no harm will result from aggregate exposure to the inert ingredient, an exemption from the requirement of a tolerance may be established.

1. Food . The Agency has developed a screening-level model for predicting dietary exposure to inert ingredients. The results of this model are considered to over-estimate exposure to an inert ingredient in a pesticide product. The modeled chronic dietary exposure for the U.S. population for an inert ingredient is 0.12 mg/kg/day. This is well-below the dose levels (discussed above) at which an adverse effect is expected from exposure to lactic acid, 2-ethylhexyl ester.

The Agency must also consider the potential for exposure to lactic acid as a result of application of a pesticide product containing a lactate ester. Lactic acid occurs naturally in meats, fruits, tomato juice, beer, wine, molasses, sour milk, yogurt and cottage cheese. Lactic acid has been added to commercially prepared foods since the 1940-1950s. The FDA has estimated a per capita daily intake for lactic acid of 15 mg. Given the existing and wide-spread presence of lactic acid in the food supply, the amount of lactic acid that could be present as a result of an application of a pesticide product containing lactic acid or a lactate ester is expected to be a very small proportion.

2. Drinking water exposure . When released to the environment, lactic acid, 2-ethylhexyl ester will be present predominantly in the dissolved phase surface and ground water. The chemical is soluble in water (0.3 g/liter). Once lactic acid, 2-ethylhexyl is in the water, it is expected that at neutral pH degradation would begin immediately via hydrolysis. Lactic acid, 2-ethylhexyl ester would also degrade rapidly via biodegradation. The estimated half-life of lactic acid, 2-ethylhexyl ester in soil is 17 days. Based on information submitted by the petitioner and estimates from the Agency's PBT profiler ( http://www.pbt.profiler.net ) lactic acid, 2-ethylhexyl ester should completely degrade to water and carbon dioxide in days. Given the rapid biodegradation (i.e. lack of persistance) significant concentrations of lactic acid, 2-ethylhexyl ester are very unlikely in either ground or surface water used as sources of drinking water.

Given their physical/chemical properties, lactate esters could have a variety of uses in and around the home. According to information on the internet they are being considered as “green” replacements for many of the organic solvents traditionally used in the manufacturing industry.

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

Unlike other pesticide chemicals for which EPA has followed a cumulative risk approach based on a common mechanism of toxicity, EPA has not made a common mechanism of toxicity finding as to lactic acid, 2-ethylhexyl ester. The lactate esters are a structurally-related group of chemicals that all hydrolyze to lactic acid, which is not a toxic metabolite. For the purposes of this tolerance action, therefore, EPA has not assumed that these chemical substances have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see the policy statements released by EPA's Office of Pesticide Programs concerning common mechanism determinations and procedures for cumulating effects from substances found to have a common mechanism on EPA's website at http://www.epa.gov/pesticides/cumulative/ .

FFDCA section 408 provides that EPA shall apply an additional tenfold margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database unless EPA concluded that a different margin of safety will be safe for infants and children. Lactic acid, 2-ethylhexyl ester has been tested in an inhalation developmental toxicity study in which there were no indications of increased susceptibility. The hydrolysis product of lactic acid, 2-ethylhexyl ester is 2-ethylhexanol. Developmental toxicity studies conducted using 2-ethylhexanol as the test substance have been performed via the oral, dermal, and inhalation routes of exposure. The results of these studies also do not indicate any increased susceptibility. A safety factor analysis has not been used to assess the risk of lactic acid, 2-ethylhexyl ester. For the same reasons, the additional tenfold safety factor for the protection of infants and children is unnecessary.

Based on the available toxicity data on lactic acid, 2-ethylhexyl ester and on its metabolites lactic acid and 2-ethylhexanol, EPA concludes that there is a reasonable certainty of no harm from aggregate exposure to residues of lactic acid, 2-ethylhexyl ester (CAS Reg. No. 6283-86-9) and lactic acid, 2-ethylhexyl ester, (2S)- (CAS Reg. No. 186817-80-1). EPA finds that establishing exemptions from the requirement of a tolerance for lactic acid, 2-ethylhexyl ester (CAS Reg. No. 6283-86-9) and lactic acid, 2-ethylhexyl ester, (2S)- (CAS Reg. No. 186817-80-1) will be safe for the general population including infants and children.

FQPA requires EPA to develop a screening program to determine whether certain substances, including all pesticide chemicals (both inert and active ingredients), “may have an effect in humans that is similar to an effect produced by a naturally occurring estrogen, or such other endocrine effect . . .” EPA has been working with interested stakeholders to develop a screening and testing program as well as a priority setting scheme. As the Agency proceeds with implementation of this program, further testing of products containing lactic acid, 2-ethylhexyl ester (CAS Reg. No. 6283-86-9) and lactic acid, 2-ethylhexyl ester, (2S)- (CAS Reg. No. 186817-80-1) for endocrine effects may be required.

An analytical method is not required for enforcement purposes since the Agency is establishing an exemption from the requirement of a tolerance without any numerical limitation.

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

• Crop production (NAICS 111), e.g., agricultural workers; greenhouse, nursery, and floriculture workers; farmers.

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

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

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

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

In addition to using EDOCKET (http://www.epa.gov/edocket/) , you may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/ . A frequently updated electronic version of 40 CFR part 180 is available at E-CFR Beta Site Two at http://www.gpoaccess.gov/ecfr/. To access the OPPTS Harmonized Guidelines referenced in this document, go directly to the guidelines at http://www.epa.gpo/opptsfrs/home/guidelin.htm/ .

In the Federal Register of August 13, 2004 (69 FR 50196) (FRL-7371-7), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (3E6787) by IR-4 on behalf of Syngenta Crop Protection, Swing Road, Greensboro, NC 27419. The petition requested that 40 CFR 180.368 be amended by establishing tolerances for combined residues (free and bound) of the herbicide S-metolachlor [S-2-chloro- N -(2-ethyl-6-methylphenyl)- N -(2-methoxy-1-methylethyl)acetamide], its R-enantiomer, and its metabolites, determined as the derivatives, 2-(2-ethyl-6-methylphenyl)amino-1-propanol and 4-(2-ethyl-6-methylphenyl)-2-hydroxy-5-methyl-3-morpholinone, each expressed as the parent compound, S-metolachlor. It should be noted that the above chemical nomenclature for S-metolachlor differs slightly from that previously listed under 40 CFR 180.368(a)(2). The Agency is establishing these tolerances for residues of S-metolachlor under a new paragraph, 180.368 (a)(3), using this nomenclature because it is more technically accurate in terms of the nature of the residues and the components determined by the analytical method. The Agency has determined that the tolerance expression as listed in paragraph (a)(2) should be changed and will be proposing that change in an upcoming rule. Further chemical definition of S-metolachlor can be found in Unit III. A. of this document. In petition, PP 3E6787, IR-4 requested tolerances for S-metolachlor in or on the following raw agricultural commodities (RACs):

1. Brassica, head and stem, subgroup 5A at 0.5 parts per million (ppm).

2. Cattle, fat at 0.04 ppm; cattle, kidney at 0.20 ppm; cattle, meat at 0.04 ppm; cattle, meat byproducts, except kidney at 0.04 ppm.

3. Corn, field, grain at 0.10 ppm; corn, field, stover at 6.0 ppm; corn, field, forage at 6.0 ppm; corn, sweet, forage at 6.0 ppm; corn, sweet, stover at 6.0 ppm; corn, pop, stover at 6.0 ppm; corn, pop, grain at 6.0 ppm; corn, sweet, kernel plus cob with husk removed at 0.1 ppm.

4. Cotton, gin byproducts at 4.0 ppm; cotton, undelinted seed at 0.1 ppm.

5. Egg at 0.04 ppm.

6. Garlic, bulb at 0.1 ppm.

7. Goat, fat 0.04 ppm; goat, kidney at 0.20 ppm; goat, meat at 0.04 ppm; goat, meat byproducts, except kidney at 0.04 ppm.

8. Horse, fat 0.04 ppm; horse, kidney at 0.20 ppm; horse, meat at 0.04 ppm; horse, meat byproducts, except kidney at 0.04 ppm.

9. Leafy petioles subgroup 4B at 0.10 ppm.

10. Milk at 0.02 ppm.

11. Onion, dry bulb at 0.1 ppm; onion, green at 2.0 ppm.

12. Pea and bean, dried shelled, except soybean, subgroup 6C at 0.1 ppm.

13. Peanut 0.2 ppm; peanut, hay at 20 ppm; peanut, meal at 0.40 ppm.

14. Poultry, fat at 0.04 ppm; poultry, meat at 0.04 ppm; poultry, meat byproducts, except liver at 0.04 ppm.

15. Safflower, seed at 0.1 ppm.

16. Shallot at 0.1 ppm.

17. Sheep, fat at 0.04 ppm; sheep, kidney at 0.20 ppm; sheep, meat at 0.04 ppm; sheep, meat byproducts, except kidney at 0.04 ppm.

18. Sorghum grain, stover at 4.0 ppm; sorghum grain, forage at 1.0 ppm; sorghum grain, grain at 0.3 ppm.

19. Soybean, seed at 0.2 ppm; soybean, forage at 5.0 ppm; soybean, hay at 8.0 ppm.

20. Vegetable, foliage of legume, except soybean, subgroup 7A at 15 ppm.

21. Vegetable, fruiting, group 8 at 0.5 ppm.

22. Vegetable, legume, edible podded, subgroup 6A at 0.5 ppm.

23. Vegetable, root, except sugar beet, subgroup 1B at 0.3 ppm.

24. Vegetable, tuberous and corm, subgroup 1C at 0.2 ppm.

Several of the proposed tolerances were subsequently amended as follows: Tolerances for vegetable, fruiting, group 8 (except tabasco pepper) at 0.1 ppm; tomato, paste at 0.3 ppm; a separate regional tolerance for pepper, tabasco at 0.5 ppm; brassica, head and stem increased from 0.5 to 0.6 ppm; corn, pop, grain decreased from 6.0 to 0.1 and barley straw from 0.1 to 0.5 ppm. Furthermore, the proposed tolerance of cattle, goat, horse and sheep meat byproducts, except kidney at 0.04 ppm was subsequently amended to establish tolerances for meat byproducts, except kidney and liver of cattle, goat, horse and sheep at 0.04 ppm and separate tolerances for liver of cattle, goat, horse and sheep at 0.1 ppm. The tolerance for poultry, meat byproducts, except liver at 0.04 ppm was also amended to poultry, meat byproducts at 0.04 ppm.

Additionally, IR-4 proposed to amend 40 CFR 180.368(a)(2) by removing tolerances established for the combined residues (free and bound) of the herbicide S-metolachlor [S-2-chloro- N -(2-ethyl-6-methylphenyl)- N -(2-methoxy-1-methylethyl)acetamide], and its metabolites, determined as the derivatives, 2-(2-ethyl-6-methylphenyl)amino-1-propanol and 4-(2-ethyl-6-methylphenyl)-2-hydroxy-5-methyl-3-morpholinone, each expressed as the parent compound, in or on the following RAC's: Carrot, roots at 0.20 ppm; Horseradish at 0.20 ppm; onion, green at 0.20; rhubarb at 0.10 ppm; swiss chard at 0.10 ppm; and tomato at 0.1 ppm. The Agency concurs with this proposal based on the fact that these uses are covered by crop group and/or crop subgroup tolerances promulgated under section (a)(3) of this ruling.

Additionally, IR-4 proposed to amend 40 CFR 180.368(d) by establishing tolerances for indirect or inadvertent combined residues (free and bound) of the herbicide S-metolachlor [S-2-chloro- N -(2-ethyl-6-methylphenyl)- N -(2-methoxy-1-methylethyl)acetamide] its R-enantiomer,, and its metabolites, determined as the derivatives, 2-(2-ethyl-6-methylphenyl)amino-1-propanol and 4-(2-ethyl-6-methylphenyl)-2-hydroxy-5-methyl-3-morpholinone, each expressed as the parent compound, S-metolachlor in or on the following RAC's:

1. Animal feed, nongrass, group 18 at 1.0 ppm

2. Barley, grain at 0.1 ppm; barley straw at 0.1 ppm

3. Buckwheat, grain at 0.1 ppm

4. Oat, forage at 0.5 ppm; oat, grain at 0.1 ppm; oat straw at 0.5 ppm

5. Peanut, meal at 0.4 ppm

6. Rice, grain at 0.1 ppm; rice, straw at 0.5 ppm

7. Rye, forage at 0.5 ppm; rye, grain at 0.1 ppm; rye straw at 0.5 ppm

8. Wheat, forage at 0.5 ppm; wheat grain at 0.1 ppm; wheat straw at 0.5 ppm

These tolerances for the various grains (barley, buckwheat, oats, rice, rye, wheat) and nongrass animal feeds are being established to cover residues of S-metolachlor in these crops when planted as rotational crops following treatment of a primary crop. The Agency concludes that these tolerances should be assigned to § 180.368(d) for indirect and inadvertent residues, and that adequate data are available to set the rotational crop tolerance for the nongrass animal feeds at 1.0 ppm. In addition, the Agency has concluded that tolerances should be established on the hays of barley, oats, and wheat at 1.0 ppm in paragraph (d). The peanut meal tolerance will be established under paragraph (a)(3) and is not necessary as proposed in (d).

The notice proposing these tolerances included a summary of the petition prepared by Syngenta Crop Protection, Incorporated, the registrant. There were no comments received in response to the notice of filing.

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

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

Consistent with section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure, consistent with section 408(b)(2) of FFDCA, for a tolerance for combined residues (free and bound) of S-metolachlor on commodities and at tolerance levels presented in Unit II. of this document. EPA's assessment of exposures and risks associated with establishing the tolerance follows.

Metolachlor is a chloroacetanilide herbicide that was first registered as a pesticide in 1976. Metolachlor (known as racemic metolachlor) is a mixture consisting of 50% each of the R-enantiomer (CGA 77101) and the S-enantiomer (CGA 77102). The S-enantiomer is the herbicidally active isomer.S-metolachlor is also a racemic mixture comprised of 88% S-enantiomer and 12% R-enantiomer. The Agency has determined that S-metolachlor has either comparable or decreased toxicity as compared to racemic metolachlor.

EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. The nature of the toxic effects caused by S-metolachlor as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies reviewed are discussed in Unit III.A. of the Federal Register of April 2, 2003 (68 FR 15945) (FRL-7299-8).

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

The information in this section is organized as follows:

After evaluating BMW's petition and public comments received in response to the November 26, 2004, Proposed Rule (69 FR 68851), we are amending the current BMW's delisting to eliminate the total concentration limits for barium, cadmium, chromium, lead, nickel, and cyanide from its conditionally excluded wastewater treatment sludge from the requirements of the hazardous waste regulations under the Resource Conservation and Recovery Act (RCRA). The waste will still be subject to local, State, and Federal regulations for nonhazardous solid wastes.

EPA believes that the information provided by BMW provides a reasonable basis to eliminate all total concentration limits. We, therefore, grant BMW an amendment to its current delisting for an elimination of all total concentration limits on its delisted wastewater treatment sludge. EPA believes that this amendment to eliminate all concentration limits will not harm human health and the environment when disposed in a nonhazardous waste landfill, if the required delisting levels are met. EPA grants the elimination of all total concentration limits, based on descriptions of waste management and waste history, evaluation of the results of waste sample analysis, on the requirement that BMW's petitioned waste must meet the required delisting level of all the constituents of concern concentration limits as state in the May 2, 2001, Final Rule before disposal, and that no substantial public comments were received during the public comment period. The petitioned waste will not be subject to regulation under 40 CFR parts 262 through 268 and the permitting standards of 40 CFR part 270. Although management of the waste covered by this petition is relieved from Subtitle C jurisdiction, the waste will remain a solid waste under RCRA. As such, the waste must be handled in accordance with all applicable Federal, State, and local solid waste management regulations. Pursuant to RCRA section 3007, EPA may also sample and analyze the waste to determine if delisting conditions are met. EPA believes that BMW's petitioned waste will not harm human health and the environment when disposed in a nonhazardous waste landfill if the delisting levels are met as granted in the May 2, 2001, Final Rule and amended in this exclusion.

The following summarizes the maximum allowable constituent concentrations (delisting levels) for BMW's waste. We calculated these delisting levels for each constituent that is part of BMW's current delisting based on the Delisting Risk Assessment Software (DRAS) EPA Composite Model for Leachate Migration with Transformation Products (EPACMTP) model, which grants BMW an exclusion from the lists of hazardous wastes in subpart D of 40 CFR part 261 for its petitioned waste when disposed in a Subtitle D landfill. BMW must meet all of the following delisting conditions in order for this exclusion to be valid: delisting levels in mg/l in the TCLP extract of the waste of 100.0 for Barium, 1.0 for Cadmium, 5.0 for Chromium, 33.6 for Cyanide, 5.0 for Lead, and 70.3 for Nickel.

This amended exclusion applies to the waste described in the petition only if the requirements described above as well as in Table 1 of Appendix IX to part 261 of Title 40 of the Code of Federal Regulations are satisfied. The maximum annual volume of the wastewater treatment sludge is 2850 cubic yards.

This rule is effective August 31, 2005. HSWA amended section 3010 of RCRA to allow rules to become effective in less than six months when the regulated community does not need the six-month period to come into compliance. That is the case here because this rule reduces, rather than increases, the existing requirements for persons generating hazardous wastes. For these same reasons, this rule can become effective immediately (that is, upon publication in the Federal Register ) under the Administrative Procedure Act, pursuant to 5 U.S.C. 553(d).

Because EPA is issuing today's exclusion under the Federal RCRA delisting program, only States subject to Federal RCRA delisting provisions would be directly affected. This would exclude two categories of States: States having a dual system that includes Federal RCRA requirements and their own requirements, and States who have received EPA's authorization to make their own delisting decisions. We describe these two situations below.

We allow states to impose their own non-RCRA regulatory requirements that are more stringent than EPA's, under Section 3009 of RCRA. These more stringent requirements may include a provision that prohibits a Federally issued exclusion from taking effect in the State, or that prohibits a Federally issued exclusion from taking effect in the State until the State approves the exclusion through a separate State administrative action. Because a dual system (that is, both Federal and State programs) may regulate a petitioner's waste, we urge petitioners to contact the applicable State regulatory authorities or agencies to establish the status of their waste under that State's program.

We have also authorized some States to administer a delisting program in place of the Federal program; that is, to make State delisting decisions. Therefore, this exclusion does not necessarily apply within those authorized States. If BMW transports the petitioned waste to, or manages the waste in, any State with delisting authorization, BMW must obtain delisting approval from that State before it can manage the waste as nonhazardous in that State.

In order for this amendment to be effective in an authorized State, that State must adopt this amendment through its State administrative process.

A delisting petition is a formal request from a generator to EPA or another agency with jurisdiction to exclude from the lists of hazardous waste regulated by RCRA, a waste that the generator believes should not be considered hazardous.

Under 40 CFR 260.20 and 260.22, a generator may petition EPA to remove its waste from hazardous waste control by excluding it from the lists of hazardous wastes contained in 40 CFR 261.31, 261.32 and 261.33. Specifically, 40 CFR 260.20 allows any person to petition the Administrator to modify or revoke any provision of parts 260 through 266, 268 and 273 of Title 40 of the Code of Federal Regulations. 40 CFR 260.22 provides generators the opportunity to petition the Administrator to exclude a waste on a “generator-specific” basis from the hazardous waste lists. A generator can petition EPA for an amendment to an existing exclusion under these same provisions of the Code of Federal Regulations.

A petitioner must provide sufficient information to allow EPA to determine that the waste to be excluded does not meet any of the criteria under which the waste was listed as a hazardous waste. In addition, the Administrator must determine that the waste is not hazardous for any other reason.

BMW in Greer, South Carolina, manufactures automobiles for domestic consumption and for shipment to foreign markets. The assembly plant operations include body welding, conversion coating, painting, final assembly, and shipment. The manufacturing process that causes F019 to be generated is conversion coating, when applied to automobile bodies that contain aluminum. Conversion coating takes place in the plant's paint shop and treats the metal surface of each automobile body before painting to provide resistance to corrosion and to prepare the metal surface for optimum paint adhesion. Wastewater from all plant operations is treated at BMW's wastewater pretreatment plant which is located in an area of the paint shop. The wastewater is treated to meet the requirements of BMW's wastewater pretreatment permit before discharging the water to the publicly owned treatment works (POTW). Treatment results in the formation of insoluble metal hydroxides and phosphates. Wastewater treatment sludge is generated when these metal hydroxides and phosphates are dewatered in a filter press. The sludge that exits from the filter press is classified as F019 when the automobile bodies contain aluminum, and the exit from the filter press will be the point of generation of F019. BMW was granted its current Federal delisting exclusion for this F019 wastewater treatment sludge at a maximum annual volume of 2,850 cubic yards on May 2, 2001 (66 FR 21877).

A full description of this waste and the Agency's evaluation of the original BMW's petition are contained in the “Proposed Rule and Request for Comments” published in the Federal Register on February 12, 2001 (66 FR 9781). After evaluating public comment on the proposed rule, we published a final decision in the Federal Register on May 2, 2001 (66 FR 21877), to exclude BMW's wastewater treatment sludge derived from the treatment of EPA Hazardous Waste No. F019 from the list of hazardous wastes found in 40 CFR 261.31. The hazardous constituents of concern for which F019 was listed are hexavalent chromium and cyanide (complexed). BMW petitioned the EPA to exclude its F019 waste because BMW does not use either of these constituents in the manufacturing process. Therefore, BMW did not believe that the waste meets the criteria of the listing. EPA's final decision to grant the delisting exclusion on May 2, 2001, was conditioned on the following delisting levels: (1) Delisting levels in mg/l in the TCLP extract of the waste of 100.0 for Barium, 1.0 for Cadmium, 5.0 for Chromium, 33.6 for Cyanide, 5.0 for Lead, and 70.3 for Nickel; (2) the total concentration of cyanide (total, not amenable) in the waste, not the waste leachate, must not exceed 200 mg/kg; (3) the total concentrations, in mg/kg, of metals in the waste, not the waste leachate, must not exceed 2,000 for Barium, 500 for Cadmium, 1,000 for Chromium, 2,000 for Lead, and 20,000 for Nickel. If the waste exceeded any of the delisting limits, then the waste has to be managed as hazardous waste.

In support of its original petition, BMW submitted: (1) Descriptions of its manufacturing and wastewater treatment processes, the generation point of the petitioned waste, and the manufacturing steps that will contribute to its generation; (2) Material Safety Data Sheets (MSDSs) for materials used to manufacture automobiles and to treat wastewater; (3) the minimum and maximum annual amounts of wastewater treatment sludge generated from 1996 through 1999, and an estimate of the maximum annual amount expected to be generated in the future; (4) results of analysis for metals, cyanide, sulfide, fluoride, and volatile organic compounds in the currently generated waste at the BMW plants in Greer, South Carolina, and Dingolfing, Germany; (5) results of the analysis of leachate obtained by means of the Toxicity Characteristic Leaching Procedure ((TCLP), SW-846 Method 1311), from these wastes; (6) results of the determinations for the hazardous characteristics of ignitability, corrosivity, and reactivity, in these wastes; (7) results of determinations of dry weight percent, bulk density, and free liquids in these wastes; and (8) results of the MEP analysis of the currently generated waste at the plant in Greer, South Carolina.

EPA reviewed the allowable total concentrations in the waste, as calculated by DRAS for the waste, to determine if eliminating the total concentration limits for the constituents of concern would be still protective to human health and the environment. The allowable total concentrations, according to the DRAS, were all at least 1,000 times greater than the actual maximum total concentrations found in the waste. Based on the DRAS results, EPA grants BMW's petition for amendment to eliminate all total concentration limits.

EPA received public comments on the proposed noticed published on November 26, 2004, from Alliance of Automobile Manufacturers; The Aluminum Association; BMW Manufacturing Co., LLC; Donald Humphrey; and EPA. All commenters were supportive of the proposal except Donald Humphrey.

Comment: On October 30, 2002, (67 FR 66251), EPA's Office of Solid Waste proposed the Methods Innovation Rule (MIR) to remove from the regulations unnecessary requirements to use only SW-846 Methods other than those considered to be Method Defined Parameters (MDP). The Agency is no longer generally requiring the use of only SW-846 Methods for regulatory applications other than those involving MDPs. The general purpose of this rule is to allow more flexibility when conducting RCRA-related sampling and analysis activities.

Response: EPA has revised Table 1: (2) Verification Testing Requirements: in Appendix IX of this Final Rule with appropriate language.

Comment: The Alliance of Automobile Manufacturers, the Aluminum Association, and BMW believe the F019 listing itself should be revised to exclude wastewater treatment sludges from automotive industry conversion coating on aluminum when hexavalent chromium and cyanides are not used in the process.

Response: Today's final rule is site-specific and waste-specific; it applies only to BMW's plant in Greer, South Carolina, and only to the petitioned waste. EPA understands the commenters' concern, but it is outside the scope of this delisting.

Comment: Donald Humphrey disagreed with granting this final rule, because he feels that BMW must abide by the rules of RCRA.

Response: On January 16, 1981, as part of its final and interim final regulations implementing section 3001 of RCRA, EPA published an amended list of hazardous wastes from non-specific and specific sources. This list has been amended several times, and is published in 40 CFR 261.31 and 261.32. These wastes are listed as hazardous because they exhibit one or more of the characteristics of hazardous wastes identified in Subpart C of part 261 ( i.e. , ignitability, corrosivity, reactivity, and toxicity) or meet the criteria for listing contained in section 261.11(a)(2) or (a)(3). Individual waste streams may vary, however, depending on raw materials, industrial processes, and other factors. Thus, while a waste that is described in these regulations generally is hazardous, a specific waste from an individual facility meeting the listing description may not be. For this reason, sections 260.20 and 260.22 provide an exclusion procedure, allowing BMW to demonstrate that its F019 waste from its specific facility should not be regulated as a hazardous waste. BMW has complied with the requirements of sections 260.20 and 260.22, and therefore, is having its petition to amend an exclusion (or delisting) from the lists of hazardous waste granted.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a rule of general applicability and therefore is not a “regulatory action” subject to review by the Office of Management and Budget. Because this action is a rule of particular applicability relating to a particular facility, it is not subject to the regulatory flexibility provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), or to sections 202, 203, and 205 of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4). Because the rule will affect only one facility, it will not significantly or uniquely affect small governments, as specified in section 203 of UMRA, or communities of Indian tribal governments, as specified in Executive Order 13175 (65 FR 67249, November 6, 2000). For the same reason, this rule 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 (64 FR 43255, August 10, 1999). This rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant.

This rule does not involve technical standards; thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ). The Congressional Review Act, 5 U.S.C. 801 et seq. as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. Section 804 exempts from section 801 the following types of rules (1) Rules of particular applicability; (2) rules relating to agency management or personnel; and (3) rules of agency organization, procedure, or practice that do not substantially affect the rights or obligations of non-agency parties (5 U.S.C. 804(3)). EPA is not required to submit a rule report regarding today's action under section 801 because this is a rule of particular applicability.

This is a summary of the Commission's Order on Reconsideration, FCC 05-139, adopted July 14, 2005, and released July 19, 2005, in CC Docket 98-67 and CG Docket 03-123. This Order on Reconsideration does not contain new or modified information collections requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, it does not contain any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506 (c)(4). The full text of the Order on Reconsideration and copies of any subsequently filed documents in this matter will be 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. The Order on Reconsideration and copies of subsequently filed documents in this matter may also be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc. (BCPI), Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. Customers may contact BCPI at their Web site: http://www.bcpiweb.com or call 1-800-378-3160. To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY). The Order on Reconsideration can also be downloaded in Word or Portable Document Format (PDF) at: http://www.fcc.gov/cgb/dro.

Title IV of the Americans with Disabilities Act of 1990 (ADA) requires the Commission to ensure that TRS is available to the extent possible in the most effective manner to persons with hearing or speech disabilities in the United States. TRS enables a person with a hearing or speech disability to have access to the telephone system to communicate with hearing individuals. The statute requires that TRS offers persons with hearing and speech disabilities telephone transmission services that are functionally equivalent to voice telephone services. When TRS was first implemented in 1993, persons desiring to use TRS to call a hearing person through the telephone system generally used a TTY (text-telephone) device connected to the public switched telephone network (the PSTN). In what is now referred to as a traditional TRS call ( e.g. , TTY text-based), the person with a hearing or speech disability dials ( i.e. , types) a telephone number for a TRS facility using a TTY, and then types the number of the party he or she desires to call. The CA, in turn, places an outbound voice call to the called party. The CA serves as the link in the conversation, converting all TTY messages from the caller into voice messages, and all voice messages from the called party into typed messages for the TTY user. The process is performed in reverse when a voice telephone user initiates a traditional TRS call to a TTY user.

The most striking development in the short history of TRS has been the enormous growth in the use of VRS. As most frequently used, VRS allows a deaf person whose primary language is ASL to communicate in ASL with the CA through a video link. The CA, in turn, places an outbound telephone call to a hearing person. During the call, the CA communicates in ASL with the deaf person and by voice with the hearing person. As a result, the conversation between the two end users, deaf and hearing, flows in near real time and in a faster and more articulate manner than with a TTY or text-based TRS call. As a result, VRS calls reflect a degree of functional equivalency that is not attainable with text-based TRS.

Section 225 of the Communications Act, creates a cost recovery framework whereby providers of TRS are compensated for their costs of providing TRS. This framework is based on a jurisdictional separation of costs. As a general matter, providers of intrastate TRS are compensated by the states, and providers of interstate TRS are compensated from the Interstate TRS Fund (Fund). The Interstate TRS Fund is funded by contributions from all carriers providing interstate telecommunications services, and is administered by the TRS fund administrator, currently the National Exchange Carrier Association, Inc. (NECA). The Fund administrator uses these funds to compensate eligible TRS providers for the costs of providing the various forms of TRS. Fund distributions are made on the basis of a payment formula initially computed by NECA in accordance with the Commission's rules, and then approved or modified by the Commission. The per-minute compensation rates are presently based on the projected average cost per minute of each service.

Since TRS became available on a nationwide basis in July 1993, the Commission has addressed the provision, regulation, and compensation of TRS on numerous occasions. As the Commission has noted, in adopting Title IV of the ADA, Congress recognized that persons with hearing and speech disabilities have long experienced barriers to their ability to access, utilize, and benefit from telecommunications services. The intent of Title IV, therefore, is to further the Communications Act's goal of universal service by ensuring that individuals with hearing or speech disabilities have access to the nation's telephone system. To this end, the Commission must ensure that persons with hearing and speech disabilities have adequate means of accessing the telephone system. At its inception, TRS was limited to the use of a TTY connected via the PSTN to the CA, who would then make a voice call to the other party to the call. In 1998, however, the Commission issued a Notice of Proposed Rulemaking, seeking comment on whether Title IV applies to other forms of TRS that go beyond the TTY-to-speech and speech-to-TTY model. The Commission tentatively concluded that improved TRS services, such as speech-to-speech (STS) and VRS, falls within the scope of Title IV because its language and structure establish that Congress intended TRS to be an evolving service that would expand beyond traditional TTY relay service as new technologies developed. The Commission therefore proposed recognizing new forms of TRS that it believed would broaden the potential universe of TRS users and further promote access to telecommunications for the millions of persons with disabilities who might otherwise be foreclosed from participating in our increasingly telecommunications and information-oriented society.

In March 2000, the Commission adopted its tentative conclusions that STS and VRS are forms of TRS. The Commission found that STS would help break the insularity barriers that confine members of the community of people with speech disabilities and offer them opportunities for education, employment, and other, more tangible benefits that are concomitant with independence. The Commission further concluded that TRS encompasses VRS, and that VRS would make relay services functionally equivalent to conventional telephone service for individuals whose first language is ASL. The Commission did not mandate the provision of VRS, given its technological infancy. The Commission nevertheless encouraged the use and development of VRS, and to this end stated that, on an interim basis, all VRS calls would be eligible for cost recovery from the Interstate TRS Fund. Finally, as discussed more fully below, the Commission also concluded that any non-English language relay services in a shared language, such as Spanish-to-Spanish, are telecommunications relay services, and required interstate common carriers to provide interstate Spanish relay service.

In April 2002, the Commission further expanded the scope of TRS by concluding that IP Relay falls within the statutory definition of TRS. In reaching this conclusion, the Commission noted that Congress did not adopt a narrow definition of TRS, but rather used the broad phrase “telephone transmission service” that was constrained only by the requirement that such service provide a specific functionality. In June 2003, the Commission released the Second Improved TRS Order & NPRM, again expanding the scope of TRS to encompass new types of TRS calls, including two-line voice carry-over (VCO) and two-line hearing carry-over (HCO). The Commission stated that as technology has further developed, new variations of traditional TRS are now available to support the preferences and needs of persons with hearing and speech disabilities.

Finally, in August 2003, the Commission concluded that captioned telephone VCO service is a type of TRS eligible for cost recovery under Section 225. In reaching this conclusion, the Commission noted that the types and forms of relay services that we have found to fall within the definition of TRS have neither been static nor limited to relay services involving a TTY or the PSTN. The Commission also emphasized that captioned telephone service will reach a segment of the population persons who develop a hearing disability later in life and have some residual hearing that has traditionally not been well serviced by current TRS options, and that just as VRS has allowed greater functional equivalence in telecommunications for callers who use sign language, captioned telephone service will provide greater functional equivalence for those people who prefer VCO TRS and use this technology.

In 1998, the Commission first raised the issue whether multilingual relay services (MRS), i.e. , relay service in a shared foreign language (such as Spanish-to-Spanish), and translation services, i.e. , relay services between two parties who each use a different language, were TRS services under Section 225. The Commission tentatively concluded that Title IV of the ADA, as a general matter, only encompasses same-language MRS, and that such calls, to the extent voluntarily provided, should be compensated by the intrastate jurisdiction or the Interstate TRS Fund, as appropriate. The Commission also tentatively concluded that translation TRS, especially foreign language translation services, are value-added TRS offerings that go beyond the “relaying” of conversations between two end users, and therefore should not be compensable from the Interstate TRS Fund. The Commission sought comment on whether an exception should be made for ASL translation services, explaining that because ASL is a language unique to the deaf community, ASL translation services may be necessary to provide functional equivalency to ASL users.

In March 2000, the Commission concluded that MRS—non-English language relay services that relay conversations in a shared language—are TRS services compensable by either the intrastate jurisdiction or the Interstate TRS Fund. The Commission recognized that Spanish is the most widely spoken non-English language in the United States, and that the number of Spanish-speaking persons is significantly larger than any other non-English speaking population and is rapidly growing. The Commission concluded that this warrants the availability of interstate Spanish relay service, and therefore mandated that interstate common carriers provide interstate Spanish relay services by March 1, 2001. The Commission added that while it was mandating only interstate Spanish relay service, any non-English language relay service provided by an interstate relay provider would be compensable from the Interstate TRS Fund. The Commission also stated that although it was not requiring each state TRS program to offer intrastate Spanish (or any other non-English language) relay service, it urged states to consider offering such services if the need arose, noting that there could otherwise be an adverse effect on the personal and economic well-being of individuals who speak a language other than English, making employment and education more difficult for them to attain.

With respect to non-shared language relay service, the Commission concluded that the translation of typed ASL to English was TRS because it was necessary to provide “functional equivalency” to ASL users. The Commission noted that where a TTY user's message is in ASL, the CA will, upon request of the TTY user, repeat the message to the hearing person using standard spoken English, and the CA will repeat the hearing person's message by typing in ASL. The Commission stated that because the grammar and syntax of ASL are different from English, if this were not done, the hearing party may not understand the information as well as if it is presented in English, and vice versa. The order did not otherwise address non-shared language TRS.

The Texas Public Utilities Commission (TX PUC) filed a petition for reconsideration, requesting that the Commission allow other non-shared language relay translation service (beyond ASL to English translation service) to be compensable from the Interstate TRS Fund. The TX PUC stated that there is a great demand for such service, and that the need for this service is particularly important for many deaf children of Latino origin. The TX PUC explained that many such children live in homes where Spanish is the spoken language, but the children are educated at school in ASL and English. Therefore, many deaf children of Spanish-speaking families are not able to participate in family communications. Sprint filed comments supporting the petition, stating that the provision of Spanish-to-English relay service is necessary to enable deaf children of Spanish-speaking parents to communicate with their families. Sprint also asserted that the incremental cost of providing such service would be de minimis .

In response to the TX PUC petition, the Commission sought comment on whether non-shared (or multi-lingual) language translation service through relay is a form of TRS compensable from the Interstate TRS Fund. The Commission noted that since the time we addressed this issue in the 1998 TRS NPRM, the Commission has developed a better understanding of the needs of certain TRS consumers in this area, and recognizes that multi-lingual translation service through TRS may meet the unique needs of certain identifiable TRS users. The Commission sought comment on whether provision of this service is consistent with, or necessary under, the functional equivalency mandate. The Commission also sought comment on how multilingual translation service for TRS would be implemented with VRS, STS, and other forms of TRS.

Several parties filed comments responding to this issue. Commenters representing TRS providers and disability advocacy groups asserted that non-shared language relay should be recognized as TRS, because it provides functionally equivalent relay service for millions of deaf children, parents, or friends who wish to communicate by telephone with Spanish-speaking Americans but cannot, because the persons who are deaf have been educated in ASL and English. Commenters in opposition generally maintained that non-shared language translation goes beyond the functional equivalency mandate because it provides relay users with a service not offered to non-relay voice telephone users, i.e. , the ability, as part of their basic telephone services, to call and communicate with a person who speaks a different language.

In 2004, the Commission found that non-shared language TRS is value-added translation service that is not compensable from the Interstate TRS Fund. At the same time, the Commission recognized that states, in their efforts to tailor intrastate TRS to meet the needs of their citizenry, may identify the need to offer non-shared language TRS. The Commission stated that it supported, and in fact encouraged, states to assess the need for, and if appropriate offer, non-shared language intrastate TRS. In this regard, the Commission noted that it was not concluding that offering non-shared language TRS conflicts with Commission rules, but rather that the offering of such a service is an example of an entity permissibly exceeding the mandatory minimum standards.

Three parties seek reconsideration of the Commission's conclusion that non-shared language TRS service is not a form of TRS compensable from the Interstate TRS Fund. Specifically, they assert that non-shared language Spanish translation Video Relay Service— i.e. , VRS where the CA translates what is signed in American Sign Language (ASL) into spoken Spanish, and vice versa —is a form of TRS compensable from the Interstate TRS Fund.

Communication Services for the Deaf (CSD) argues that the enormous size of America's Spanish-speaking population means that the provision of VRS between ASL and Spanish-speaking users is needed to achieve functional equivalent relay service. CSD notes that the recent growth of the Spanish-speaking population in America has been extraordinary, and that the Commission's disability access rules already reflect this fact. CSD notes, for example, that the Commission has already required Spanish-to-Spanish interstate relay services, singling out this language only because the number of Spanish-speaking persons is significantly larger than any other non-English speaking population and is rapidly growing. CSD further argues that it is inconsistent to permit reimbursement for ASL-to-English VRS, but not ASL-to-Spanish VRS. CSD asserts, in other words, that having recognized at least one translation relay service to achieve functional equivalency, it makes little sense to deny reimbursement for relay translation between ASL and Spanish-speaking people, particularly because after English, Spanish is the next most widely spoken language in the country. Further, CSD emphasizes that authorizing ASL-to-Spanish VRS is particularly critical for deaf Latino children because such children are educated in ASL and therefore can communicate by telephone with their relatives and other Spanish-speaking persons only through non-shared language TRS. Finally, CSD suggests that the cost to provide non-shared language ASL-to-Spanish calls would not be any greater than that for ASL-to-English calls, and that ASL-to-Spanish calls would likely constitute no more than one to two percent of all VRS calls. The National Video Relay Service Coalition (NVRSC) makes similar arguments.

In response to the petitions for reconsideration, eighteen individuals filed comments in support, making many of the same arguments made by petitioners. These comments generally express the desire of deaf members of the Latino community to have the ability to communicate over the telephone via VRS in ASL, their native language, with the members of the Spanish-speaking community who are not deaf. No comments opposed recognizing Spanish translation VRS as a form of TRS compensable from the Interstate TRS Fund.

We reverse the Commission's prior ruling on this issue and conclude that ASL-to-Spanish VRS— i.e. , relay service where the CA translates what is signed in American Sign Language (ASL) into spoken Spanish, and vice versa—is a form of TRS compensable from the Interstate TRS Fund. Accordingly, we grant the petitions for reconsideration on this issue filed by CSD, NVRSC, and Hands On. (We note that the petitions for reconsideration only addressed Spanish language translation VRS, i.e. , ASL-to-Spanish VRS). NECA shall compensate providers of this service at the same rate we adopt for VRS when a Spanish translation service is not involved. In reaching this conclusion, we find that it is essential that members of the large Spanish-speaking population in this country who are deaf, hard of hearing, or have a hearing disability, and for whom ASL is their primary language, have the means to communicate via the telephone system with persons without such disabilities who speak Spanish, in keeping with the goal of universal service.

As explained above, the Commission has recognized that Congress intended TRS to be an evolving service that would encompass new developments in technology and meet the needs of identifiable segments of the population of persons with hearing and speech disabilities. The Commission has also recognized Congress' clear direction that Title IV and the TRS regime are intended to further the goals of universal service by bringing persons with hearing and speech disabilities into the telecommunications mainstream and facilitating their educational and employment opportunities. To this end, Section 225 specifically directs the Commission to ensure that TRS is available to the extent possible to persons with hearing and speech disabilities in the United States.

The Commission's recognition of new forms of TRS to meet the particularized needs of certain persons with hearing and speech disabilities has not been confined to addressing the needs of persons with certain disabilities ( e.g. , Speech-to-Speech) or the use of new technologies ( e.g. , VRS and captioned telephone service). It has also included recognizing that persons with hearing and speech disabilities who do not speak English should have access to the telephone system, and therefore that some non-English language relay service should be provided. As stated above, the Commission has concluded that the provision of Spanish language relay service is essential to ensuring that the nation's large Spanish-speaking population has access to the telephone system.

We find that the recognition of ASL-to-Spanish VRS as a form of TRS compensable from the Interstate TRS Fund serves once again to meet the needs of an identifiable segment of the population of persons with hearing and speech disabilities, and therefore to further the goal of universal service, consistent with the Commission's decisions noted above. The record reflects both that there is a large and growing Spanish-speaking population in this country, and that deaf members of this population, educated in ASL, cannot communicate with their family and friends who speak only Spanish. Indeed, the Commission has previously recognized that the provision of non-shared language relay service may satisfy a particular need of persons with hearing or speech disabilities. Further, the Commission has specifically recognized both shared non-English language relay service and VRS as forms of TRS compensable from the Interstate TRS Fund, and that precluding such services through a narrow reading of the statute would be inconsistent with Congress' intent in enacting Title IV of the ADA.

First, the record reflects that there are nearly 40 million Latinos living in the United States, and that number will increase to over 60 million by 2025, representing over 18% of the population. This is the largest minority population in the nation, and Spanish is the most widely used non-English language spoken in the United States. The record also reflects that, as reported by Gallaudet University, as many as 24.5% of all deaf and hard of hearing students age three and over are Latino. The Commission has previously acknowledged that Hispanics are the fastest growing minority group in the deaf school age population. Relatedly, we note that Spanish is the predominant language in Puerto Rico, which has a certified state relay program under the Commission's rules. (Territories such as Puerto Rico are encompassed by Section 225 and the TRS regulations. See 47 U.S.C. 225(b)(1); 42 U.S.C. 12102(3). Puerto Rico's state TRS program was re-certified by the Commission on July 24, 2003. Notice of Certification of State Telecommunications Relay Service (TRS) Programs , Public Notice, CC Docket No. 98-67, 18 FCC Rcd 15322, (2003), published at 68 FR 45819, August 4, 2003; see generally http://welcome.topuertorico.org/descrip.shtml (noting that language has been a central issue in Puerto Rican education and culture since 1898, and that now English and Spanish are both official languages in Puerto Rico)). As NVRSC has noted, in Puerto Rico, where Spanish is the primary language, failure to compensate for ASL-to-Spanish VRS leads to the result that Puerto Ricans who are deaf or hard of hearing using ASL must have their VRS conversations translated into English, a language that is either not spoken or is a second language for most Puerto Ricans. (NVRSC Petition at 10).

Second, the Commission has also acknowledged that for many deaf Hispanic persons, particularly children, ASL is their primary language, even though it is not the language used in their home. As a result, as CSD has noted, because many do not learn Spanish in the deaf and residential day schools they attend, the only way for these children to communicate with some relatives by telephone—especially because many are young and cannot yet type—is through non shared-language VRS. (CSD Petition at 10). In other words, the particular communications needs of deaf children raised in Spanish-speaking households arise precisely because the children are deaf, and therefore learn ASL as their primary language and not Spanish. Recognizing non shared-language Spanish translation VRS as a form of TRS therefore empowers these persons to have access to the telephone system to become more fully integrated into society. The legislative history of Title IV makes clear that the lack of telephone access for persons with certain disabilities relegated them to second-class citizenship, and that the relay system was intended to empower such persons to have greater control over their own lives and greater opportunities. Therefore, we agree with CSD that precisely because Spanish-speaking Latino Americans make up so large a portion of the American population, the Commission should be taking actions to enhance, not reduce communication between deaf people and Americans who speak Spanish.

In reaching the conclusion that ASL-to-Spanish VRS is TRS, we find significant, as have petitioners and commenters, that TRS already entails translation between two languages, English and ASL. The Commission has previously recognized that ASL is not English. For two persons to communicate with each other using these languages there must be a translation between a spoken language (English) and a visual language (ASL), each with its own grammatical structure and syntax. ( See also CSD Petition at 6. CSD adds that it was for this very reason that VRS was first created—it was seen as a means of enabling ASL users who were not sufficiently acquainted with the English language to be able to communicate with hearing people who did not know ASL).

Further, we now conclude that the Commission's previous characterization of ASL-to-Spanish translation VRS as a value added service was misplaced. As we have noted, for certain identifiable segments of the population, the only way to communicate via telephone in a functionally equivalent manner is by ASL-to-Spanish translation VRS. Therefore, although a translation to Spanish may be a value added service for hearing persons, or in other contexts, we do not believe it can be fairly characterized as such for the deaf community for whom ASL is their primary language. As the record reflects, for deaf children who are raised in Spanish-speaking homes, and who are taught ASL in school as their primary language, without this service it is virtually impossible to communicate with their Latino communities.

We also believe that the statutory mandate of functional equivalency must serve primarily as a benchmark for determining those services and features that TRS must offer, not as a barrier that precludes the recognition of new forms of TRS that give access to the nation's telephone system to identifiable groups of persons with hearing and speech disabilities. Significantly, the Commission has made clear that functional equivalency is reflected in the services and features required by the mandatory minimum standards that a provider must offer to receive compensation from the Interstate TRS Fund. At the same time, the TRS regulations recognize that states may offer services that exceed the mandatory minimum standards, as long as they do not conflict with the existing standards; indeed, in the past the Commission has encouraged states to do so with regard to non-shared language TRS. The determination of whether a particular service falls within the scope of TRS and is compensable from the Fund must take into account the purpose of the service and whether it affords persons with hearing and speech disabilities a means of functionally equivalent access to the nation's telephone system.

The conclusion that ASL-to-Spanish VRS falls within the scope of TRS compensable from the Interstate TRS Fund is also supported by the special emphasis the Commission has placed on providing the nation's Spanish-speaking population with access to communications in other contexts. First, as we have noted above, the Commission concluded that the provision of Spanish-to-Spanish relay service is essential to ensuring that the nation's large Spanish-speaking population has access to the telephone system. The Commission explained that just as the voice telephone network allows for a Spanish-speaking user to call a parent and speak in Spanish, TRS users should have the same functional equivalency. The Commission found that because Spanish is the most widely spoken non-English language in the country, it was appropriate that the Commission mandate the availability of interstate Spanish relay service; at the same time, the Commission left to the states the determination whether particular demographics made it appropriate to offer other non-English language relay service.

Second, the Commission has adopted captioning rules for Spanish language programming because there was already a market for such programming in the United States. The Commission explained that it was extending its disability access obligations only to Spanish video programmers because the number of Spanish-speaking persons is significantly larger than any other non-English speaking population and is rapidly growing. The Commission also noted that it was appropriate to require Spanish language captioning because the captioning rules applied to programming in Puerto Rico.

Third, the Commission's Web site has a homepage that contains information written in Spanish about its rules and regulations. Consumers also have access to numerous Commission Factsheets and other documents that have been translated to Spanish. (The Commission has endeavored to provide Spanish translations of Commission Factsheets and Consumer Advisories. In addition, because we receive a large number of inquiries about charges on telephone bills, we have sample telephone bills available (both wireline and wireless) with definitions in Spanish of all line item terms. We also have translated telephone complaint Form 475, and “slamming” complaint Form 501, into Spanish to allow Spanish-speaking consumers to easily file complaints with the Commission). In sum, the Commission has endeavored in a variety of contexts to make its services and information accessible to the nation's large population of Spanish-speaking persons.

Finally, the record reflects that allowing compensation from the Interstate TRS Fund for ASL-to-Spanish VRS will not have an appreciable impact on the required size of the Fund. We are mindful that the size of the Interstate TRS Fund has been rapidly increasing in recent years, largely due to the popularity of the two Internet-based relay services (IP Relay and VRS), and that a larger Fund size requires a higher carrier contribution factor, with costs ultimately passed on to all consumers. But as we have noted, the record indicates that ASL-to-Spanish VRS calls should constitute no more than one to two percent of all VRS calls. Therefore, as the Commission stated when it recognized STS as a form of TRS, we find that no information has been presented that demonstrates that ASL-to-Spanish VRS is too costly relative to the benefit derived from this service. Further, the record also reflects that the operational cost of providing ASL-to-Spanish VRS is not likely to be significantly more than ASL-to-English VRS. Prior to the 2004 TRS Report and Order , CSD had been providing ASL-to-Spanish VRS service for a period in 2002 and 2003 at the same rate as ASL-to-English VRS service.

We therefore conclude that ASL-to-Spanish VRS— i.e. , relay service where the CA translates what is signed from ASL to spoken Spanish, and vice versa —is a form of TRS compensable from the Interstate TRS Fund. (We remind providers (and consumers) that VRS is not the same as Video Remote Interpreting (VRI), and that VRS, including the ASL-to-Spanish VRS that we recognize in this Order on Reconsideration , may not be used when two persons are together and an interpreter is needed. As the Commission has explained, VRI is a service that is used when an interpreter cannot be physically present to interpret for two persons who are together at the same location (for example, at a meeting or in a doctor's office). See Federal Communications Commission Clarifies That Certain Telecommunications Relay Services (TRS) Marketing And Call Handling Practices Are Improper And Reminds That Video Relay Service (VRS) May Not Be Used As A Video Remote Interpreting Service , Public Notice, CC Docket No. 98-67, CG Docket No. 03-123, 20 FCC Rcd 1471, (2005), published at 70 FR 8034, February 17, 2005. In that situation, an interpreter at a remote location may be used via a video connection. A fee is generally charged by companies that offer this service. By contrast, VRS, like all forms of TRS, is a means of giving access to the telephone system. Therefore, VRS is to be used only when a person with a hearing disability, who absent such disability would make a voice telephone call, desires to make a call to a person without such a disability through the telephone system (or when, in the reverse situation, the hearing person desires to make such a call to a person with a hearing disability). In circumstances where a person with a hearing disability desires to communicate with someone in person, he or she may not use VRS but must either hire an “in-person” interpreter or a VRI service). Accordingly, providers offering ASL-to-Spanish VRS may be compensated from the Interstate TRS Fund. Because presently VRS is not a mandatory service, we also do not make ASL-to-Spanish VRS a mandatory service at this time. Further, NECA shall compensate providers of this service at the same rate we adopt for VRS when a Spanish translation service is not involved. (We note that the petitions for reconsideration only addressed Spanish language translation VRS, i.e. , ASL-to-Spanish VRS. As noted above, the record suggests that compensation of ASL-to-Spanish VRS will not impose costs significantly greater than those associated with ASL-to-English VRS. We leave open the issue whether providers, after the 2005-2006 fund year, may include in their submitted projected costs any additional costs caused by providing ASL-to-Spanish VRS translation service we recognize in this Order on Reconsideration ).

The Regulatory Flexibility Act of 1980, as amended (RFA), requires that an initial regulatory flexibility analysis be prepared for notice-and-comment rulemaking proceedings, unless the agency certifies that “the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” ( See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601-612, has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Public Law 104-121, Title II, 110 Statute 857 (1996)). The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” (5 U.S.C. 601(6)). In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. (5 U.S.C. 601(3) incorporating by reference the definition of “small-business concern” in the Small Business Act, 15 U.S.C. 632). Pursuant to 5 U.S.C. 601(3), the statutory definition of a small business applies unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register ”). 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). (15 U.S.C. 632). Nationwide, there are approximately 1.6 million small organizations. (Independent Sector, The New Nonprofit Almanac & Desk Reference (2002)).

This Order on Reconsideration addresses three petitions for reconsideration of the Commission's prior conclusion that non-shared language TRS service is not a form of TRS compensable from the Interstate TRS Fund. ( See petitions filed by CSD (September 30, 2004), NVRSC (October 1, 2004), and Hands On Video Relay Services, Inc. (Hands On) (October 1, 2004)). This item reverses the Commission's prior conclusion that non-shared language Spanish translation Video Relay Service— i.e. , VRS where the CA translates what is signed in American Sign Language (ASL) into spoken Spanish, and vice versa —is a not a form of TRS compensable from the Interstate TRS Fund. The Commission concludes that the public interest is best served by requiring the Interstate Fund Administrator to pay to eligible providers of ASL-to-Spanish VRS the costs of providing interstate service. We find that it is essential that members of the large Spanish-speaking population in this country who are deaf, hard of hearing, or have a hearing disability, and for whom ASL is their primary language, have the means to communicate via the telephone system with persons without such disabilities who speak Spanish, in keeping with the goal of universal service. In addition, as noted in paragraph 31 of the item, the record reflects that allowing compensation from the Interstate TRS Fund for ASL-to-Spanish VRS will not have an appreciable impact on the required size of the Fund, or that ASL-to-Spanish VRS is too costly relative to the benefit derived from this service. Therefore, given the lack of a significant economic impact, we certify that the requirements of the Order on Reconsideration will not have a significant economic impact on a substantial number of small entities.

We also note that, arguably, there are not a substantial number of small entities that will be affected by our action. The SBA has developed a small business size standard for Wired Telecommunications Carriers, which consists of all such firms having 1,500 or fewer employees. (13 CFR 121.201, NAICS code 517110 (changed from 513310 in October 2002). According to Census Bureau data for 1997, there were 2,225 firms in this category which operated for the entire year. U.S. Census Bureau, 1997 Economic Census, Subject Series: Information, “Establishment and Firm Size (Including Legal Form of Organization),” Table 5, NAICS code 513310 (issued October 2000). Of this total, 2,201 firms had employment of 999 or fewer employees, and an additional 24 firms had employment of 1,000 employees or more. Thus, under this size standard, the majority of firms can be considered small. (The census data do not provide a more precise estimate of the number of firms that have employment of 1,500 or fewer employees; the largest category provided is “Firms with 1,000 employees or more”)). Currently, only eight providers are providing VRS and being compensated from the Interstate TRS Fund: AT&T, Communication Access Center for the Deaf and Hard of Hearing, Hamilton, Hands On, MCI, Nordia, Sorenson and Sprint. We expect that only one of the providers noted above is a small entity under the SBA's small business size standard. In addition, the Interstate Fund Administrator is the only entity that will be required to pay to eligible providers of ASL-to-Spanish VRS the costs of providing interstate service. The Commission will send a copy of this Order on Reconsideration , including a copy of this Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the SBA. (5 U.S.C. 605(b)).

The Commission will send a copy of this Order on Reconsideration in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

Pursuant to the authority contained in Sections 1, 2, and 225 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152, and 225, this Order on Reconsideration is hereby adopted.

The Petition for Partial Reconsideration filed by Hands On is granted in part, as provided herein; the Petition for Reconsideration filed by CSD is granted in part, as provided herein; and the Petition for Reconsideration filed by NVRSC is granted, as provided herein.

This Order on Reconsideration shall be effective September 30, 2005.

The Commission's Consumer & Governmental Affairs Bureau, Reference Information Center shall send a copy of this Order on Reconsideration , including the Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the U.S. Small Business Administration.

This is a summary of the Commission's Report and Order, FCC 05-140, adopted July 14, 2005, and released July 19, 2005, in CC Docket 98-67 and CG Docket 03-123. The Commission addresses threes issues related to the provision of Video Relay Services, a form of telecommunications relay service (TRS): (1) The adoption of a speed of answer rule for VRS; (2) whether VRS should be required to be offered 24 hours a day, 7 days a week (24/7); and (3) whether VRS providers may be compensated for providing VRS Mail. This Report and Order does not contain new or modified information collections requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, it does not contain any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506 (c)(4). The full text of the Report and Order and copies of any subsequently filed documents in this matter will be available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, NW., CY-A257, Washington, DC 20554. The Report and Order and copies of subsequently filed documents in this matter may also be purchased from the Commission's duplicating contract, Best Copy and Printing, Inc. (BCPI), Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. Customers may contact BCPI at their Web site www.bepiweb.com or call 1-800-378-3160. To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an e-mail to fee504@fcc.gov or call the Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY). The Report and Order can also be downloaded in Word or Portable Document Format (PDF) at: http://www.fcc.gov/cgb/dro.

Title IV of the Americans with Disabilities Act of 1990 (ADA), Pub. L. 101-336, 401, 104 Statute 327, 336-69 (1990), adding Section 225 to the Communications Act of 1934 (Communications Act), as amended, 47 U.S.C. 225; implementing regulations at 47 CFR 64.601 et seq. ), requires common carriers offering telephone voice transmission services to provide TRS throughout the area in which they offer service so that persons with disabilities will have access to telecommunications services, and provides that they will be compensated for their just and reasonable costs of doing so. Title IV is intended to further the universal service goal set out in the Communications Act of 1934 (Act), as amended, by providing to individuals with hearing or speech disabilities telephone services that are “functionally equivalent” to those available to individuals without such disabilities. Congress recognized that persons with hearing and speech disabilities have long experienced barriers to their ability to access, utilize, and benefit from telecommunications services.

The advent of VRS as a form of TRS has been one of the most important developments in the short history of TRS. VRS allows a deaf person whose primary language is ASL to communicate in ASL with the CA, a qualified interpreter, through a video link; the CA, in turn, places an outbound telephone call to a hearing person. During the call, the CA communicates in ASL with the deaf person and by voice with the hearing person. As a result, the conversion between the two end users, deaf and hearing, flows in near real time and in a faster and more articulate manner than with a TTY or text-based TRS world. The use of VRS reflects this reality. In April 2005 the monthly minutes of use were approximately 1.8 million, a ten-fold increase in the past two years, and more than the number of interstate traditional TRS minutes. ( See TRS Fund Performance Status Report as of May 31, 2005, http://www.neca.org (under Resources, then TRS Fund)).

TRS became available on a nationwide basis in July 1993. Initially, the Commission's regulations required the provision of only “traditional,” or text (TTY)-based TRS, and the Commission adopted mandatory minimum standards to govern the provision of this service. Providers seeking compensation from the Interstate TRS Fund for providing any form of TRS must offer service in compliance with the applicable mandatory minimum standards, unless waived. In the initial Notice of Proposed Rulemaking following the adoption of Section 225, the Commission explained that the statute requires the Commission to establish minimum federal standards to be met by all providers of intrastate and interstate telecommunications relay services to ensure that telephone service for [persons with hearing and speech disabilities] is functionally equivalent to voice service offered to hearing individuals. Guided by this principle, the Commission's proposed rules included a speed of answer performance standard requiring that a least 85 percent of all calls be answered within 10 seconds the “85/10” rule).

In July 1991, the Commission adopted the TRS mandatory minimum standards, including the speed of answer rule. The rule stated, in relevant part, that TRS shall, except during network failure, answer 85% of all calls within 10 seconds and no more than 30 seconds shall elapse between receipt of dialing information and the dialing of the requested number. The rule did not address whether compliance would be measured daily, monthly, or on some other basis. The Commission stated that although some common carriers favored relaxing the proposed rule, no evidence had been presented to suggest that the proposed rule was neither feasible nor clear. The Commission concluded that the 85/10 standard will best meet our goal of providing relay services which are functionally equivalent to voice telephone services.

In 1998, the Commission proposed amendments to the TRS mandatory minimum standards to enhance the quality of TRS and broaden the potential universe of TRS users. (This NPRM followed a Notice of Inquiry. See Telecommunications Relay Services, the Americans with Disabilities Act of 1990, and the Telecommunications Act of 1996, CC Docket No. 90-571, Notice of Inquiry, 12 FC Red 1152, (1997)). These proposals included recognizing VRS as a form of TRS (“improved services”), and also changing the TRS rules, including the speed of answer rule. Specifically, the 1998 TRS NPRM proposed: (1) Revising the speed of answer rule to require TRS providers to answer 85% of all calls within 10 seconds by a CA prepared to place the TRS call at that time; (2) requiring that compliance with the 85/10 rule be calculated on a daily basis; (3) clarifying that the 10 second speed of answer time is triggered when a call initially arrives at the provider's network, and that once a call does so, regardless of how the provider's network handles the call, the call must be answered within 10 seconds by a CA prepared to place the call; and (4) finding that “abandoned” calls— i.e., calls that are abandoned or successively redialed without being completed because the caller does not reach a CA prepared to place the call-not be included in the speed of answer calculation. The Commission proposed amending the speed of answer rule to make the experience of persons using TRS in placing a telephone call through a TRS center more functionally equivalent to the experience of voice callers using the voice telephone network. The Commission stated that the ability to make a telephone call without delay is fundamental to our concept of a rapid, efficient, Nationwide communications system. The Commission further emphasized that the speed-of-answer requirements are a cornerstone of the Commission's TRS rules, and the ability of a TRS user to reach a CA prepared to place his or her call, without experiencing delays that a voice telephone user would not experience in placing a telephone call, is fundamental to the concept of “functional equivalence.”

In the March 2000 Improved TRS Order , the Commission expanded the scope of TRS by recognizing VRS as a form of TRS eligible for compensation from the Interstate TRS Fund. The Commission also modified the speed of answer rule to minimize the circumstances under which customers experience delays in placing their calls through relay services. In so doing, the Commission again emphasized that for a TRS user, reaching a CA to place a relay call is the equivalent of picking up a phone and getting a dial tone. Any interpretation of our rule that delays a customer's ability to place a call through the relay center clearly compromises the functional equivalence of relay service.

The modified speed of answer rule: (1) Requires 85 percent of all calls to be answered in 10 seconds by any method that results in the TRS caller's call immediately being handled, not put in a queue or on hold; (2) clarifies that the 10-second limit begins at the time the call is delivered to the TRS center's network, and that the call is considered delivered when the relay center's equipment accepts the call from the LEC and the public switched network actually delivers the call to the TRS center; (3) requires that compliance with the speed of answer rule be measured on a daily basis; and (4) requires that abandoned calls be included in the speed of answer calculation. The Commission stated that these new rules will protect consumers from delays in placing calls through TRS services, and will ensure calls are received and answered by relay centers as quickly as possible, thereby giving TRS users functionally equivalent servicer.

However, the March 2000 order did not address the speed of answer rule for VRS. In December 2001, the Commission waived the speed of answer rule for VRS providers for two years in order to encourage more entrants into the VRS market and help provide more time for technology to develop. The Commission also stated that because demand for VRS was undetermined, the 85/10 rule might keep potential VRS providers out of the market, thereby hindering the development and growth of VRS. For this Internet-based service, the Commission stated that it would consider the call delivered to the IP Relay center when the IP Relay center's equipment accepts the call from the Internet. The Commission added that carriers providing IP Relay, in order to remain qualified to receive reimbursement from the Interstate TRS Fund, will have to maintain sufficient staffing to adhere to the Commission's speed of answer standard. In De ember 2003, the Commission extended the initial two-year waiver until June 30, 2004. In the June 30, 2004, 2004 TRS Report & Order the Commission further extended the speed of answer waiver for VRS until January 1, 2006, or such time as the Commission adopts a separate rule addressing speed of answer for VRS, whichever is earlier. The Commission found that it was premature to require VRS providers to meet the speed of answer requirement (or to adopt a different speed of answer requirement for VRS), and noted comments that a lack of qualified interpreters would make it difficult to meet the standard.

At the same time, because of the importance of this issue to the notion of functional equivalency, the Commission sought comment in the 2004 TRS Report & Order's FNPRM on whether a particular speed of answer requirement should be adopted for VRS. The Commission stated that consumers have expresses some frustration over long wait times in placing VRS calls, a result at least in part due to the rapidly growing use of VRS by consumers, and that long wait times undermine the notion of functional equivalency, mandated by Congress. The Commission therefore sought comment on what an appropriate speed of answer rule for VRS might be, whether it should be the same as the present rule for traditional TRS calls, when such a rule should become effective, whether there are a sufficient number of interpreters available to ensure that providers could meet a particular speed of answer rule, and how a particular rule might affect the cost of providing VRS.

On February 8, 2005 after the close of the comment period on the speed of answer issue as raised in the 2004 TRS Report & Order's FNPRM , the Commission released a Public Notice seeking additional comment on the adoption of a speed of answer rule for VRS. ( See Federal Communications Commission Seeks Additional Comment on the Speed of Answer Requirement for Video Relay Service (VRS) , CC Docket No. 98-67, CG Docket No. 03-123, Public Notice, 20 FCC Rcd 2376, (2005), published at 70 FR 10930, March 7, 2005, ( 2005 Speed of Answer PN )). The Commission noted that the comments previously filed lacked specificity on certain elements of a speed of answer rule, and therefore requested comment on several specific points, including what the rule should be, whether different standards should be phased in over time, how speed of answer should be measured, how abandoned calls should be treated, how “call backs” should be treated, whether compliance should be measured on a daily, monthly, or some other basis, and whether the providers should be required to submit reports to the Commission detailing their compliance with the speed of answer rule.

In response to the 2004 TRS Report & Order's FNPRM , seven comments and five reply comments were filed; comments were filed by the State of California and the California Public Utilities Commission (CA PUC)(October 18, 2004); Communication Services for the Deaf, Inc. (CSD) (October 18, 2004); Hands On Video Relay Services, Inc. (Hands On) (October 15, 2004); National Video Relay Service Coalition (NVRSC) (October 18, 2004); Sorenson Media, Inc. (Sorenson) (October 18, 2004); Sprint Corporation (Sprint) (October 18, 2004); and one individual Karl Kosiorek (October 5, 2004). Reply comments were filed by CSD (November 15, 2004); Hands On (November 15, 2004); NVRSC (November 15, 2004); and two individuals, Sarah Blattburg (November 12, 2004) and Judith Jones (November 15, 2004). Several other commenters, although not specifically addressing the speed of answer requirement, expressed concern about the shortage of interpreters necessary to staff VRS centers as well as to provide services for the deaf and hard of hearing community. In response to the 2005 Speed of Answer PN , 27 comments and 48 reply comments were filed. Comments were filed by CSD (February 25, 2005); Hands On (February 25, 2005); NVRSC (February 25, 2005); Sorenson (February 25, 2005); AT&T Corp. (AT&T) (February 25, 2005); MCI (February 25, 2005); NorCal Center on Deafness (NorCal) (February 8, 2005); Registry of Interpreters for the Defa, Inc. (RID) (February 25, 2005); University of Minnesota, Disability Services (UMDS) (February 25, 2005); Utah State Office of Rehabilitation (USOR) (March 3, 2005); and 56 individuals. Reply comments were filed by CSD (March 4, 2005(); MCI (March 5, 2005); Hands On (March 4, 2005); NVRSC (March 4, 2005); Arizona Commission for the Deaf and Hard of Hearing (ACDHH) (March 4, 2005); California Public Utilities Commission (CAPUC) (March 4, 2005); Hamilton Relay, Inc. (Hamilton) (March 4, 2005); Sprint Corporation (Sprint) (March 4, 2005); and Gallaudet University, Gallaudet Interpreting Service (Galaudet) (March 3, 2005). The majority of commenting VRS providers and the organizations representing deaf and hard of hearing consumers support adopting a speed of answer rule for VRS. Compare AT&T Comments to PN at 2; Hands On Comments to PN at 1; CSD Comments to PN at 1-2; Sprint Reply Comments to PN at 2 (Supporting adoption of a speed of answer rule); NVRSC Comments to PN at 1; NorCal Comments to PN at 1 with Sorenson Comments to PN at 1; MCI Comments to PN at 1, and Hamilton Reply Comments to PN at 1; USOR Comments to PN at 1; UMDS Comments to PN at 2 and GIS Reply Comments to PN at 3 (opposing adoption of a speed of answer rule)). (For the initial commenters supporting the adoption of a speed of answer rule, see CSD Comments at 29-39; Hands On Comments at 14-20; NVRSC Comments at 12; Sprint Comments at 11; CSD Reply Comments at 2-4). Several commenting parties assert that presently there are not a sufficient number of qualified interpreters in the labor pool to meet a mandatory answering standard and to have community interpreters available for other purposes. (Sorenson Comments at 11; MCI Comments to PN at 2; RID Comments to PN at 1; Sorenson Comments to PN at 3; UMDS Comments to PN at 2). Some commenters also assert that if a speed of answer rule were adopted it would result in a high quality service with a slower answer speed being replaced by a lower quality service with a faster answer speed. (Sorenson Comments to PN at 2; GIS Reply Comments to PN at 2). Sorenson argues that the Commission should not focus on just one element of functional equivalency (speed of answer). (Sorenson Comments to PN at 4). CP PUC, UMDS, and USOR also oppose adoption of a speed of answer rule at this time. CA PUC Comments to PN at 16; UMDS Comments to PN at 2; USOR Comments to PN at 1. (MCI further contends that the adoption of a speed of answer rule would create an outcome that would unfairly disadvantage new entrants. MCI Comments to PN at 2-3). Supporting commenters stress that the functional equivalency mandate requires VRS providers to be able to answer a VRS call within a reasonable amount of time. ( See , Sprint Comments at 11). However, the majority of the individual commenters to the PN express their opposition to adopting a speed of answer rule based on their general belief that such a rule would compel the VRS providers to hire less qualified interpreters in order to meet the speed of answer rule. Several commenters also maintain that VRS has become a sufficiently mature service to satisfy the speed of answer rule and that the Commission should either allow the existing speed of answer waiver to expire or adopt a speed of answer rule at this time. (CSD Comments at 29-30; Hands On Comments at 14-20; NVRSC Comments at 12; CSD Reply Comments at 2-4).

The commenters recommending a speed of answer requirement suggest proposals ranging from applying the current 85/10 rule to VRS, to requiring 85 percent of all calls to be answered within 30 seconds. ( See AT&T Comments to PN at 2-3 (85 percent of all calls must be answered within 30 seconds (85/30)); Hands On Comments to PN at 2 (proposing 85/30 rule); NVRSC Coments to PN at 4 (proposing 85/10) rule; NorCal Comments to PN at 1 (proposing 85/10 rule); Sprint Reply Comments to PN at 2 (proposing initial 75/60 rule followed by 85/30 rule)).

Some commenters that oppose adoption of a speed of answer rule nevertheless offer standards if such rule were to be adopted. Sorenson, although opposing the adoption of a speed of answer requirement, asserts that if a speed of answer requirement is adopted, the rule should require 80 percent of calls to be answered within four minutes for the first year, and 80 percent of calls to be answered within three minutes for the second year. (Sorenson Comments to PN at 7). The commenters also generally propose that the rule should become effective within three to six months of the date of the order adopting a standard. (AT&T Comments to PN at 3 n.8 (6 months; CSD Comments to PN at 2 (3 months); Hands on Comments to PN at 4 (6 months); NVRSC Comments to PN at 4 (60 to 120 days); NorCal Comments to PN at 2 (“immediately”); Sprint reply Comments to PN at 3 (6 months); Sorenson Comments to PN at 7 (6 months)). Sorenson asserts that a transition period is essential given the existing shortage of qualified interpreters. (Sorenson Comments to PN at 7). Some commenters also support having various speed of answer requirements phased in over time. (CSD Comments to PN at 2 (phase-in of 75/60 within 3 months of date of order, and 85/30 within 6 months of date of order, with the goal of reaching 85/10 in 2 years); Sprint Reply Comments to PN at 2 (phase-in of 75/60 to 85/30)). Further, commenters generally agree that the speed of answer calculation should be measured, at least initially, on a monthly basis, and then in a few years on a daily basis. (AT&T Comments to PN at 2-3; CSD Comments to PN at 5; Hands On Comments to PN at 6; Sorenson Comments to PN at 8). NVRSC and ACDHH recommend that the calculation be made on a daily basis. (NVRSC Comments to PN at 8; ACDHH Reply Comments to PN at 3). MCI recommends that the calculation be made on a quarterly basis. (MCI Comments to PN at 4). CSD asserts, for example, “[a] monthly measurement will provide the flexibility to meet the ebbs and flows characteristic of VRS in this changing market.” (CSD Comments to PN at 5).

Commenters also address the appropriate starting and ending points for measuring speed of answer. (AT&T Comments to PN at 3-4; CSD Comments to PN at 3; Hands On Comments to PN at 4-5; MCI Comments to PN at 4; NVRSC Comments to PN at 5; Sorenson Comments to PN at 7). Commenters generally agree that the measurement standard should be the same as the speed of answer measurement for IP Relay, where the measurement begins when the call is delivered to the provider's server and ends when the call is assigned to a VRS CA to handle the call. (AT&T Comments to PN at 3-4; CSD Comments to PN at 3; Hands On Comments to PN at 4-5; MCI Comments to PN at 4; NVRSC Comments to PN at 5; Sorenson Comments to PN at 7). AT&T and Hands On, however, caution that there may be a several seconds delay for the call to “synchronize” into the VRS system before an interpreter may answer the call. (AT&T Comments to PN at 4 n. 10; Hands On Comments to PN at 5). No commenters proposed an alternative method for this measurement.

Commenters also generally agree that abandoned calls (abandoned calls are those calls answered by a relay center but never handled by a CA because the customer hangs up), should be included in the VRS speed of answer calculation, as they are in the speed of answer calculation for the other forms of TRS. (AT&T Comments to PN at 4; CSD Comments to PN at 3; Hands On Comments to PN at 5; NVRSC Comments to PN at 6; ACDHH Reply Comments to PN at 3. RID, however, does not support the inclusion of abandoned calls in the calculation because VRS calls are susceptible of being dropped in the Internet Protocol. RID Comments to PN at 2). CSD asserts, however, that calls that are abandoned within the permissible speed of answer time should not be included with the calculation. SCD states that when a call is abandoned shortly after the call is placed, it is generally because the consumer has decided either not to place the call, or to do so at another time, and not because the caller no longer wished to wait for an interpreter or because he or she has waited too long. (CSD Comments to PN at 3-4). In addition, commenters generally agree that “call backs”— i.e. , calls where the consumer elects to have the provider call the consumer back when a VRS CA becomes available to place the call, rather than have the consumer wait for the next available CA should not be allowed because it is not an element of functional equivalency. (AT&T Comments to PN at 4; CSD Comments to PN at 4-5; Hands On Comments to PN at 5-6; NVRSC Comments to PN at 7; NorCal Comments to PN at 1; CA PUC Reply comments to PN at 5). Hands On and NVRSC recommend that providers be permitted to call back the calling party when necessary to “re-connect” a call that has been disconnected for technical reasons. Hands On Comments to PN at 6; NVRSC Comments to PN at 7, note 15. Sorenson and RID, however, support the call back feature as an option to be offered to the caller. (RID Comments to PN at 3; Sorenson Comments to PN at 8). Sorenson recommends that the call backs be included in the speed of answer calculation. (Sorenson Comments to PN at 8). Finally, all commenters support having providers submit their speed of answer data to the TRS Fund administrator either on a monthly or quarterly basis. (AT&T Comments to PN at 4 (monthly basis); CSD Comments to PN at 5 (monthly basis); Hands On comments to PN at 6 (monthly basis); NVRSC Comments to PN at 8 (monthly basis); ACDHH Reply Comments to PN at 3 (monthly basis); CA PUC Reply Comments to PN at 7 (monthly basis); Sorenson Comments to PN at 8 (quarterly basis)).

We conclude that waiver of the speed of answer rule for VRS can no longer be justified. The record reflects that VRS providers have now had over three and a half years of experience in providing VRS, and with monthly minutes of use approaching two million (now more than interstate traditional TRS); it can no longer be said that the provision of VRS is in its infancy. We do not, however, require VRS providers to meet the 85/10 speed of answer rule in the TRS mandatory minimum standards at this time. Instead, we adopt the following speed of answer rule for VRS, and amend our rules accordingly: (1) By January 1, 2006, VRS providers must answer 80 percent of all VRS calls within 180 seconds, measured on a monthly basis; (2) by July 1, 2006, VRS providers must answer 80 percent of all VRS calls within 150 seconds, measured on a monthly basis; and (3) by January 1, 2007, VRS providers must answer 0 percent of all VRS calls within 120 seconds, measured on a monthly basis. VRS providers must answer 80 percent of all VRS calls within 120 seconds, measured on a monthly basis. VRS providers must meet these standards to be eligible for compensation from the Interstate TRS Fund.

VRS Speed of Answer Standards and Phase-In Period. From the inception of TRS mandated by Title IV of the ADA, speed of answer has been one of the fundamental components of ensuring that TRS users have functionally equivalent access to the telephone system. Substantial delays in reaching a CA who is ready to place the call cannot be reconciled with the ability of hearing persons to pick up the telephone and hear a dial tone. We therefore conclude that VRS must be subject to a speed of answer requirement so that consumers using this service will have prompt access to a CA ready to place their call. The Commission has repeatedly recognized that TRS service should mirror voice telephone service to the extent feasible, and that requires that a VRS user be able to promptly reach a CA.

At the same time, we recognize the concerns expressed by commenters that there may not presently be a sufficient number of qualified interpreters to permit VRS providers to meet a speed of answer rule that approaches the present rule applicable to the other forms of TRS. RID, for example, asserts that although it supports VRS calls being answered in a reasonable period of time, it is “concerned that the current number of certified, qualified interpreters is well below the number required to adequately and safely provide quality VRS service.” (RIC Comments to PN at 1). RID states that the “crisis in the quantity, quality, and qualifications of interpreters dates back to the 1996 * * * declaration * * * that a national shortage of interpreters exists,” and that this “crisis affects all deaf citizens needing interpreting services for medical appointments, business meetings, court appearances, and now VRS.” (RIC Comments to PN at 1). ( See also Sorenson comments at 8-11; CA PUC Comments at 16; Sorenson Comments to PN at 4-5; MCI Comments to PN at 1-3; Hamilton Reply comments at 1-2; CA PUC Reply Comments to PN at 7; ACDHH Reply Comments to PN at 1-2; UMDS Comments to PN at 2; USOR comments to PN at 1). Many individual commenters expressed a similar concern. We also recognize that as VRS providers hire interpreters in greater numbers to meet the demand of VRS users, there are fewer community interpreters available to meet the needs of persons with hearing disabilities in other circumstances ( e.g. , in schools, hospitals, business meetings, etc.). ( See , Sorenson Comments 8-9; CA PUC Comments at 16; RID Comments to PN at 1; ACDHH Reply Comments to PN at 1-2; Hamilton Reply Comments to PN at 2; MCI Reply comments to PN at 3; UMDS Comments to PN at 2). Further, we recognize that providers will need some time to adjust their staffing levels to meet a speed of answer requirement. Therefore, as noted elsewhere, we will phase-in speed of answer requirements beginning January 1, 2006. (We note that when the Commission adopted the closed captioning rules, it adopted a transition period because of concerns that a limited number of captioners were avialable. See Closed Captioning and Video Description of Video Programming , MM Docket No. 95-176, Report and Order, 13 FCC Rcd 3272, 3292-3293, paragraphs 41-42, (1997), published at 62 FR 48487, September 16, 1997)). We find that this should allow VRS providers adequate time to meet the requirements adopted herein. (We also note that the question whether end-user VRS equipment must be interoperable with the relay services of all VRS providers is presently pending before the Commission. See Petition for Declaratory Ruling Filed by the California Coalition of Agencies Serving the Deaf and Hard of Hearing (CCASDHH) Concerning Video Relay Service (VRS) Interoperability, CC Docket No. 98-67, CG Docket No. 03-123, Public Notice, 20 FCC Red 4162, (2005), published at 70 FR 12884, March 16, 2005. We recognize that our resolution of the interoperability issue may also affect VRS providers' speed of answer performance).

We conclude, based on the record before us, that providers shall be required to meet the following VRS speed of answer requirements: (1) By January 1, 2006, VRS providers must answer 80 percent of all VRS calls within 180 seconds, measured on a monthly basis; (2) by July 1, 2006, VRS providers must answer 80 percent of all VRS calls within 150 seconds, measured on a monthly basis; and (3) by January 1, 2007, VRS providers must answer 80 percent of all VRS calls with 120 seconds, measured on a monthly basis. We believe these requirements best balance the fundamental policy considerations underlying the TRS regime ( e.g., that reaching a CA ready to place the call is the same as reaching a dial tone) and the concerns of some providers and consumers that there is a shortage of interpreters. (Because of the concerns we have noted about the shortage of interpreters, and comments in the record proposing a compliance standard of less than 85 percent, we find that the 80 percent threshold is appropriate in these circumstances). In this regard, we also recognize that call volume and the capacity of a provider to handle incoming Internet-based VRS calls may affect speed of answer performance. These issues are currently under review. For this reason as well, we require VRS speed of answer to be measured on a monthly basis, instead of a daily basis. We recognize that there may be some days when it is difficult to meet the speed of answer rule, particularly until the providers have determined, and are able to maintain, optimal VRS CA staffing levels to meet call demand. Because we are requiring VRS providers to offer service 24/7, a provider's answer performance during periods of less demand ( e.g., in the late night hours) may offset answer performance during periods of high demand.

We believe that this is a starting point that moves us toward the goal of functional equivalency without compromising: (1) The quality of interpreters; (2) the availability of community interpreting; and (3) the viability of open competition where inflexible requirements serve as an obstacle to new entrants. We, therefore, will carefully monitor compliance with these requirements, and will revisit them if necessary. We will also re-examine the VRS speed of answer rule after January 1, 2007, to determine if, and when, it might be appropriate to further tighten the speed of answer requirement.

Measuring Speed of Answer. We conclude that the speed of answer measurement begins when the VRS provider's equipment accepts the call from the Internet. In the IP Relay Declaratory Ruling, the Commission stated that it would consider the IP Relay call delivered to the IP Relay center the IP Relay center's equipment accepts the call from the Internet. We adopt a similar rule for VRS. Further, the call is “answered” when either a CA or an automated system responds to the incoming call and begins taking instructions from the calling party about the outbound call the calling party wishes to make. We not that the commenters that addressed this issue generally support this approach. (AT&T Comments to PN at 3-4; CSD Comments to PN at 3; Hands On Comments to PN at 4-5; MCI Comments to PN at 4; NVRSC Comments to PN at 5; Sorenson Comments to PN at 7).

Abondoned Calls. We conclude that abandoned calls must be included in the VRS speed of answer calculation. As many commenters note, (AT&T Comments to PN at 4; CSD Comments to PN at 3; Hamilton Comments to PN at 5; NVRSC Comments to PN at 6; ACDHH Reply Comments to PN at 3), the treatment of abandoned calls for VRS should be the same as for the other forms of TRS. Sorenson asserts that sequential calls should be included in the speed of answer calculation, i.e., that multiple calls made by the calling party through the same CA should be counted as separate calls (which results in the subsequent calls having a speed of answer of zero). (Sorenson Comments to PN at 7; but see CSD Reply Comments to PN at 10; NVRSC Replay Comments to PN at 10 (both opposing this suggestion); see generally 47 CFR 64.604(a)(3)(i) (requiring providers to handle sequential calls)). Because the speed of answer measurement is intended to regulate the time it takes for the TRS user to reach a CA ready to place his or her call ( i.e., answer speed for the first in-bound call to the TRS provider), it does not apply to sequential calls made by a caller through the same CA. ( See CSD Reply Comments to PN at 10; NVRSE Reply Comments to PN at 10). Therefore, we reject Sorenson's suggestion. The speed of answer rule presently provides that abandoned calls shall be included in the speed of answer calculation. ( See 47 CFR 64.604(b)(2)(ii)(B)). As the Commission has explained, abandoned calls are those calls answered by a relay center, but never handled by a CA because the customer hangs up. As noted above, although the Commission realized that some calls might be abandoned for reasons that have nothing to do with the length of time it takes for the call to reach a CA, such calls are included in the speed of answer measurement because excluding them would distort a provider's actual speed of answer performance by reducing the total number of calls from which speed of answer is calculated.

“ Call Backs. ” We conclude that, effective January 1, 2006, VRS (and TRS) provider may not use a call back arrangement, including one that gives the consumer the choice of waiting for a CA or having the provider call the consumer back when a CA is available. (We recognize a narrow exception to this rule in circumstances where because of reliance on the Internet the VRS equipment user and the CA become disconnected. In those circumstances, the VRS provider may initiate a call to the VRS user to try to reconnect the call with the called party so that the VRS user does not have to contact the VRS provider again and wait for an available CA to handle the call). In the Call Handling Practices Public Notice, the Commission stated that TRS providers may not offer their service in such a way so as to force a TRS consumer (deaf or hearing) to leave a message with the TRS provider asking the caller to provide call back information so that the provider can call the consumer back when a CA is available to handle the call. The Commission further stated that this type of “call back” arrangement was impermissible because it relieves the provider of its central obligation to be available when a caller desires to make a TRS call, and permits the provider, and not the caller, to be in control of when the TRS call is placed. The Commission distinguished that situation, however, from that where the consumer reaches a recording but is given the choice of either waiting for an available CA or having a CA call the consumer back when available. The Commission stated, however, that it was concerned that the use of a “call back” option in any context is inconsistent with the functional equivalency mandate, but also noted that use of a call back feature “will be an issue only for those forms of TRS not subject to a speed of answer rule.”

We conclude that because in this Report and Order we have adopted a speed of answer requirement for VRS, VRS (and TRS) providers may not use a call back arrangement. We also conclude that call backs are inconsistent with functional equivalency and the notion that TRS is a service whereby a consumer, in reaching a CA, reaches the equivalent of a “dial tone,” and therefore the ability to immediately have his or her outgoing call placed.

Filing Reports. The 2005 Speed of Answer PN also sought comment on whether the Commission should require providers to submit reports detailing call data reflecting their compliance with the speed of answer rule. ( 2005 Speed of Answer PN at 3). We decline to impose such a mandatory requirement at this time. We note, however, that NECA, in connection with its obligation to make payments from the Fund only “to eligible TRS providers operating pursuant to the mandatory minimum standards,” and therefore to verify payment claims, may seek access to this data. ( See 47 CFR 64.604(c)(5)(iii)(E)).

Title IV of the ADA directs the Commission to adopt regulations to implement TRS, including regulations that mandate that TRS services operate every day for 24 hours per day. 47 U.S.C. 225(d)(1)(C). As a result, the Commission's initial regulations similarly provided that TRS shall operate 24 hours per day, seven days per week (“24/7”). ( See TRS I, 6 FCC Rcd 4669, Appendix B (adopting 47 CFR 64.604(b)(4)). When the Commission recognized VRs as a form of TRS, however, it stated that because it was not mandating the service it would not require providers to offer it 24/7. Therefore, the Commission amended its rules to state that relay services that are not mandated by this Commission need not be provided every day, 24 hours a day. (47 CFR 64.604(b)(4)(i)).

In the 2004 TRS Report & Order's FNPRM, the Commission, noting the increasing popularity of VRS service, sought comment on whether VRS should be a mandatory service and whether it should be required to be offered 24/7, either as a mandatory service or even if not made a mandatory service. The Commission also sought comment on how the possible shortage of qualified interpreters might affect this issue.

Three VRS providers, one consumer organization, and eight individuals filed comments on this issue. (Comments were filed by Hands On (October 15, 2004); Sprint (October 18, 2004); Sorenson (October 18, 2004), and NVRSC (October 18, 2004); Robin Mills; (September 23, 2004); PJ Carberg (September 15, 2004); Paula Warner (September 16, 2004); Jan Humphrey (October 13, 2004); Karl Kosiorek (October 5, 2004); Candita Lewis (October 18, 2004); Jennifer Sweeney (October 20, 2004); and Risa Gottlieb (October 14, 2004). NVRSC also filed reply comments on this issue (November 12, 2004)0. Hands On, Sprint, and NVRSC assert that VRS should be offered 24 hours a day and 7 days a week because the provision of VRS is sufficiently mature, its use is widespread, and there would be minimal costs associated with providing VRS on a 24/7 basis. (Hands On Comments at 21; NVRSC Comments at 12; Sprint Comments at 10). Hands On notes, for example, that according to its traffic usage data the usage rate for the first hour and the last hour of the service consists of only 3 percent of the total minute usage, which means that the provider would only need to staff three to four additional interpreters during the midnight hours. (Hands On Comments at 22). Sorenson, however, asserts that “there is a limited number of qualified individuals availab eto serve as interpreters for VRS and mandating that all providers staff [24/7] would put additional strains on this already limited pool.” (Sorenson Comments at 11-12). We note, however, that since the filing of its comments, Sorenson has begun offering VRS 24/7. ( See Sorenson Comments at 12; http://www.sorensonvrs.com ). We also note that Hands On currently offers service 20 hours a day, 7 days a week, see http://www.hovrs.com , and the Communication Access Center for the Deaf and Hard of Hearing (CAC) currently offers service 21 hours a day Monday through Friday, and 18 hours a day Saturday and Sunday, see http://www.cacvrs.org . NVRSC asserts that the 24/7 requirement will create a market for VRS interpreters that will eliminate any shortages. (NVRSC Reply Comments at 4). All but one of the individual commenters support adopting a 24/7 requirement for VRS to make the service more functionally equivalent to voice telephone service, although some of the commenters (including the individual commenter opposed to the adoption of the 24/7 rule) express concern about the availability of interpreters necessary to meet this requirement.

We conclude that VRS providers must offer service 24/7 to be eligible for compensation from the Interstate TRS Fund. The record reflects the rapid growth in the use of VRS since provision of this service began in 2002. Presently, there are approximately two million minutes of use of VRS each month. As consumers increasingly rely on VRS as their preferred means of using TRS to access the telephone system, it becomes imperative that consumers have access to this service 24/7. Indeed, Congress expressly recognized that having TRS available 24/7 is centeral to the notion of functional equivalency; it included that requirement in the statute. Finally, we recognize that the adoption of a speed of answer rule for VRS would be less meaningful if providers can choose when they will offer service.

For these reasons, we conclude that VRS providers must offer this service 24/7 to be eligible for compensation from the Interstate TRS Fund. Because the regulations provide that non-mandatory forms of TRS need not be offered 24/7, ( see 47 CFR 64.604(b)(4)(i)), we amend the rule so that it no longer applies to VRS. (We also note that the Commission raised the issue of whether VRS should be made a mandatory service at the same time it raised the issue of whether VRS should be required to be provided 24/7. We will address whether VRS should be a mandatory service in a separate order). The requirement that providers offer VRS 24/7 shall become effective on January 1, 2006, the same date that the VRS speed of answer rule adopted above is effective.

On March 31, 2004, Hands On filed a Petition for Declaratory Ruling requesting that the Commission declare that the provision of video VRS Mail to deaf and hard of hearing persons is eligible for compensation form the Interstate TRS Fund. ( VRS Mail Petition at 1). Video VRS mail is used by a hearing person when she attempts to call a deaf or hard of hearing VRS user through a VRS CA, but the VRS user is not available to answer the call. In those circumstances, the hearing persons can have a VRS CA leave a message in video format ASL for the deaf or hard of hearing VRS user, so that the VRS user can retrieve the video message at a later time.

As Hands On notes, although the majority of VRS calls are initiated by a deaf or hard of hearing person using a video link to a CA, a hearing person may also initiate a VRS call. ( VRS Mail Petition at 2). In the latter situation, the hearing person calls the VRS provider (usually via an 800 number) and gives either the IP address, or the name or proxy number (if the deaf or hard of hearing person is registered with the VRS service), of the deaf or hard of hearing person to be called. ( VRS Mail Petition at 2). The VRS provider then attempts to place a VRS call to the deaf or hard of hearing person. If the deaf or hard of hearing person does not answer, VRS Mail gives the hearing calling party the option of leaving VRS Video Mail message. If the calling party chooses to do so, the CA listens to the calling party's message and makes a video recording of the message in ASL. The CA then transmits (or otherwise makes available) the video message (the VRS Mail) to the deaf or hard of hearing person, who is able to retrieve the message on her video equipment at a later time. ( VRS Mail Petition at 3). For example, the video message can be sent to the VRS user either via e-mail or, if the provider knows the IP address of the VRS user ( e.g. , through registration or some other arrangement with the particular provider), directly to the VRS user's hardware. Hands On asserts that, under the functional equivalency mandate, because a hearing person can receive a voice mail message from a CA who is relaying a VRS call initiated by a deaf or hard of hearing person, a deaf or hard of hearing person should also be able to receive a message from a hearing person who has initiated a VRS call. ( VRS Mail Petition at 5). Hands On also notes that because a deaf or hard of hearing person can leave a voice message via VRS for a hearing person, a deaf or hard of hearing person should be able to receive a message in video from a hearing person. ( VRS Mail Petition at 3). Regardless of how characterized, the thrust of Hands On's argument is that VRS must provide symmetry between the parties to a call and their ability to leave or receive a message from the other party to the call. Hands On also asserts that regardless of how the transmission of Video Mail is technically accomplished, i.e. , how it is stored and retrieved, the VRS call ends when the hearing person hangs up after leaving the message for the deaf or hard of hearing person. ( VRS Mail Petition at 3).

On July 9, 2004, the Commission released a Public Notice requesting comment on Hands On's petition. ( Petition for Declaratory Ruling Filed Regarding Provision of Video Relay Service (VRS) Video Mail , CG Docket No. 03-123, Public Notice, DA 04-2062 (July 9, 2004), published at 69 FR 44534, July 26, 2004). Five VRS providers, a state administrator, three consumer organizations, and ten individuals filed comments, and ten individuals filed reply comments. Comments were filed by CSD (August 11, 2004); Hands On (August 16, 2004); MCI (August 16, 2004); Sorenson (August 16, 2004); Sprint (August 16, 2004); Deaf Counseling, Advocacy and Referral Agency California Center for Law and the Deaf (DCARA) (August 12, 2004), NorCal Center on Deafness (NorCal) (August 13, 2004), Telecommunications for the Deaf, Inc. (TDI) (August 16, 2004); the Idaho Public Utilities Commission (Idaho PUC) (August 16, 2004). We note that the Consumer & Governmental Affairs Bureau received nine Congressional letters in response to constituents' inquiries about VRS Mail. All commenters generally support Hands On's petition. Commenters generally agree that under the functional equivalency mandate both hearing persons (voice users) and persons who are deaf or hard of hearing (video users) should be able to leave messages with the other party to the VRS call through the CA. ( See, e.g., CSD Comments at 2; MCI Comments at 3; Hands on Comments at 7; Sorenson Comments at 3-4; NorCal Comments at 1; Sprint Comments at 2; DCARA Comments at 1; TDI Comments at 3-6). They state that how the ASL message is stored by the CA and retrieved by the called party is irrelevant, so long as the VRS Mail service provides the functionality of leaving a message for the called party. ( See, e.g., CSD Comments at 1-8; MCI Comments at 1-3; Sorenson Comments at 2; Sprint Comments 2). Commenters note that presently CAs leave voice mail messages from deaf and hard of hearing VRS users on the called party's answering machine or voice mail system, and that this is considered a reimbursable TRS call. ( See, e.g., CSD Comments at 1; Sorenson Comments at 2-3; NorCal Comments at 1). They assert that a deaf or hard of hearing VRS user should similarly be able to receive a message from the calling party, and that the VRS provider should be compensated for the conversation time in handling the call and creating the video message. ( See, e.g., CSD Comments at 3; Hands On Comments at 9; Sorenson Comments at 1-2). Sorenson asserts, for example, that when a deaf or hard of hearing VRS users calls a hearing individual and the call is answered by an answering machine or is directed to voice mail, the TRS fund supports the portion of the call in which the [CA] leaves a voice message on behalf of the deaf user, translating the message from ASL into spoken language. The reverse scenario, in which the CA translates a hearing caller's spoken message into an ASL video message for a deaf user who has missed a call, is simply a variation of the one the Commission has already approved. There is no functional difference between a message being left in video format for a deaf user or in voice format for a hearing user; both allow the recipient of the message to retrieve the message in his or her native language (ASL or spoken English).” (Sorenson Comments at 2).

Sorenson also emphasizes that the ability to leave a voice mail message is common and vital for both business and personal communications, and therefore that it is essential that VRS users also have the ability to retrieve messages when they are unavailable to receive a call. (Sorenson Comments at 3). Sorenson notes that it offers a service it calls “SignMail” that allows incoming video messages to be left for a VRS users when a hearing individual initiates a call and the VRS user is not available to answer the call. Sorenson asserts that this service has proved to be very popular with users, but that it has not been able to be compensated from the Interstate TRS Fund for the conversation minutes used to convert incoming voice messages into ASL video messages for VRS users. (Sorenson Comments at 1). CSD, noting that the Commission has an obligation “to ensure that regulations * * * encourage * * * the use of existing technology and do not discourage or impair the development of improved technology,” contends that Congress intended to bring voice mail and other enhanced services under the wing of TRS as soon as these services became technological possible. (CSD Comments at 5). Several comments assert that video VRS mail service is no different from the TTY answering machine or voice mail features of traditional TRS. ( See, e.g., Idaho PUC Comments at 1-2; CSD Comments at 3-7).

Commenters assert that providers should be compensated from the Interstate TRS Fund for the CA's conversational time with the calling party and recording the video message. ( See, e.g., CSD Comments at 3; Sorenson Comments at 2; Hands On Comments at 9; Spring Comments at 2). CSD asserts, for example, that the Commission is simply being asked “to approve compensation for the conversation minutes needed to convert the message that the caller wishes to leave from voice to ASL.” (CSD Comments at 3 (emphasis in original)). Sorenson states that “[t]hose conversation minutes used by a CA to connect to the video screen, prompt the hearing caller to begin speaking his or her message and sign the message in ASL should be compensated, as these steps are functionally identically to those in the TRS/TTY context.” (Sorenson Comments at 2).

We conclude that VRS providers offering VRS Mail may be compensated from the Interstate TRS Fund for handling VRS calls that result in leaving a video message for the VRS user. (VRS Mail, by definition, is used when a hearing person attempts to make a call through a VRS provider to a person who is deaf or hard of hearing (sometimes called a “reverse” VRS call). We remind VRS providers that, to be eligible for compensation from the Interstate TRS Fund, they must provide access for hearing persons to call the VRS provider (generally via an 800 number) so the hearing person can request that the provider make an outbound call via video to a person who is a deaf or hard of hearing using VRS equipment. ( See 47 U.S.C. 225(a)(3) defining TRS as providing persons with hearing and speech disabilities the ability to engage in communication with persons without such disabilities, and not limiting it to calls initiated by the person with a hearing or speech disability). As commenters note, a deaf or hard of hearing user who attempts to make a VRS call (or any kind of TRS call) to a hearing person, but reaches an answering machine or voice mail system, may have the CA leave a voice message for the called party, which is then reimbursable from the Fund. We also conclude that in the reverse scenario—when a hearing person attempts to call a VRS user who is not available—the CA should similarly be able to leave a reimbursable message with the called party. Whether viewed as affording VRS users the ability to receive messages from hearing persons, or as affording hearing persons the ability to leave a message with the VRS user, the implication is the same: Regardless of which party to a VRS call initiates that call, each party should be able to leave messages with, and receive messages from, the other party. (Hands On and commenters make various arguments in support of the petition by analogizing to other services the TRS regulations require, including answering machine and voice mail retrieval, and the rules on calls placed through TRS that reach voice mail or interactive menus. See, e.g., Hands On Comments at 4-6; MCI Comments at 2-3; Sorenson Comments at 3-4; Spring Comments at 2; TDI Comments at 5; see generally 47 CFR 64.604(a)(3)(vii) and (viii). Although we do not necessarily agree that these requirements address situations directly analogous to VRS Mail, they do support our conclusion here by indicating that the use of, and access to, messages that are left by calling parties when the called party is not available is fundamental to the meaningful use of the telephone system).

We also find that the fact that the CA, in creating a VRS Mail message, records in ASL what the calling party desires to say, and the VRS user retrieves the message as a video message (and not as a voice message), is of no consequence. As commenters have noted, the end result is that regardless of which party to the VRS call is leaving or receiving a message, each party is retrieving the message in his or her primary language. We believe that this fundamental service cannot be denied to VRS users simply because they receive the message as a video message. We agree with commenters that the ability to leave and receive messages is vital in both business and personal communications, and therefore VRS Mail service should be reimbursable. ( See, e.g., Sorenson Comments at 3). We also find that it is immaterial how the VRS provider stores the video message and how the VRS user retrieves the message. So long as the video message is created in real time— i.e., the VRS CA records the video message at the same time that the hearing person is speaking the message during the VRS call, and not at some later time after the calling party has disconnected—the call is a VRS call that is compensable from the Interstate TRS Fund. In other words, the VRS providers may be compensated for the call from the beginning of the conversation time until the CA is done signing the message voiced by the calling party. (The Interstate TRS Fund compensates for conversation minutes, which begin when someone (usually the called party) answers the outbound telephone call from the CA, and ends when either party to the call hangs up. See generally 47 CFR 64.604(c)(5)(iii)(E)). Conversation minutes therefore do not include time for call set-up, ringing, waiting for an answer, and wrap-up, or calls that reach a busy signal or no answer. Therefore, for calls that result in VRS Mail, the VRS provider may be compensated for the time beginning when the hearing party begins to voice his or her message, and ending when the CA completes signing the message voice from the calling party or the calling party hangs up, whichever is earlier. Because the conversation time for such calls will generally be short, and there are presently relatively few inbound VRS calls, we do not believe compensating this service will have a significant impact on the Interstate TRS Fund. Further, nothing in the record suggests the contrary.

In the Report and Order we close the TRS docket—CC Docket No. 98-67, which the Commission opened in 1998 when it released the 1998 TRS NPRM addressing improved TRS services, and incorporate its materials in the current docket, CG Docket No. 03-123 (materials submitted in CC Docket No. 98-67 need not be resubmitted). All filings addressing TRS matters should be filed in CG Docket No. 03-123.

The Regulatory Flexibility Act of 1980, as amended (RFA), requires that an initial regulatory flexibility analysis be prepared for notice-and-comment rule making proceedings, unless the agency certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities. ( See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601-602, has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Public Law 104-121, Title II, 110 Statute 857 (1996)). The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” (5 U.S.C. 601(6)). In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. (5 U.S.C. 601(3) (incorporating by reference the definition of “small business concern” in the Small Business Act, 15 U.S.C. 632). Pursuant to 5 U.S.C. 601(3), the statutory definition of a small business applies “unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register ”). 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). (15 U.S.C. 632). Nationwide, there are approximately 1.6 million small organizations. (Independent Sector, The New Nonprofit Almanac & Desk Reference (2002)).

This Report and Order addresses three issues related to the provision of Video Relay Service (VRS): (1) The adoption of a speed of answer rule for VRS; (2) whether VRS should be required to be offered 24 hours a day, 7 days a week, (24/7); and (3) whether VRS providers may be compensated for providing VRS Mail. The Commission concludes that the public interest is best served by requiring providers of VRS to comply with a speed of answer rule in order to be compensated for such services. However, we do not require VRS providers to meet the new speed of answer rule in order to be compensated from the TRS Fund at this time. Instead, by January 1, 2006, VRS providers must answer 80 percent of all VRS calls within 180 seconds, measured on a monthly basis; by July 1, 2006, VRS providers must answer 80 percent of all VRS calls within 150 seconds, measured on a monthly basis; and by January 1, 2007, VRS providers must answer 80 percent of all VRS calls within 120 seconds, measured on a monthly basis. As noted in paragraph 25 of this Report and Order , although the Commission sought comment on whether to require providers to submit reports detailing call data reflecting their compliance with the speed of answer rules, we declined to impose such a requirement at this time.

The Commission further concludes that it is in the public interest that VRS providers seeking compensation from the Interstate TRS Fund must provide VRS 24 hours a day, 7 days a week. As consumers increasingly rely on VRS as their preferred means of using TRS to access the telephone system, it becomes imperative that consumers have access to their service 24/7.

Finally, the Commission concludes that VRS providers may be compensated from the Interstate TRS Fund for the conversation minutes devoted to creating VRS Mail, i.e. , for recording a video message in American Sign Language (ASL) that is sent to a deaf or hard of hearing person's VRS equipment, or is otherwise retrievable by such person, so that a hearing person attempting to call a VRS user can leave a message when the VRS user is not available to answer the call. As explained in paragraph 37 of this Report and Order , the Commission believes that this fundamental service cannot be denied to VRS users simply because they receive the message as a video message.

We do not believe that these actions will have a significant economic impact; however, in the event that they do, we also note that there are not a substantial number of small entities that will be affected by our actions. The SBA has developed a small business size standard for Wired Telecommunications Carriers, which consists of all such firms having 1,500 or fewer employees. (13 CFR 122.201, NAICS code 517110 (changed from 513310 in October 2002). According to Census Bureau data for 1997, there were 2,225 firms in this category which operated for the entire year. U.S. Census Bureau, 1997 Economic Census, Subject Series: Information, “Establishment and Firm Size (Including Legal Form of Organization),” Table 5, NAICS code 513310 (issued October 2000). Of this total, 2,201 firms had employment of 999 or fewer employees, and an additional 24 firms had employment of 1,000 employees or more. Thus, under this size standard, the majority of firms can be considered small. (The census data do not provide a more precise estimate of the number of firms that have employment of 1,500 or fewer employees; the largest category provided is Firms with 1,000 employees or more)). Currently, only eight providers are providing VRS and are being compensated from the Interstate TRS Fund: AT&T, Communication Access Center for the Deaf and Hard of Hearing, Hamilton, Hands On, MCI, Nordia, Sorenson and Sprint. We expect that only one of the providers noted above is a small entity under the SBA's small business size standard. In addition, the Interstate Fund Administrator is the only entity that will be required to pay to eligible providers of VRS the costs of providing interstate service. The Commission will send a copy of this Report and Order , including a copy of this Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the SBA (5 U.S.C. 605(b)). This certification will also be published in the Federal Register . (5 U.S.C. 605(b)).

The Commission will send a copy of this Report and Order in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see , 5 U.S.C. 801(a)(1)(A).

Pursuant to the authority contained in Section 1, 2, and 225 of the Commissions Act of 1934, as amended, 47 U.S.C. 151, 152, and 225, that this Report and Order is hereby adopted and Part 64 of the Commission's rules, 47 CFR 64.604 is amended as set forth in the Rule Changes.

Hands On's Petition for Declaratory Ruling on VRS Mail is granted to the extent indicated herein.

CC Docket No. 98-67 is terminated .

This Report and Order shall be effective September 30, 2005.

The Commission's Consumer & Government Affairs Bureau, Reference Information Center shall send a copy of this Report and Order , including the Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the U.S. Small Business Administration.

This is a summary of the Federal Communications Commission's Report and Order, FCC 05-159, adopted on August 22, 2005 and released on August 23, 2005. The full text of this document is available for public inspection and copying during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. These documents will also be available via ECFS ( http://www.fcc.gov/cgb/ecfs/ ). (Documents will be available electronically in ASCII, Word 97, and/or Adobe Acrobat.) The complete text may be purchased from the Commission's copy contractor, Best Copy and Printing, Inc., 445 12th Street, SW., Room CY-B402, Washington, DC 20554. To request this document in accessible formats (computer diskettes, large print, audio recording, and Braille), send an e-mail to fcc504@fcc.gov or call the Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

This document does not contain proposed information collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. The Commission received approval for the information collection requirements contained in this Order from the Office of Management and Budget on June 14, 2005. There have been no changes to the information collection requirements since receiving OMB approval. In addition, therefore, it does not contain any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4). As described in the Final Regulatory Flexibility Certification, supra , the businesses affected by our action are not small.

1. In this Report and Order (“Order”), we adopt rules to implement section 210 of the Satellite Home Viewer Extension and Reauthorization Act of 2004 (“SHVERA”). The Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA), Public Law 108-447, section 210, 118 Stat 2809 (2004). SHVERA was enacted on December 8, 2004, as title IX of the “Consolidated Appropriations Act, 2005.” Section 210 of the SHVERA amends section 338(a) of the Communications Act of 1934, as amended, (“Communications Act” or “Act”). Section 338 of the Act governs the carriage of local television broadcast stations by satellite carriers; see 47 U.S.C. 338. In general, the SHVERA amends this section to require satellite carriers to carry the analog and digital signals of television broadcast stations in local markets in states that are not part of the contiguous United States, and to provide these signals to substantially all of their subscribers in each station's local market by December 8, 2005 for analog signals and by June 8, 2007 for digital signals; see 47 U.S.C. 338(a)(4). Our rules will implement the SHVERA requirements for carriage of analog and digital signals in Alaska and Hawaii. This Order concludes that such carriage shall include high definition and multicast signals as broadcast by local stations in these states. We adopt a two-step carriage election process beginning with carriage elections for analog signals by October 1, 2005, and followed by carriage elections for digital signals by April 1, 2007.

2. In 1988, Congress passed the Satellite Home Viewer Act (“SHVA”), which established a statutory copyright license for satellite carriers to offer subscribers access to broadcast programming via satellite when they are unable to receive the signal of a broadcast station over the air (that is, an “unserved” household). The Satellite Home Viewer Act of 1988, Pub. L. No. 100-667, 102 Stat. 3935, Title II (1988) (codified at 17 U.S.C. 111, 119). SHVA was enacted on November 16, 1988, as an amendment to the copyright laws. SHVA gave satellite carriers a statutory license to offer signals to “unserved” households. In 1999, Congress enacted the Satellite Home Viewer Improvement Act (“SHVIA”), which expanded the 1988 SHVA by amending both the 1988 copyright laws ( see 17 U.S.C. 119, 122), and the Communications Act ( see 47 U.S.C. 325, 338, 339 and 340) to permit satellite carriers to retransmit local broadcast television signals directly to subscribers in the station's local market (“local-into-local” service) without requiring that they be “unserved” households. The Satellite Home Viewer Improvement Act of 1999, Pub. L. No. 106-113, 113 Stat. 1501 (1999) (codified in scattered sections of 17 and 47 U.S.C.). SHVIA was enacted on November 29, 1999, as Title I of the Intellectual Property and Communications Omnibus Reform Act of 1999 (“IPACORA”) (relating to copyright licensing and carriage of broadcast signals by satellite carriers).

3. A satellite carrier provides “local-into-local” service when it retransmits a local television station's signal back into the local market of the television station for reception by subscribers; see 17 U.S.C. 122(j). If a carrier carries one or more stations in the market pursuant to the statutory copyright license, it is required to carry all of the other local stations in that market upon the station's request (that is, the “carry-one, carry-all” requirement); see 47 U.S.C. 338(a)(1). Generally, a television station's “local market” is the designated market area (“DMA”) in which it is located. Section 340(i)(1) ( as amended by section 202 of the SHVERA) defines the term “local market” by using the definition in 17 U.S.C. 122(j)(2): “The term ‘local market,’ in the case of both commercial and noncommercial television broadcast stations, means the designated market area in which a station is located, and—(i) In the case of a commercial television broadcast station, all commercial television broadcast stations licensed to a community within the same designated market area are within the same local market; and (ii) in the case of a noncommercial educational television broadcast station, the market includes any station that is licensed to a community within the same designated market area as the noncommercial educational television broadcast station.” DMAs describe each television market in terms of a unique geographic area, and are established by Nielsen Media Research based on measured viewing patterns; see 17 U.S.C. 122(j)(2)(A)-(C). There are 210 DMAs that encompass all counties in the 50 states, except for certain areas in Alaska; see Nielsen Station Index Directory and Nielsen Station Index United States Television Household Estimates (2004-5 ed.); see also Television and Cable Factbook 2005 (Warren Communications) A-73. A satellite carrier choosing to provide such local-into-local service is generally obligated to carry any qualified local station in a particular DMA that has made a timely election for mandatory carriage, unless the station's programming is duplicative of the programming of another station carried by the carrier in the DMA, or the station does not provide a good quality signal to the carrier's local receive facility; see 47 U.S.C. 338(a)(1), (b)(1) and (c)(1).

4. In December 2004, Congress passed and the President signed the Satellite Home Viewer Extension and Reauthorization Act of 2004. SHVERA again amends the 1988 copyright laws and the Communications Act. This rulemaking is required to implement provisions in section 210 of the SHVERA which establishes new and special requirements for satellite carriage of local stations in states outside the contiguous United States.

5. Section 210 of the SHVERA creates a new subsection of the Communications Act, 338(a)(4), that requires satellite carriers with more than five million subscribers in the United States to carry the analog and digital signals of each television broadcast station licensed in local markets “within a State that is not part of the contiguous United States.” Due to an apparent inconsistency in numbering the provisions added by the SHVERA, it is not clear if this provision will ultimately be codified as 338(a)(4) or (a)(5); see 47 U.S.C.A. 338 n.1 (West 2005) (“So in original. Two pars. (3) enacted.”). In this Order we use the subsection as enacted by section 210, 338(a)(4). Analog signals are required to be carried by December 8, 2005, and digital signals by June 8, 2007. A carrier is required to provide these signals to substantially all of its subscribers in each station's local market. In addition, a satellite carrier is required to make available the stations that it carries in at least one local market to substantially all of its subscribers located outside of local markets and in the same state. The SHVERA also mandates that satellite carriers may not charge subscribers for these local signals more than they charge subscribers in other States to receive local market television stations. Although most of the requirements imposed by the new section 338(a)(4) are self-effectuating, the SHVERA requires the Commission to promulgate regulations concerning the timing of carriage elections by stations in local markets covered by section 338(a)(4) of the Act; see 47 U.S.C. 338(a)(4) ( as amended by the SHVERA), which provides:

(4) Carriage of Signals of Local Stations in Certain Markets—A satellite carrier that offers multichannel video programming distribution service in the United States to more than 5,000,000 subscribers shall (A) within 1 year after the date of the enactment of the Satellite Home Viewer Extension and Reauthorization Act of 2004, retransmit the signals originating as analog signals of each television broadcast station located in any local market within a State that is not part of the contiguous United States, and (B) within 30 months after such date of enactment retransmit the signals originating as digital signals of each such station. The retransmissions of such stations shall be made available to substantially all of the satellite carrier's subscribers in each station's local market, and the retransmissions of the stations in at least one market in the State shall be made available to substantially all of the satellite carrier's subscribers in areas of the State that are not within a designated market area. The cost to subscribers of such retransmissions shall not exceed the cost of retransmissions of local television stations in other States. Within 1 year after the date of enactment of that Act, the Commission shall promulgate regulations concerning elections by television stations in such State between mandatory carriage pursuant to this section and retransmission consent pursuant to section 325(b), which shall take into account the schedule on which local television stations are made available to viewers in such State.

6. We adopted the required Notice of Proposed Rulemaking (“ NPRM ”) on April 29, 2005 and established a short pleading cycle due to the need to implement the new rules before the upcoming carriage cycle; see Implementation of Section 210 of the Satellite Home Viewer Extension and Reauthorization Act of 2004 to Amend Section 338 of the Communications Act , 20 FCC Rcd 9319, 9330, paragraph 30 (2005) (“ NPRM ”). We received comments from six parties. As we stated in the NPRM , the new and amended rules apply only to satellite service in the states covered by section 338(a)(4), which we herein conclude are Alaska and Hawaii. The existing signal carriage provisions in § 76.66 of the Commission's rules also continue to apply to satellite service in these states, where relevant and not inconsistent with the rules adopted in this proceeding; see 47 CFR 76.66.

7. Section 338(a)(4) of the Act expressly applies to a “satellite carrier that offers multichannel video programming distribution service in the United States to more than 5,000,000 subscribers;” see 47 U.S.C. 338(a)(4) ( as amended by the SHVERA). In the NPRM , we proposed that this provision applies to satellite carriers that have more than five million subscribers in 2005 and, in the future, to any carriers with more than five million subscribers. Currently, DIRECTV and EchoStar qualify under this definition; see Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming , Eleventh Annual Report, MB Docket No. 04-227, FCC 05-13 at paragraphs 54-55 (2004). We received no comments relevant to the proposed rule, which follows the statutory language and which we adopt as new § 76.66(b)(2) without change. Section 76.66(a)(1) of the current rules defines “satellite carrier;” see 47 CFR 76.66(a)(1). If in the future there are new satellite carriers with more than five million subscribers, they would be required to comply with this carriage provision and to follow the rule provisions that apply to “new local-into-local service;” see 47 CFR 76.66(d)(2).

8. Section 338(a)(4) of the Act as amended by section 210 of the SHVERA applies to “a State that is not part of the contiguous United States;” see 47 U.S.C. 338(a)(4) ( as amended by the SHVERA). Because the general definition of “State” in the Communications Act includes “the Territories and possessions,” we sought comment on whether “State” as used in the SHVERA should be read to include the noncontiguous territories and possessions of the United States, including but not limited to Puerto Rico and Guam, and whether considerations such as a satellite carrier's regulatory authorizations and/or actual service area are relevant to interpreting the obligation under section 338(a)(4) of the Act to serve “noncontiguous states.” Territories in the Pacific, such as Guam, are in a different International Telecommunication Union (“ITU”) region from the 50 states. The contiguous United States, Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands are located in ITU Region 2 and have orbital assignments in the Region 2 BSS Plan. The “ Region 2 Plans ” comprise the Plan for BSS in the band 12.2-12.7 GHz in ITU Region 2 as contained in Appendix 30 of the ITU Radio Regulations, and the associated Plan for the feeder-links in the frequency band 17.3-17.8 GHz for the broadcasting-satellite service in Region 2 as contained in Appendix 30A of the ITU Radio Regulations. Guam, the Northern Marianas, Wake Island and Palmyra Island are located in ITU Region 3 and have orbital assignments in the Region 3 BSS plan at 122.0° E.L., 121.80° E.L., 140.0° E.L. and 170.0° E.L. respectively. Satellites operating pursuant to the Region 2 BSS plan are subject to different technical requirements and use different frequency bands than satellites authorized to operate in Region 3. Therefore, satellites designed to serve Region 2 areas would not meet the technical requirements necessary to serve Region 3 areas. We requested comment on the impact of regulatory differences ( e.g. , use of different frequency bands) between ITU regions in providing service to these locations, but we noted in the NPRM that spot beam technology may allow coverage of widely spaced areas if visible from the satellite location; see NPRM, 20 FCC Rcd at 9322, paragraph 7.

9. We recognize that the phrase “a State that is not part of the contiguous United States” is susceptible to different interpretations. It is unclear from the statutory text whether the intended application of the term “State” means the definition of “State” as it appears in the Communications Act, which includes all territories and possessions, or whether it refers to the literal or colloquial use of the word “State,” meaning one of the fifty more or less internally autonomous territorial and political units composing the United States of America. In determining the proper interpretation, we bear in mind that section 3 of the Communications Act provides definitions of terms that apply for the purposes of this Act, “unless the context otherwise requires;” see 47 U.S.C. 153. As explained below, we believe the best construction of this phrase, based on context and the current record before us, is that “a State that is not part of the contiguous United States” was intended to refer only to Alaska and Hawaii and not to the broader definition of the Communications Act which includes territories and possessions. This conclusion is consistent with arguments made by satellite carriers EchoStar and DIRECTV, who point out the serious technical difficulties of serving all the territories and possessions. Several broadcast stations in Puerto Rico argue that “State” should be read to include territories and possessions so that stations in Puerto Rico will be entitled to mandatory carriage. In addition to the technical difficulties, EchoStar also argues that Congress' intent to limit section 338(a)(4) of the Act to Alaska and Hawaii is evidenced by the related copyright provisions in the SHVERA. We agree. As mentioned in the NPRM , Alaska is the only one of the 50 states that is not entirely subsumed within one or more DMAs; see Notice , 20 FCC Rcd at 9326, paragraph 18. Similarly, none of the noncontiguous territories and possessions are included in a DMA. However, section 122 of title 17, which defines “local market” for the statutory copyright license, as well as for section 338 of the Act generally, was amended only to add the areas in the State of Alaska that are outside of all DMAs to the definition of “local market;” see 17 U.S.C. 122(j)(2) (generally defining local market as “the designated market area in which a station is located” and further defining “designated market area” by reference to determinations by “Nielsen Media Research and published in the 1999-2000 Nielsen Station Index Directory and Nielsen Station Index United States Television Household Estimates or any successor publication.”); 47 U.S.C. 338(k) (3). Critically, the noncontiguous territories and possessions were not added; see 17 U.S.C. 122(j)(2)(D), as amended by section 111(b) of the SHVERA (“Certain areas outside of any designated market area.—Any census area, borough, or other area in the State of Alaska that is outside of a designated market area, as determined by Nielsen Media Research, shall be deemed to be part of one of the local markets in the State of Alaska. A satellite carrier may determine which local market in the State of Alaska will be deemed to be the relevant local market in connection with each subscriber in such census area, borough, or other area.”); 47 U.S.C. 338(k)(3). Consequently, were we to apply “State” to the noncontiguous territories and possessions, satellite carriers would not have a statutory copyright license to retransmit the stations in these markets because they would not fall within the definition of “local market” in section 122(j).

10. Satellite carriers do not and are not required to reach all geographic areas that include the possessions and territories of the United States. Many areas are not visible to all satellites. For example, Guam is below the horizon for United States satellite assignment east of 148° W.L. The Commission has recognized that contiguous United States (“CONUS”) antenna beams modified to include Puerto Rico and the U.S. Virgin Islands could divert power from other regions and potentially adversely affect the services of other countries; see Policies and Rules for Direct Broadcast Satellite Service Report and Order , 17 FCC Rcd 11,368, 11,372 (2002). We acknowledge that EchoStar and a company affiliated with DIRECTV currently provide service to Puerto Rico, including some local stations, and to the U.S. Virgin Islands. No one disputes, however, that service to Guam and other islands in the far Pacific would be outside the range of these companies and that requiring service to islands without television stations and without permanent populations would be absurd. Based on the serious technical difficulties of serving the territories and possessions, and the fact that the affected satellite carriers have never before served any subscribers in much of these areas, we believe Congress did not have in mind the definition of “State” as set forth in the Communications Act. For all the reasons discussed above, we believe the best reading of the statute, and the one most consistent with Congressional intent, is that section 338(a)(4) of the Act's use of the phrase “State that is not part of the contiguous United States” was not meant to include the noncontiguous territories and possessions, but instead was meant to refer only to the states of Alaska and Hawaii; see Griffin v. Oceanic Contractors, Inc. , 458 U.S. 564, 575 (1982) (stating that interpretations of a statute which would produce absurd results are to be avoided if alternative interpretations consistent with the legislative purpose are available); Lawson v. Suwanee Fruit & S.S. Co. , 69 S. Ct. 503 (1949) (Statutory definitions usually control the meaning of statutory words, but not where obvious incongruities in language would be created and major purpose of statute would be destroyed); Teva Pharm., USA, Inc. v. FDA , 182 F.3d 1003, 1011 (D.C. Cir. 1999) (citing Robinson v. Shell Oil Co. , 519 U.S. 337, 346 (1997)) (asserting that the FDA must interpret that statute to avoid absurd results and further congressional intent).

11. We explained in the NPRM that the SHVERA requirements for satellite carriage to the noncontiguous states differ significantly from the existing satellite broadcast carriage requirements, both in scope and timing; see Notice , 20 FCC Rcd at 9323, paragraph 8. Currently, under the Communications Act and Commission rules implementing the Act, satellite carriers choose whether to rely on the statutory copyright license in section 122 of title 17 to offer “local-into-local service,” which in turn triggers the carry-one, carry-all obligation; see 47 U.S.C. 338(a)(1) and 47 CFR 76.66(b); see also Implementation of the Satellite Home Viewer Improvement Act of 1999 , 16 FCC Rcd 1918 (2000) (“ DBS Must Carry Report and Order ”), 16 FCC Rcd 16544 (2001) (“ DBS Must Carry Reconsideration Order ”). The U.S. Court of Appeals for the Fourth Circuit upheld the constitutional validity of SHVIA and the reasonableness of the Commission's rules promulgated thereunder. See Satellite Broadcasting and Communications Ass'n v. FCC , 275 F.3d 337 (2001), cert. denied , 536 U.S. 922 (2002). The Communications Act, moreover, prohibits a multichannel video programming distributor from retransmitting the signal of a broadcast station unless it has “the express authority” of the station. 47 U.S.C. 325(b)(1)(A). See also 17 U.S.C. 122(a) ( as amended by section 1002 of the SHVIA) and 47 U.S.C. 338(a)(1) ( as amended by section 1008 of the SHVIA); see 47 U.S.C. 338(a)(1) and 47 CFR 76.66(b); see also Implementation of the Satellite Home Viewer Improvement Act of 1999 , 16 FCC Rcd 1918 (2000) (“ DBS Must Carry Report and Order ”), 16 FCC Rcd 16544 (2001) (“ DBS Must Carry Reconsideration Order ”). The U.S. Court of Appeals for the Fourth Circuit upheld the constitutional validity of SHVIA and the reasonableness of the Commission's rules promulgated thereunder. See Satellite Broadcasting and Communications Ass'n v. FCC , 275 F.3d 337 (2001), cert. denied , 536 U.S. 922 (2002). The Communications Act, moreover, prohibits a multichannel video programming distributor from retransmitting the signal of a broadcast station unless it has “the express authority” of the station. 47 U.S.C. 325(b)(1)(A). See also 17 U.S.C. 122(a) ( as amended by section 1002 of the SHVIA) and 47 U.S.C. 338(a)(1) ( as amended by section 1008 of the SHVIA). Satellite carriers are not currently required to offer local-into-local service in any market. The question of satellite carriage obligations concerning a station's digital signal is currently pending before the Commission; see MB Docket Nos. 98-120 and 00-96; see also WHDT v. Echostar , 18 FCC Rcd 396 (MB 2003) (“WHDT Order”).

12. Section 338(a)(4) of the Act supersedes carry-one, carry-all by mandating analog and digital carriage in Alaska and Hawaii. A satellite carrier with more than five million subscribers is now required to retransmit the analog signals of each television station in local markets in Alaska and Hawaii to subscribers in those local markets by December 8, 2005 (one year after enactment of the SHVERA) and to retransmit the digital signals of each station no later than June 8, 2007 (30 months after enactment of SHVERA). We sought comment in the NPRM on whether the statute unambiguously means that if any or all of the local stations in these states are still broadcasting analog signals as well as digital signals as of June 8, 2007, the SHVERA requirement mandates dual must carry; see NPRM , 20 FCC Rcd at 9323-24, paragraph 9. The Communications Act provides for termination of analog signal licenses as of December 31, 2006, unless local stations request an extension and demonstrate that one or more criteria exist in their markets; see 47 U.S.C. 309(j)(14) (criteria include the so-called “85% test”).

13. DIRECTV contends that section 338(a)(4) of the Act does not unambiguously require that satellite carriers must continue carrying analog signals after they begin carrying digital signals. DIRECTV suggests that there are two plausible readings of the text: that satellite carriers must retransmit analog signals either as long as Alaska and Hawaii broadcasters transmit in analog, or until satellite carriers are required to retransmit digital signals. It advocates that latter reading as the wiser policy. DIRECTV therefore reads section 338(a)(4) of the Act to require that satellite carriers replace the analog signals with digital signals in June 2007. DIRECTV explains that because satellite carriers digitize analog broadcast signals, there is little quality difference between an analog and SD digital signal to the DBS subscriber. Microcom, a satellite distributor and dealer in Alaska, argues that dual carriage is not warranted when a broadcast station is operating both its digital and analog service in a standard definition format because the law requires the content of those two services to be identical. Microcom, however, is in error as the “simulcasting” requirements were eliminated in our Second DTV Periodic Review last year. In contrast, IBC and R y F, representing broadcast stations in Puerto Rico, argue that SHVERA requires satellite carriers to retransmit both the analog and digital signals by the mandated dates.

14. We find that section 338(a)(4) of the Act is ambiguous with respect to the question of dual carriage. The statutory provision states that satellite carriers “shall (A) within 1 year after December 8, 2004, retransmit the signals originating as analog signals of each television broadcast station located in any local market within a State that is not part of the contiguous United States; and (B) within 30 months after December 8, 2004, retransmit the signals originating as digital signals of each such station.” While this language clearly contains two separate carriage requirements, it is unclear from the text whether Congress intended the analog carriage requirement to continue after commencement of the digital carriage requirement ( i.e. , simultaneous or dual carriage) or whether it intended the analog requirement to end when the digital requirement takes effect. The statute does not speak directly to the issue, and there is no legislative history to shed light on what Congress intended. Where the statutory language is ambiguous, we must construe the statute so as to effectuate the legislative purpose and intent; see Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984) (asserting that if a statute is silent or ambiguous, the question for the court is whether the agency's interpretation is based on a permissible construction of the statute). The Supreme Court stated, “If Congress has explicitly left a gap for the agency to fill, there is express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute;” see Id. at 843-44; see also Nat'l Cable & Telecomm. Assn. v. Brand X Internet Serv., 125 S. Ct. 2688, 2699 (2005) (citing Smiley v. Citibank, 517 U.S. 735, 742 (1996)) (clarifying that Chevron established the presumption that Congress, when it left a statute ambiguous, understood that the ambiguity would be resolved by an agency and desired the agency to possess whatever degree of discretion the ambiguity allowed). The Supreme Court noted that where a statute's plain terms admit two or more reasonable ordinary usages, the Commission's choice of one of them is entitled to deference; see Id. at 2704. Here, we agree with DIRECTV that the most reasonable interpretation of section 338(a)(4) of the Act is that the analog carriage requirement ends upon commencement of the digital carriage requirement. We therefore conclude that satellite carriers must carry the signals of local stations in Alaska and Hawaii that originate as analog beginning no later than December 8, 2005, and the signals that originate as digital beginning no later than June 8, 2007, but that the analog carriage requirement ends when the digital carriage requirement begins. Based on the record in this proceeding, requiring carriage of both analog and digital signals simultaneously would likely increase the burden on satellite carriers without offering subscribers a substantial benefit. Because satellite carriers digitize analog broadcast signals, there is essentially no difference from a satellite subscriber's perspective between the analog signal and the standard definition (SD) digital signal broadcast when such signals are carrying the same programming, as is currently the general practice in the industry. Thus, a dual carriage requirement would often result in a satellite carrier carrying the same programming with essentially the same signal quality twice. Moreover, in light of the requirement to carry multicast signals described below, satellite subscribers will be able to receive multiple digital programming streams offered by local stations, and we do not believe that the remote likelihood that certain programming transmitted by analog signals would not be transmitted by any of a station's digital signals justifies the burden that a dual carriage requirement would impose on satellite carriers. Therefore, we conclude that simultaneous carriage of both analog and digital signals is not required and would serve no useful purpose in light of our other decisions in this proceeding. We will address other issues related to carriage of digital signals in the context of the proceeding addressing satellite carriage of local stations pursuant to section 338 of the Act as it applies throughout the United States during and after the transition to digital television; see Carriage of Digital Television Broadcast Signals: Amendment to Part 76 of the Commission's Rules, CS Docket Nos. 98-120 and 00-96 (pending rulemaking proceeding to determine satellite carriers' obligations with respect to carriage of digital signals pursuant to section 338 of the Act.

15. Section 338(a)(4) of the Act requires carriage of “signals originating as analog signals” and “signals originating as digital signals.” We stated in the NPRM that there is no reference to “primary video” or any other term in section 338(a)(4) of the Act that expressly limits or describes the nature, format or content of the broadcast signal that satellite operators must carry in the noncontiguous states; see NPRM, 20 FCC Rcd at 9323-24, paragraph 9; see also 47 U.S.C. 338(j), 534(b)(3) and 535(g). The Commission recently concluded that the statutory term relating to cable mandatory carriage, “primary video,” was ambiguous with respect to whether it requires cable operators to carry broadcasters' multicast signals. Faced with an ambiguous statute, the Commission did not require mandatory carriage of multicast signals by cable systems; see Carriage of Digital Television Broadcast Signals: Amendment to Part 76 of the Commission's Rules, CS Docket No. 98-120, Second Report and Order and First Order on Reconsideration, FCC 05-27, at paragraph 33 (rel. Feb. 23, 2005) (“ DTV Second Report and Order ”) (declining, based on the record, to require cable operators to carry more than one programming stream of a digital station that multicasts). The NPRM concluded, therefore, that the amendment requires that satellite carriers carry all multicast signals of each station in noncontiguous states and carry the high definition digital signals of stations in noncontiguous states in high definition format. We also referenced the pending proceeding on satellite carriage of digital signals, in general, and sought comment on our view of the statutory language and any alternative construction of the SHVERA as the statute relates to the carriage of multicast and/or high definition signals. Satellite carriage of high definition and multicast local signals is also under review in the ongoing broadcast carriage rulemaking docket in the context of applying the statutory prohibition on material degradation; see Implementation of the Satellite Home Viewer Improvement Act of 1999, 16 FCC Rcd 1918, 1970-72 , paragraphs 120-123 (2000) (“ Report and Order”); Carriage of Digital Television Broadcast Signals: Amendment to Part 76 of the Commission's Rules, 16 FCC Rcd 2598, 2600, 2658, paragraphs 3 and 136 (2001) (“ First Report and Order ”). See also NPRM, 20 FCC Rcd at 9323-24, paragraph 9.

16. As explained in the NPRM, we continue to believe that the statutory language requires that satellite carriers carry all multicast signals and high definition (HD) signals of each local broadcast station in the noncontiguous states. We find section 338(a)(4)of the Act's use of the plural term “signals” in requiring carriage of “signals originating as digital signals” to unambiguously mean carriage of the entire free over-the-air digital broadcast, without limitation, being transmitted by a broadcaster. While DIRECTV argues that, because Congress also used the plural term “signals” with respect to analog signals (and there is no analog multicast or analog HD), the phrase “signals of each station” could be interpreted to mean the transmission of a single station's signal over time, we do not believe that this constitutes a reasonable interpretation of the statute. Section 338(a)(4) of the Act contains no limitation on the nature of the digital broadcast signal—such as the term “primary video” as used in the cable context—in describing the digital signals the satellite operator must carry in the noncontiguous states. At the time the SHVERA was enacted in December 2004, the Commission had interpreted, in the cable carriage proceeding three years earlier, the term “primary video” in section 614(b)(3) of the Act to mean “a single programming stream and other program-related content.” Had Congress intended to limit digital carriage to only a single standard definition stream, we believe Congress would have included similar limiting language in the satellite context. Section 338(a)(4) of the Act, by contrast, contains a broad requirement that satellite carriers retransmit “the signals originating as digital signals.” We also find unconvincing DIRECTV's reliance on section 338(j) of the Act's general directive that the Commission prescribe requirements on satellite carriers that are “comparable” to the must carry requirements imposed on cable operators; see 47 U.S.C. 338(j). According to DIRECTV, because cable operators in Alaska and Hawaii are not yet required to carry most digital signals in HD format nor are they required to carry multicast signals, the Commission cannot impose such requirements on satellite carriers in Alaska and Hawaii without running afoul of section 338(j) of the Act. We disagree. Under principles of statutory construction, section 338(a)(4) of the Act's specific mandate requiring carriage of “the signals originating as digital signals” in Alaska and Hawaii supercedes the general comparability directive set forth in section 338(j) of the Act. Where the statute is clear and unambiguous, we must implement the express meaning of the statutory language; Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984). Requiring carriage of multicast and HD signals most accurately reflects the requirement set forth in the statutory language itself. We decline to read into the statute a limitation where none exists. We believe that section 338(a)(4) of the Act requires carriage of Alaska and Hawaii broadcasters' entire free over the air broadcast, including multicast and HD signals. This decision, however, is limited to section 338(a)(4) of the Act and does not interpret any other statutory provision that regulates cable or satellite carriage obligations.

17. Even if we were to find ambiguity in the statutory language, however, we believe, for the reasons given above, that the better reading, and the one that most accurately reflects Congress's intent, requires satellite carriers to carry all multicast and HD signals. We also reject EchoStar and DIRECTV's argument that in order to avoid an unconstitutional construction of section 338(a)(4) of the Act, the Commission must not construe the statute to impose a multicast and HD carriage obligation. As explained below, we find interpreting section 338(a)(4) of the Act as mandating multicast and HD carriage is consistent with the First Amendment. The Supreme Court has held that must carry “is a content-neutral regulation” that must be analyzed under the intermediate level of scrutiny. Under this test, a content-neutral regulation will be upheld if: (1) It furthers an important or substantial governmental interest; (2) the government interest is unrelated to the suppression of free expression; and (3) the provisions do not burden substantially more speech than is necessary to further those interests.

18. With regard to the first prong of the analysis, we find that the multicast and HD carriage obligation imposed under section 338(a)(4) of the Act furthers two important governmental interests. First, it ensures that the citizens of Alaska have full access to television programming. In enacting section 338(a)(4), we believe Congress recognized the unique situation in Alaska which makes communications services critically important to the public safety, education, and economic development of the state. Alaska has the lowest population density in the country, and communities in rural Alaska are unique in several ways. Most rural Alaskan communities are quite small—almost 90% of Alaskan communities have fewer than 1,000 people; 25% of the communities have between 100 and 250 people; and 29% of the communities have fewer than 100 people. Most Alaskan communities are also very remote and isolated—most rural communities in Alaska do not have access via road systems to the relatively urban areas of the State (Anchorage, Fairbanks and Juneau), and, indeed, many Alaskan communities can be accessed only by air or by water and are frequently inaccessible because of weather conditions. These characteristics taken together significantly limit the communications options available to Alaskan communities. Indeed, Alaska's unique geography when combined with the State's unique population distribution presents many rural Alaskans with serious challenges in obtaining a diverse range of television programming, particularly through over-the-air broadcasting. Moreover, cable service and other forms of multichannel video programming distribution services are often not available to them. As the Alaska Broadcasters have reported, 23% of Alaskan households are unable to access cable television, and these rural households on average are able to receive only one television station through over-the-air broadcasting. Service transmitted by satellite is one of the few viable means of transcending these obstacles, and the ability to receive multiple programming streams from local stations through satellite carriers would be the only way that many rural Alaskan households would be able to access these programming streams. Moreover, given the important role that DBS service plays in rural Alaska, unless satellite customers are provided with access to multicasting, there may not be sufficient incentive for Alaskan television stations to develop additional programming streams targeted to the needs and interests of rural communities, thus denying these Alaskans the benefits of the digital transition. We thus believe Congress intended section 338(a)(4) of the Act to be interpreted broadly, without limitations, in order to further the important governmental interest of providing the Alaskan community with full access to digital communications.

19. In addition, we find that multicast and HD carriage obligations imposed under section 338(a)(4) of the Act further a second important governmental interest of ensuring Alaska and Hawaii an equitable distribution of satellite service. We recognize that section 338(a)(4) of the Act is responsive to a long history of more limited DBS service in Alaska and Hawaii than in the lower 48 states. Filings in prior Commission proceedings indicate that, with respect to DBS service, Alaskans had “far fewer choices than other Americans do, often their signal reception is poorer, and the reception equipment required is often much larger.” In Hawaii, the DBS subscriber packages were not comparable to the subscriber packages available in the 48 lower states, particularly in the area of programming. For example, some of the most popular programming channels—such as CNN, ESPN, Headline News, Discovery Channel—were not offered to subscribers in Hawaii. The State of Hawaii continues to maintain today that the level of service provided to Hawaiian subscribers remains significantly lower than that provided to subscribers in the lower 48 states. According to the State of Hawaii, every television market that is larger than Honolulu already receives local-into-local service from DIRECTV and nearly half of the 130 markets that receive local-into-local service from DIRECTV are smaller than Honolulu. We believe section 338(a)(4) of the Act was intended to remedy the situation in the noncontiguous states by providing Alaska and Hawaii with access to all of the programming offered through free over-the-air broadcasts, including all multicast and HD signals. We find that interpreting the statute in this manner best achieves the important governmental interest of making available “to all people of the United States” a “rapid, efficient, Nation-wide , and world-wide wire and radio communication service” and of providing “a fair, efficient, and equitable distribution of radio services” among the several States.

20. With respect to the second prong of the constitutional analysis, we find the Government's interest in ensuring the citizens of Alaska full access to television programming and the equitable distribution of satellite service are aimed at bringing a more robust communications service to the citizens of Alaska and Hawaii, not at stemming expression. These governmental interests are thus “unrelated to the suppression of free expression.” Indeed, they are aimed at providing the residents of Alaska and Hawaii with access to more information. We therefore find the second prong of the intermediate scrutiny test to be easily satisfied.

21. With respect to the third prong of the analysis, we find that this multicast and HD carriage requirement will not burden substantially more speech than is necessary to further the important governmental interests. Satellite carriage of local digital broadcast signals pursuant to section 338 of the Act as it will apply in the contiguous states, including carriage of HD and multicast signals, is under review in the ongoing broadcast carriage rulemaking docket; see Carriage of Digital Television Broadcast Signals: Amendment to Part 76 of the Commission's Rules, CS Docket No. 98-120. Congress took steps to confine the breadth and burden of the regulation by directing the multicast and HD carriage obligation to apply only in the states of Alaska and Hawaii. The carriage requirement is thus narrowly tailored to serve the important government interests identified above in a direct and effective way. In addition, while DIRECTV makes a number of claims as to the burdensomeness of the regulation, the actual effects of a multicast and HD requirement in the States of Alaska and Hawaii remain unclear. We find speculative DIRECTV's argument that imposing an HD and multicast carriage requirement for Alaska and Hawaii would place a substantial capacity burden on its system. The requirement for carriage of multicast and HD signals does not begin until June 2007. We do not know at this time how many programming streams Alaskan and Hawaiian local broadcast stations will be multicasting in 2007. At this point, for example, no station in Alaska or Hawaii is broadcasting more than two streams of programming; see e.g. www.CheckHD.com (showing one station, each, in Anchorage, Fairbanks, and North Pole, Alaska currently broadcasting two streams and none in Hawaii). Moreover, by the time the multicast and HD carriage requirement would take effect, many of the capacity issues may well be remedied through improvements in satellite technology.

22. In short, we believe that in enacting section 338(a)(4), Congress sought to address the specific communications problems and special needs that exist in the states of Alaska and Hawaii and intended, through expanded satellite carriage, that subscribers in Alaska and Hawaii would be ensured full, not limited, access to the benefits of the digital transition. The multicast and HD carriage requirement furthers these important governmental interests without burdening substantially more speech than necessary and thus satisfies the requirements under the First Amendment. We note, however, that the foregoing analysis interprets section 338(a)(4) of the Act only, and thus does not interpret sections 614 and 615 or section 338 with respect to satellite carriage of digital signals throughout the United States.

23. Section 338(a)(4) of the Act leaves implementation of carriage election rules expressly to the Commission's discretion; see 47 U.S.C. 338(a)(4). Consequently, in the NPRM we proposed regulations concerning the timing of the carriage elections related to the new carriage requirements in Alaska and Hawaii; see NPRM , 20 FCC Rcd at 9324-25, paragraphs 10-15. The first satellite carriage cycle (pursuant to the SHVIA) will end on December 31, 2005. The carriage election deadline for the second cycle is October 1, 2005, for carriage beginning January 1, 2006; see 47 CFR 76.66(c)(4). As described in the NPRM , the analog signal carriage requirement for Alaska and Hawaii commences December 8, 2005, which is just a few weeks before the carriage cycle that applies to satellite carriers and broadcast stations in the contiguous states, which commences January 1, 2006, and continues until December 31, 2008; see NPRM , 20 FCC Rcd at 9324, paragraph 11; see 47 CFR 76.66(c). The carriage election process enables stations to choose between carriage pursuant to retransmission consent or mandatory carriage; see 47 U.S.C. 325(b). Retransmission consent is based on an agreement between a broadcast station and satellite carrier, and includes a station's authorization and terms for allowing its broadcast signal to be carried. Broadcast stations and satellite carriers are required to negotiate retransmission consent agreements in good faith. 47 U.S.C. 338(b)(3)(c) ( as amended by section 207 of the SHVERA). If a station elects must-carry status, it is, in general, entitled to insist without other terms that the satellite carrier carry its signal in its local market; see 47 U.S.C. 338(a); see also 47 CFR 76.66(c).

24. To implement the carriage election timing requirements in section 210 of the SHVERA, we will track the existing regulations as closely as possible so that carriage elections in Alaska and Hawaii will be synchronized with carriage elections in the contiguous states. Because the analog carriage requirement in Alaska and Hawaii takes effect only 24 days before the carriage cycle in the rest of the country, we will use the same carriage election deadline of October 1, 2005. Thus, commercial television broadcast stations in a local market in the noncontiguous states are required to make a retransmission consent-mandatory carriage (must carry) election by October 1, 2005, which is the same deadline for local stations in local-into-local markets in the contiguous states; see amended § 76.66(c)(6). No commenter disagreed with this proposal and we adopt rules to implement it now; see amended rule § 76.66(c)(6).

25. With respect to carriage of the digital signals of stations in Alaska and Hawaii, the NPRM proposed that the retransmission consent-must carry election by a station in a local market in Alaska or Hawaii should be a two-step process with one election that applies to the analog signal carriage, which commences December 8, 2005, and a second carriage election that would govern carriage of the digital signal. Carriage of signals originating as digital must commence by June 8, 2007, but may begin pursuant to retransmission consent at any time. We proposed that the deadline for the second carriage election, for digital carriage, would be April 1, 2007, two months before carriage must commence. As an alternative, we suggested a one-step process in which the station's election by October 1, 2005, for its analog signal, would also apply to its digital signal, for which mandatory carriage will commence by June 8, 2007.

26. Two commenters, EchoStar and Microcom, favored the one-step approach on the basis of simplicity for satellite carriers and reduced burden for broadcasters. We believe, however, that the two-step approach better tracks Congress' decision to mandate carriage of analog and digital signals in two separate steps. Two separate elections is also more consistent with the Commission's Cable Must Carry decision in 2001, which permits stations broadcasting both analog and digital signals to elect must carry for their analog signal and retransmission consent for their digital signal; see Carriage of Digital Television Broadcast Signals: Amendment to Part 76 of the Commission's Rules, etc. , 16 FCC Rcd 2598, 2610 (2001) (“ DTV Carriage First Report and Order ”). The two-step approach is also consistent with treating carriage of the digital signal as sequential rather than concurrent with the analog signal. It is important for local stations in Alaska and Hawaii to have a second, separate opportunity to elect between must carry and retransmission consent for their digital signals. We adopt the rule, as proposed in the NPRM , which establishes the procedures for this two-step carriage election; see amended rule § 76.66(c)(6).

27. As further described in the NPRM , after the initial carriage cycle in Alaska and Hawaii (January 1, 2006 through December 31, 2008), the election cycle and carriage election procedures provided in section 76.66(c) will apply in the future; see NPRM , 20 FCC Rcd at 9325, paragraph 14. For example, the next carriage election (after the upcoming 2005 election) is required by October 1, 2008, for the carriage cycle beginning January 1, 2009; see 47 CFR 76.66(c)(2) and (4). We received no comments on this point.

28. We also confirm that stations in Alaska and Hawaii should be permitted to elect must carry for their analog signals and negotiate for carriage of the digital signals via retransmission consent before the mandatory digital signal carriage takes effect. We received no comments on this point. Therefore, prior to June 8, 2007, when the mandatory digital carriage rights for local stations in Alaska and Hawaii take effect, such stations may separately negotiate for voluntary carriage of their digital signals even if they elect mandatory carriage for their analog signals; see amended § 76.66(c)(6). This flexibility is also consistent with the approach generally taken in the digital carriage rulemaking proceeding thus far.

29. We also described in the NPRM that new television stations in Alaska or Hawaii should follow § 76.66(d)(3) of the Commission's rules to notify the satellite carrier and elect carriage. Based on section 338(a)(4) of the Act, a new station in Alaska or Hawaii will have a right to mandatory carriage for its analog signal if it begins service after December 8, 2005, and for its digital signal if it begins service after June 8, 2007. The existing rule describes the procedures and timing for requesting and obtaining carriage; thus, no rule amendments are needed; see 47 CFR 76.66(d)(3)(ii) through (iv). We received no comments on this issue, except that EchoStar asked that we clarify that stations that commence digital service after March 1, 2007 be required to comply with the Commission's rules for new stations. This date was related to the proposed special notification rules, which are discussed, infra . We provide that clarification here: new television broadcast stations in Alaska and Hawaii should follow the new station rule in § 76.66(d)(3) of the Commission's rules to notify satellite carriers and elect must carry or retransmission consent for their analog and digital signals.

30. The NPRM provided that in all other respects related to the mechanics of carriage, other than the carriage election cycle, we would apply the existing rules pertaining to satellite carriage as they were adopted to implement section 338 pursuant to the SHVIA; see NPRM , 20 FCC Rcd at 9324, paragraph 10; see also 47 U.S.C. 338(a)(1), (b)(1), and (c); 47 CFR 76.66(g) and (h). As noted in the NPRM, section 338(a)(4) of the Act also refers to the “cost to subscribers of such transmissions” but does not require rules for implementation. NPRM, 20 FCC Rcd at 9324, n. 34. We received no comments with respect to the mechanics for carriage and application of the existing rules. Therefore, our amended rules provide that carriage may be requested by television broadcast stations in local markets in Alaska and Hawaii effective December 8, 2005 for analog signals, and June 7, 2007 for digital signals; see amended rule § 76.66(b)(2). The carriage procedures for stations in Alaska and Hawaii shall follow the existing requirements, except with respect to the carriage election process, as described herein; see amended rule § 76.66(c)(6). Non-commercial television stations do not elect carriage because they cannot elect retransmission consent; see 47 U.S.C. 325(b)(2)(A). They are entitled to mandatory carriage; see 47 U.S.C. 338.

31. Section 338(a)(4) of the Act provides that satellite retransmissions of local stations in Alaska and Hawaii “shall be made available to substantially all of the satellite carrier's subscribers in each station's local market;” see 47 U.S.C. 338(a)(4) ( as amended by section 210 of the SHVERA). The provision did not define “substantially all” subscribers, and we sought comment on its meaning in this context. Given that the statute refers to “subscribers,” obviously it is not referring to parts of the state that the carrier cannot reach at all. Rather, as the NPRM pointed out, this wording is consistent with the physical limitations of some satellite technology that may not be able to reach all parts of a state or a DMA where a spot beam is used to provide local stations. EchoStar agrees with our interpretation, noting that the existing geographic service rules apply to both Alaska and Hawaii and provide well-established parameters for service offerings. Microcom asserts that, at a minimum, “substantially all” should be defined as those that could be served by a satellite providing primary services within the engineering constraints of the primary or spot beams.

32. We believe that this statutory provision recognizes the existing physical limitations on satellite service, particularly in these noncontiguous states. With respect to DBS service to Alaska, for example, the Commission has stated that although reliable service usually requires a minimum elevation angle of ten degrees or more, service to Alaska is often offered at elevation angles as low as five degrees; see Policies and Rules for the Direct Broadcast Satellite Service, 17 FCC Rcd 11,331, 11,358-59 (2002). The Commission defined elevation angle “as the upward tilt of an earth station antenna measured in degrees relative to the horizontal plane (ground), that is required to aim the earth station antenna at the satellite. When aimed at the horizon, the elevation angle is zero. If the satellite were below the horizon, the elevation angle would be less than zero. If the earth station antenna were tilted to a point directly overhead, it would have an elevation angle of 90°.” In addition, the Commission determined that in some areas of Alaska, from some orbital locations, the elevation angle was less than five degrees, or even below the horizon, thereby making service to those areas impossible. For example, the elevation angle for Attu Island, Alaska is less than zero or below the horizon for the 61.5°, 101°, and 110° orbit locations and only 4 for the 119° location. Microcom asserts that no location in Alaska has an elevation angle less than 10 degrees to the DBS orbital locations at 148 and 157 degrees West Longitude and proposes that carriers that use these orbital locations to provide local-into-local service to local markets on the west coast could do the same to provide the local stations in one or more of the Alaska DMAs, as well as to serve parts of Alaska not in a DMA. We are inclined to agree with Microcom that satellite carriers that have these orbital slots and can serve these areas should do so, and we note that satellite carriers must abide by the geographic service rules that require service where technically feasible; see Policies and Rules for the Direct Broadcast Satellite Service, 17 FCC Rcd at 11,358-62.

33. In the NPRM we said it is not necessary to adopt new rules to implement this provision and noted that this provision is similar to the Commission interpretation adopted in the implementation of the SHVIA, that satellite carriers that offer local-into-local service are not required to provide service to every subscriber in a DMA. Only EchoStar commented and agreed that no special rules were necessary on this point.

34. As described above, Alaska is the only one of the fifty states that has areas that are not included within any DMA. Section 338(a)(4) of the Act requires a satellite carrier in Alaska to make available the signals of all the local television stations that it carries in at least one local market to substantially all of its subscribers in areas outside of local markets who are in the same state; see 47 U.S.C. 338(a)(4), as amended by section 210 of SHVERA. Congress also modified the copyright provisions of title 17 to include these areas of Alaska that are outside of all DMAs within the definition of “local market” as it pertains to the statutory copyright license for carriage of local stations; see 17 U.S.C. 122(j)(2)(D) as amended by section 111(b) of the SHVERA. In Alaska, there are three DMAs covering the main population centers, but most of the state, which is sparsely populated, is not included in a DMA. Thus, a satellite carrier in Alaska will be required to provide the television stations that it carries in at least one of the three DMAs, in which carriage of local stations is required by section 338(a)(4) of the Act, to areas of the State not included in DMAs. In the NPRM we said that we believe the statute speaks for itself and that no special rule is required to implement this statutory requirement.

35. No commenter disputed that the statutory language is largely self-effectuating, but Microcom recommended that the Commission allow subscribers that are outside all DMAs to subscribe to any local package that they are technically capable of receiving. DIRECTV contends that section 338(a)(4) of the Act does not contemplate giving subscribers this option and that the SHVERA leaves the choice of which package to offer to the satellite carrier. DIRECTV explains that it could not comply with a rule that allowed subscribers outside of DMAs to choose which DMA package of local signals they want due to limitations in the set top box based upon the “market ID” that DIRECTV assigns to each local market. The market ID is critical to the operation of DIRECTV's billing and customer service system, which cannot function with differing choices of local market packages within a given zip code or county. We agree that the statute does not require that the choice of local package rest with the individual subscriber, and, therefore, it is unnecessary to require a satellite carrier to reconfigure its operations to afford this choice. Moreover, the statutory copyright license in section 122 of title 17 specifies that: “A satellite carrier may determine which local market in the State of Alaska will be deemed to be the relevant local market in connection with each subscriber in such census area, borough, or other area;” see 17 U.S.C. 122(j)(2)(D) as amended by section 111(b) of the SHVERA We note, too, that DIRECTV has committed to working with local officials in Alaska to identify the appropriate local market to offer to Alaska subscribers who are not in a DMA. A satellite carrier that wishes to offer subscribers their choice of Alaska DMA package, however, is free to do so, as the statutory language neither compels nor forbids this approach.

36. Microcom also raises a separate issue concerning signal availability, which is related to the revisions to the distant signal statutory copyright license, as revised by the SHVERA in conjunction with local signal availability pursuant to section 338(a)(4). Section 119(a)(16) of title 17 provides that the statutory copyright license for satellite retransmission of distant signals shall not apply with respect to satellite retransmission of a network station located outside of the State of Alaska to any subscriber in Alaska if a television station located in Alaska is made available by the satellite carrier pursuant to section 122; see 17 U.S.C. 119(a)(16)(A) as amended by section 111 of the SHVERA. Section 119(a)(16)(B) limits the restriction in (A) if the distant signal is a digital signal and no television station licensed to a community in Alaska and affiliated with the same network is transmitting a digital signal. See also, 17 U.S.C. 122(j)(2)(D) as amended by section 111(b) of the SHVERA, which amends the definition of “local” and thereby creates the copyright license for the areas in Alaska that are outside of a DMA: “Any census area, borough, or other area in the State of Alaska that is outside of a designated market area, as determined by Nielsen Media Research, shall be deemed to be part of one of the local markets in the State of Alaska. A satellite carrier may determine which local market in the State of Alaska will be deemed to be the relevant local market in connection with each subscriber in such census area, borough, or other area.” Microcom asks that we define when a signal is made “available” for this purpose and to consider the cost to a subscriber to obtain the equipment to access the local signal package. We did not raise this question in the NPRM, as it applies specifically to eligibility for distant signals. We note, however, that the statute defines “available,” as it pertains to the copyright license in section 119, to mean that the station is available if the satellite carrier offers that local station to other subscribers who reside in the same zip code as the subscriber in question; see 17 U.S.C. 119(a)(4)(G) as amended by section 103 of the SHVERA; see also 47 U.S.C. 339(a)(2)(H) as amended by section 204 of the SHVERA, which is substantially the same definition. Thus, we cannot agree with Microcom's proposal to determine availability based on the cost of equipment to receive the local station package. Microcom also asks the Commission to address questions pertaining to “commercial retransmission consent” for commercial establishments in Alaska that are not within a DMA. This issue is not within the scope of this proceeding, which is limited to implementation of section 338(a)(4).

37. The rules governing satellite carriage of local stations that were adopted to implement the SHVIA define “local market” based upon the copyright definition cited in section 338 of the Act; see 47 U.S.C. 338(k)(3) (formerly (h)(3)); see also 47 CFR 76.66(e). EchoStar referred to the notification proposal in connection with its request for clarification concerning new stations. Accordingly, we amend our rule section to track the revised definition of local market in section 122 of title 17 to reflect the revisions related to areas of Alaska outside of all DMAs; see adopted § 76.66(e)(2) and (3).

38. In the NPRM we sought comment on a proposal to require special satellite carrier notifications to local stations in connection with the new carriage requirements in Alaska and Hawaii, although section 338(a)(4) of the Act does not require such notification. We proposed two special notifications: the first for the forthcoming carriage election for analog signals, and the second for carriage of digital signals in 2007. We received no comments on this proposal. We conclude that it is unnecessary to establish a special notification procedure for the upcoming carriage election with respect to analog signal carriage. Moreover, there is inadequate time to adopt such a provision and make it effective in time to be meaningful for the analog carriage election deadline adopted in this Order. The deadline for stations to make carriage elections is October 1, 2005, for the carriage cycle that commences January 1, 2006, and that will govern carriage for local stations' analog signals in Alaska and Hawaii beginning December 8, 2005. Thus, satellite carriers would have to send the proposed 30 day notification before September 1, which would require Federal Register publication of this Order no later than August 1, 2005. We note that EchoStar currently provides local-into-local service in the Honolulu and Anchorage DMAs, assuring that the stations in those markets are aware that they should make carriage elections no later than October 1, 2005 to ensure continued carriage. With respect to the other local markets in Alaska and Hawaii, if satellite carriers follow the existing rule for initiating local service, the notifications, elections, and carriage would come too late to satisfy the statutory requirement of commencing carriage of analog signals by December 8, 2005; see 47 CFR 76.66(d)(2) (Requires 60 day notice prior to commencing service in a new market, gives stations 30 days to elect carriage, requires carriage to commence 90 days later). We will instead rely on the publication of this Order and the existing carriage election deadline to assure that stations in Alaska and Hawaii receive adequate notice for the October 1, 2005 carriage election deadline.

39. We will adopt the second notification requirement to ensure that local stations in Alaska and Hawaii are reminded of their digital carriage rights commencing in June 2007. We will require satellite carriers with more than 5 million subscribers to notify all television broadcast stations located in local markets in Alaska and Hawaii that they are entitled to carriage of their digital signals as of June 8, 2007, and that they must elect mandatory carriage or retransmission consent by April 1, 2007, to be assured of carriage, as provided in §§ 76.66(b)(2) and (c)(6). This notification will be required by March 1, 2007, with respect to the carriage election for digital signals; see adopted § 76.66(d)(2)(iii). The amended rule provides for carriage requests from both commercial and noncommercial television broadcast stations.

40. As further described in the NPRM , a new satellite carrier that meets the definition in section 338(a)(4) of the Act in the future will be required to comply with § 76.66(d)(2) of the Commission's rules regarding “new local-into-local service” (imposes requirements when a new satellite carrier intends to retransmit a local television station back into its local market).

41. Accessibility Information. To request this Report and Order or other materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty). This document can also be downloaded in Word and Portable Document Format (PDF) at: http://www.fcc.gov .

42. The Commission will send a copy of this Report and Order in a report to be sent to Congress and the Government Accountability Office (GAO) pursuant to the Congressional Review Act, see U.S.C. 801(a)(1)(A).

43. The Regulatory Flexibility Act of 1980, as amended (RFA), requires a regulatory flexibility analysis be prepared for notice-and-comment rule making proceedings, unless the agency certifies that “the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” 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).

44. We are amending § 76.66 of the Commission's rules as required by section 210 of the SHVERA. We expect these rule amendments will not have a significant economic impact on a substantial number of small entities. The rules are required by statute and will allow for local television stations to elect carriage pursuant to retransmission consent or mandatory carriage with respect to satellite carriers with more than 5 million subscribers in a non-contiguous state. “Satellite carriers,” including Direct Broadcast Satellite (DBS) carriers, will be directly and primarily affected by the rules.

45. The satellite carriers covered by these rules are governed by the SBA-recognized small business size standard of Cable and Other Program Distribution. This size standard provides that a small entity is one with $12.5 million or less in annual receipts. The two satellite carriers that are subject to these rule amendments because they currently have more than five million subscribers, DIRECTV and EchoStar, report annual revenues that are in excess of the threshold for a small business. We anticipate that any satellite carrier that, in the future, has more than five million subscribers would necessarily have more than $12.5 million in annual receipts. Thus, the entities directly affected by the proposed rules are not small entities.

46. We also note that, in addition to satellite carriers, television broadcast stations are indirectly affected by the amended rule in that they potentially benefit from the satellite carriage required by the rule and must elect between mandatory carriage and retransmission consent. This carriage election, however, follows the existing Commission rules. These existing rules currently permit stations in Alaska and Hawaii to elect carriage if and when a satellite carrier offers local-into-local service in their market. The amended rules affect these election rights by merely providing a date certain for carriage in these specified markets, and this change does not amount to a significant economic impact.

47. Therefore, we certify that the adopted rules will not have a significant economic impact on a substantial number of small entities. The Commission will send a copy of this Report and Order, including a copy of this Final Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the SBA. This certification will also be published in the Federal Register .

48. This document does not contain new or modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. The Commission received approval for the information collection requirements contained in this Order from the Office of Management and Budget on June 14, 2005. There have been no changes to the information collection requirements since receiving OMB approval. In addition, we note that there is no new or modified “information burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see U.S.C. 3506(c)(4). As described in the Final Regulatory Flexibility Certification, supra , the businesses affected by our action are not small.

49. Further Information. For additional information concerning the PRA information collection requirements contained in this Order, contact Cathy Williams at 202-418-2918, or via the Internet to Cathy.Williams@fcc.gov .

50. Additional Information. For additional information on this proceeding, contact Eloise Gore, Eloise.Gore@fcc.gov , of the Media Bureau, Policy Division, (202) 418-2120.

51. Accordingly, it is ordered that pursuant to section 210 of the Satellite Home Viewer Extension and Reauthorization Act of 2004, and sections 1, 4(i) and (j), and 338(a)(4) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j), and 338(a)(4), that this Report and Order is adopted and the commission's rules are hereby amended and shall become effective October 31, 2005.

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

In 1995, the National Highway Traffic Safety Administration (NHTSA) amended Federal Motor Vehicle Safety Standard (FMVSS) No. 201, “Occupant protection in interior impact,” to require passenger cars, trucks, and multipurpose passenger vehicles with a gross vehicle weight rating (GVWR) of 4,536 kilograms (10,000 pounds) or less, and buses with a GVWR of 3,860 kilograms (8,500 pounds) or less, to provide head protection when an occupant's head strikes upper interior components, such as pillars, side rails, headers, and the roof during a crash. 1 The new head protection requirements were necessary because head impacts with upper interior components resulted in a significant number of occupant injuries and fatalities.

The head impact protection provisions of FMVSS No. 201 set minimum performance requirements for vehicle interiors by establishing target areas within the vehicle that must be properly padded or otherwise have energy absorbing properties to minimize head injury in the event of a crash. Compliance with the upper interior impact requirements is determined, in part, by measuring the forces experienced by a Free Motion Headform (FMH) test device when it is propelled, at any speed up to and including either 18 km/h or 24 km/h (12 mph or 15 mph), into certain targets on the vehicle interior.

New vehicle designs not contemplated by the 1995 amendments to FMVSS No. 201 emerged, and with them, certain safety concerns. First, a number of manufacturers began producing three door coupes and pickup trucks with three or four doors. Unlike the conventional designs, these vehicles do not have B-pillars between doors. Yet, the door frames appeared to be equivalent to the B-pillar for purposes of head impact protection because these door frames were located near the head of a seated vehicle occupant and posed the same potential head injury risks as a B-pillar. Second, certain pillarless coupes and convertibles used a freestanding vertical structure to provide an attachment point for the upper anchorage of a lap and shoulder belt. This structure, which must be relatively stiff in order to ensure the stability of the belt anchorage, was normally located near the head of the occupant in the seating position for which the belt is provided.

Because these structures do not support the roof of the vehicle, neither the door frames nor freestanding vertical seat belt mounting structures fit within the definition of “pillar” found in FMVSS No. 201 and, thus, did not have to meet the FMH impact requirements. Yet, the agency was concerned about the potential safety consequences of these new designs because they posed the same potential head injury risks as a pillar, roll-bar, or other stiff vertical component.

On February 27, 2004, the agency published a final rule that addressed this concern (69 FR 9217; Docket 00-7145). The February 2004 final rule amended the definition of “B-pillar” and added several other definitions, to ensure that door frames aft of the A-pillar and forward of any other pillars become subject to the FMH impact requirements. The final rule also required freestanding vertical seat belt mounting structures to meet the FMH impact requirements. The final rule defined “seat belt mounting structure” as:

The agency received petitions for reconsideration of the February 2004 final rule from the Alliance of Automobile Manufacturers (Alliance) and from DaimlerChrysler (DCX). Subsequently, Alliance also filed a request for an interpretation related to the February 2004 final rule. 2

In its petition, Alliance stated that the current definition of seat belt mounting structure encompasses some vehicle components that were not contemplated by the agency. While the agency intended to subject freestanding vertical seat belt mounting structures to the head impact protection requirements of FMVSS No. 201, according to Alliance, the current definition will also require rear package shelves, side-wall trim panels, and interior rear quarter trim panels to provide head impact protection. Alliance believes that these seat belt mounting structures are “integrated into the body structure of the vehicle” and should be excluded from the FMH impact requirements. In support of its view, Alliance provided examples of vehicles with rear seat belt anchorages located on the rear package shelf or in the rear upper corner of the interior rear quarter panel, next to the seat back. Other examples showed vehicles with the front seat belt anchorage located on the front upper corner of the interior rear quarter panel, or on the rear package shelf area, behind the seat back. 3

On October 5, 2004, NHTSA met with Alliance to further discuss certain provisions of the petition for reconsideration. 4 At the meeting, Alliance supplemented its petition by proposing an alternative definition of the seat belt mounting structure. Specifically, Alliance requested that the definition state that only a portion of the seat belt mounting structure that “projects into the daylight opening” be subjected to the FMH impact requirements. For vehicles in which a daylight opening cannot be clearly established, Alliance suggested that the seat belt mounting structure be defined as a “freestanding load bearing component of the vehicle body” or part of the roof.”

In its petition, DCX indicated support for the Alliance petition and expressed concern that NHTSA unintentionally subjected seat belt mounting anchorages integrated within the vehicle body structure to the FMH impact requirements. DCX suggested that language in the preamble to the final rule referring to “stand-alone structures rising from the floor of a vehicle” indicated that NHTSA did not intend to include seat belt anchorages located on the interior rear quarter panel or rear package shelf in the definition of the seat belt mounting structure. DCX requested that NHTSA amend the definition of the seat belt mounting structure as follows:

In amending the upper interior impact requirements, the agency did not intend to limit the definition of the seat belt mounting structure strictly to “stand-alone” objects. This is because some seat belt mounting structures that could cause injury (because of their proximity to an occupant's head and the resulting risk of head injury) could be located on “attached” or integrated vehicle components. Nevertheless, the agency did not intend to apply the FMH impact requirements to interior quarter panel trim, or rear package shelves that are located such that they could not readily come in contact with the normally seated occupant's head.

Accordingly, the agency agrees with Alliance and DCX that the definition provided in the February 2004 final rule encompasses some vehicle components that were not contemplated by that rulemaking. We are amending the definition of the seat belt mounting structure to ensure that the seat belt mounting structure FMH impact requirements are not overly broad.

In their petitions, Alliance and DCX urged the agency to change the definition of seat belt mounting structure such that only pillar-like components protruding above the vehicle beltline or the daylight window opening by a certain vertical distance would be subject to FMH impact requirements. We note that the agency has previously considered the issue of defining the seat belt mounting structure in terms of daylight opening. 5 We again decline to adopt the petitioner's suggestion for two reasons.

First, we believe the terms “beltline” or “daylight opening” are inappropriate for defining the seat belt mounting structures because these design elements may not exist or may not be easily identified in vehicles that are most likely to include seat belt mounting structures. Specifically, the agency believes that freestanding seat belt mounting structures are most likely to appear in open body vehicles. Because these vehicles may not include complete roofs, side windows, or side doors, it may not be possible to define where the “daylight opening” or “beltline” begins. For example, a Jeep Wrangler is, in certain configurations, an open body vehicle that has a soft roof assembly and detachable side doors. This vehicle design makes it difficult to clearly establish a daylight opening or beltline.

Second, in some vehicles, the rear package shelf panel is located higher than the daylight opening or beltline. Because petitioners argue that these shelves should not be subjected to the FMH impact requirements, the definition based on daylight opening or beltline location would not fully resolve the manufacturer's concerns.

The agency believes that locating the seat belt mounting structure should not depend on the location and the height of the nearest daylight opening, but on the structure's proximity to the occupant's head, and the likelihood that the occupant's head could strike that structure. Thus, instead of attempting to define the seat belt mounting structure in reference to daylight opening, the agency believes that it is more appropriate to describe the seat belt mounting structure in reference to the head CG of a seated Hybrid-III 50th percentile male dummy. The head CG of the seated Hybrid-III 50th percentile male dummy is 660 mm vertically above the seating reference point (SgRP). 6 Regardless of vehicle type, using this geometric measurement method enables identification of the seat belt mounting structure parts or components that could come in contact with the occupant's head.

In deciding how to best refine the current definition of seat belt mounting structure, the agency carefully evaluated the information presented by Alliance and DCX. Specifically, we examined the upper seat belt anchorage locations of vehicles shown in Appendices A and B of the Alliance petition. 7 The seat belt mounting structure configurations, presented by Alliance as problematic in light of the current seat belt mounting structure definition, fall into two categories.

In some vehicles described by Alliance, the upper seat belt anchorage is located on the rear package shelf behind the seat back. This configuration exists in some two-seat vehicles such as the Corvette Convertible and Cadillac XLR, and some four-seat vehicles such as the Mitsubishi Eclipse Spyder. In other vehicles, the seat belt upper anchorage is located on either the front upper corner of the interior quarter panel, or the rear upper corner of the interior quarter panel, near the junction of the seat back and rear package shelf.

We believe that raising the minimum height specification in the seat belt mounting structure definition and excluding interior rear quarter panels from the FMH impact requirements would resolve the petitioner's concerns without compromising occupant safety.

After examining the information presented by Alliance, we conclude that an upper seat belt anchorage located on the rear package shelf is usually located such that it could not come in contact with the occupant's head.

For two-seat vehicles, because of front seat head restraint height requirements, it is unlikely that the head of the front seat occupant would impact objects that are located behind the seat back or the head restraint, as the head impact trajectory would be blocked. Accordingly, the agency believes that the head restraint will prevent head contact with most targets located on the rear package shelf. For vehicles with two rows of seating positions, the rear seat back or rear seat head restraint would likely prevent the rear seat occupant's head contact with most targets located on the rear package shelf.

In sum, we conclude that a seated occupant's head is not likely to contact a vehicle interior component that is located behind the head restraint or seat back because the head impact trajectory would be blocked. Because the upper seat belt anchorage located behind the rearmost designated seating is unlikely to come into contact with the occupant's head, the agency decided to revise the seat belt mounting structure definition such that it would not encompass most interior components located on the rear package shelf.

Specifically, for seat belt mounting structures located behind the rearmost designated seating positions, the revised definition will encompass only components that extend 660 mm above the SgRP of that seating position; i.e. , above the head CG of a Hybrid-III 50th percentile male dummy in a generic vehicle seat. The agency believes that this definition will ensure that components located behind the rearmost seat back or the head restraint are not subject to the new FMH impact requirements unless they reach a height where head contact becomes possible.

For seat belt mounting structures located in front of other seating positions, the definition remains unchanged because the rear seat occupants could strike the vehicle components that extend 460 mm above the SgRP of the seating position located behind these components.

The relevant portion of the revised regulatory text will read as follows:

Seat belt mounting structure means:

(a) A vehicle body or frame component, including trim, that incorporates an upper seat belt anchorage conforming to the requirements of S4.2.1 and S4.3.2 of 49 CFR 571.210, that is located rearward of the rearmost outboard designated seating position, and that extends above a horizontal plane 660 mm above the seating reference point (SgRP) of that seating position; and

(b) A vehicle body or frame component, including trim, that incorporates an upper seat belt anchorage conforming to the requirements of S4.2.1 and S4.3.2 of 49 CFR 571.210, that is located forward of the rearmost outboard designated seating position, and that extends above a horizontal plane 460 mm above the SgRP of that seating position located rearward of the anchorage.

In amending the upper interior impact requirements, the agency did not intend to add new FMH impact targets to interior quarter panels located between the edge of the side door opening and the rearmost outboard seating position. We believe that locating additional targets on the interior rear quarter panels would be impracticable for a variety of vehicle designs. Accordingly, we are revising the seat belt mounting structure definition to exclude interior rear quarter panels. We defined the interior rear quarter panel as follows: “Interior rear quarter panel means a vehicle interior component located between the rear edge of the side door frame, the front edge of the seat back, and the daylight opening.”

Petitioners requested that NHTSA clarify several issues related to target relocation procedures. Specifically, they asked if an SB target, requiring relocation because of vehicle configuration, to a point below the 460 mm plane, would become invalid, and whether targets relocated into open space would become invalid.

First, the agency believes that targets relocated below the 460 mm horizontal plane should not be automatically invalidated. This is consistent with our position regarding other targets subject to current head impact protection requirements. For example, a BP4 target relocated below a 460 mm horizontal plane is not automatically excluded from testing. Instead, the target is relocated in accordance with target relocation procedures specified S10(b) and S10(c) of FMVSS No. 201. 8 Thus, there is no minimum height limitation for a relocated target. Second, any target that is relocated in “open space” need not meet the FMH impact requirements. Finally, with respect to other target relocation questions raised by petitioners, we again note that target relocation procedures are specified in S10(b) and S10(c) of FMVSS No. 201. In order for us to answer a more specific relocation question related to an individual vehicle configuration, a manufacturer would need to provide more specific information related to the target in question.

Because the effective date for the new requirements for door frames and seat belt mounting structures is imminent, we are delaying the implementation of the new requirements from September 1, 2005 until December 1, 2005. This short delay will enable manufacturers to carefully evaluate how the changes in this document would affect vehicle compliance. Because the practical affect of these changes is that fewer vehicle components will be subject to certain requirements of 49 CFR 571.201, longer lead time is unnecessary. For the same reasons, we are making the amendments effective September 1, 2005.

This rulemaking document was not reviewed under Executive Order 12866, “Regulatory Planning and Review.” The agency has considered the impact of this rulemaking action under the Department of Transportation's regulatory policies and procedures, and has determined that it is not “significant.”

This document narrows the definition of the seat belt mounting structure to ensure that the definition is not unnecessarily broad, and clarifies several issues raised by a petitioner. The practical affect of this change in the definition is that fewer vehicle components will be subject to certain requirements of 49 CFR 571.201.

The agency has analyzed this rulemaking action in accordance with the principles and criteria set forth in Executive Order 13132. This final rule does not have a 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.

Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any rule that: (1) Is determined to be “economically significant” as defined under E.O. 12866, and (2) concerns an environmental, health or safety risk that NHTSA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, we 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 us.

This rule is not subject to the Executive Order 13045 because it is not economically significant as defined in E.O. 12866 and does not involve decisions based on environmental, safety or health risks having a disproportionate impact on children.

Pursuant to Executive Order 12988, “Civil Justice Reform” (61 FR 4729, February 5, 1996), the agency has considered whether this rulemaking would have any retroactive effect. This final rule does not have any retroactive effect. A petition for reconsideration or other administrative proceeding will not be a prerequisite to an action seeking judicial review of this rule. This final rule would not preempt the states from adopting laws or regulations on the same subject, except that it would preempt a state regulation that is in actual conflict with the Federal regulation or makes compliance with the Federal regulation impossible or interferes with the implementation of the Federal statute.

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq. ) requires agencies to evaluate the potential effects of their rules on small businesses, small organizations and small governmental jurisdictions. I have considered the possible effects of this rulemaking action under the Regulatory Flexibility Act and certify that it would not have a significant economic impact on a substantial number of small entities because the amendments in this rulemaking do not impose new requirements. Instead, this rulemaking narrows the definition of the seat belt mounting structure. The practical affect of this change in the definition is that fewer vehicle components will be subject to certain requirements of 49 CFR 571.201.

Under the Paperwork Reduction Act of 1995, a person is not required to respond to a collection of information by a Federal agency unless the collection displays a valid OMB control number. This final rule does not adopt any new information collection requirements.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272) directs us to use voluntary consensus standards in its regulatory activities unless doing 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 us to provide Congress, through OMB, explanations when we decide not to use available and applicable voluntary consensus standards.

There are no available voluntary consensus standards that are equivalent to FMVSS No. 201.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires Federal agencies to prepare a written assessment of the costs, benefits and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local or tribal governments, in the aggregate, or by the private sector, of more than $100 million in any one year ($120.7 million as adjusted annually for inflation with base year of 1995).

This final rule will not result in costs of $120.7 million or more to either State, local, or tribal governments, in the aggregate, or to the private sector. Thus, this final rule is not subject to the requirements of sections 202 and 205 of the UMRA.

The Department of Transportation assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda.

Please note that anyone is able to search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (Volume 65, Number 70; Pages 19477-78), or you may visit http://dms.dot.gov .

NHTSA has analyzed this rulemaking action for the purposes of the National Environmental Policy Act. The agency has determined that implementation of this action will not have any significant impact on the quality of the human environment.

The National Traffic and Motor Vehicle Safety Act requires vehicle manufacturers to certify that their vehicles comply with all applicable Federal motor vehicle safety standards (49 U.S.C. 30112 et seq. ). The Act further prohibits manufacturers, distributors, dealers, and repair businesses from knowingly making inoperative any part or device or element of design installed in or on a motor vehicle that is in compliance with an applicable standard (49 U.S.C. 30122; “make inoperative” provision). Any action that removes or disables safety equipment or features installed to comply with an applicable standard, or that degrades the performance of such equipment or features could lead to the assessment of civil penalties. Section 30122 authorizes regulations to exempt a person from the make inoperative provision if the agency decides the exemption is consistent with motor vehicle safety and the purpose and policy of the Safety Act.

To facilitate the modification of motor vehicles for persons with disabilities, NHTSA provides a limited exception from the make inoperative provision. While a vast majority of Americans can drive and ride in a motor vehicle as produced and certified by manufacturers, individuals with disabilities often require special modifications to accommodate their particular needs. Some of these modifications may require removal of federally required safety equipment. In these instances, if individuals with disabilities are to drive and ride in a motor vehicle in these instances, federally required safety features must be made inoperative.

Recognizing the specialized transportation needs of individuals with disabilities, NHTSA established an exemption from the make inoperative provision. 49 CFR 595 Subpart C, “Vehicle Modifications To Accommodate People With Disabilities,” permits repair businesses to modify certain types of federally required safety equipment and features under specified circumstances. This exemption from the make inoperative provision was established because the previous policy of considering and responding to requests on a case-by-case basis was not effective or efficient for the vehicle modifiers, the persons requiring the modifications, or the agency. (66 FR 12638; February 27, 2001.)

When establishing the exemption from the make inoperative provision, the agency considered that, as of 1997, approximately 383,000 vehicles had some type of adaptive equipment installed in them to accommodate a driver or passenger with a disability. 1 We also recognized that the modification of vehicles to accommodate persons with disabilities would increase in frequency as the population ages and as a greater number of individuals with physical disabilities take advantage of opportunities presented by the Americans With Disabilities Act. 2 Using 2002 data from the Bureau of Transportation Statistics, we estimate the number of personal motor vehicles modified for use by persons with disabilities existing in the U.S. in 2002 was about 1,123,000, with a 95 percent confidence interval from 743,000 to 1,504,000. An estimated 75 percent of modified vehicles were modified for the driver (including vehicles modified for both driver and passenger). The estimated proportion of the U.S. personal motor vehicle fleet that are modified for use by people with disabilities is 0.0051 (0.51 percent) with a confidence interval from 0.0034 to 0.0067. We estimate that in 2002, 814,000 households had one modified vehicle and another 155,000 households had two modified vehicles. 3

The exemption from the make inoperative provision facilitates modifications by providing guidance to modifiers on the type of modifications that can be made without unduly decreasing the level of safety provided to the vehicle occupants and to others. Included in the exemption are the seat belt and passive restraint requirements for passenger cars, and light trucks, buses and multipurpose passenger vehicles, under Federal Motor Vehicle Safety Standard (FMVSS) No. 208, Occupant crash protection   4 and head impact protection requirements for certain target points under FMVSS No. 201, Occupant protection in interior impacts . 5

In response to petitions for rulemaking from Bruno Independent Living Aids (Bruno), the Adaptive Driving Alliance (ADA)  6 and the National Mobility Equipment Dealers Association (NMEDA), NHTSA published a notice of proposed rulemaking on September 17, 2004 (69 FR 56018) (DOT Docket No. NHTSA-2004-19092). The agency proposed to amend the exemption from the make inoperative provision under 49 CFR Part 595, by adding the FMVSS No. 208 advanced air bag requirements, a limited exemption for the FMVSS No. 225 LATCH requirements, and a limited exemption for the FMVSS No. 201 upper interior head protection requirements. Each of the proposed changes is summarized below.

After the exemption from the make inoperative provision was published on February 27, 2001, the agency published a final rule that added requirements to FMVSS No. 208 to reduce the risk of serious air bag-induced injuries, especially to small women and young children, and to improve the safety for all occupants by means that include advanced air bag technology. (65 FR 30680; May 12, 2002.) The advanced air bag technology requirements are being phased in beginning September 1, 2003, with full compliance required September 1, 2006. Motor vehicles subject to the phase-in will be required to minimize air bag risks by automatically turning off the air bag in the presence of an occupant who is a young child or deploy the air bag in a manner less likely to cause serious or fatal injury to an out of position occupant. Among the technologies used to comply with these requirements are a variety of seat position, occupant weight, and pattern sensors incorporated into the seat structure.

In its petition for rulemaking, Bruno requested that the advanced air bag requirements be included with the other FMVSS No. 208 requirements excluded from the make inoperative provision. Bruno stated that the installation of one of its mobility aid products, the Turning Automotive Seat (TAS) could be accomplished without making a conventional air bag inoperative, but would require deactivation of advanced air bag features. Bruno stated that maintaining the operation of seat position and occupant sensing devices used to comply with the advanced air bag requirements for numerous makes and models of motor vehicles is beyond its capability.

ADA's August 8, 2002 petition provided additional support for Bruno's request. The ADA argued that it is no more feasible for modifiers to comply with the advanced air bag requirements than the “ existing air bag requirements,” which are currently exempted. Petitioners argued that maintaining compliance with the advanced air bag requirements would require modifiers to reinstall, modify, or design complex components of the air bag system. Petitioners further argued that the advanced air bag requirements are just as incompatible with the one-of-a kind, custom-fitted nature of vehicle modifications to accommodate a specific individual's disability as the current FMVSS No. 208 requirements in Part 595.

In response to the petitions for rulemaking, NHTSA proposed to expand the make inoperative exemptions established at 49 CFR 595.7(c)(14) by adding to it the following sections of FMVSS No. 208:

In many instances, a vehicle modification requiring an exemption for the advanced air bag requirements would also rely on the current exemption from the occupant crash protection requirements of S5, Occupant crash protection requirements for the 50th percentile adult male dummy , of FMVSS No. 208. NHTSA stated that it expected that modifications requiring an exemption from the advanced air bag requirements in conjunction with the exemption from S5, as well as those requiring only an exemption from the advanced air bag regulations, would affect a very small number of motor vehicles each year in comparison to the overall number of motor vehicles in the country.

In the NPRM, the agency tentatively concluded that these modifications would be essential to enable individuals with a disability to use a motor vehicle. Additionally, seating positions modified under the proposed exemption would accommodate specific, individual needs making it less likely that these seating positions would be used by other occupants who would benefit either from the air bag itself, or from those features designed to minimize air bag risk. We recognize that in most cases, the decision to deactivate the air bag, or not, will be a product of the equipment, the vehicle and the method of installation. We strongly urge the vehicle manufacturers, equipment manufacturers, and modifiers to work together to determine whether the air bag actually needs to be deactivated for these different combinations. There may be seating, equipment and vehicle combinations in which air bag deactivation is not necessary. However, these situations should be studied carefully so that modification does not result in inadvertent air bag suppression or overly forceful deployment.

Prior to establishing the exemption from the make inoperative provision (published on February 27, 2001), the agency established FMVSS No. 225, which requires motor vehicles to be equipped with a lower anchorage and tether anchorage (LATCH  7 ) system designed exclusively to secure child restraint systems. (64 FR 10786; March 5, 1999; “LATCH rule”.)

FMVSS No. 225 requires vehicles with three or more forward-facing rear designated seating positions, manufactured on or after September 1, 2002, to be equipped with: (1) A LATCH system at not fewer than two forward-facing rear designated seating positions, with at least one system installed at a forward facing seating position in the second row in each vehicle that has three or more rows; and, (2) a tether anchorage at a third forward-facing rear designated seating position. Under S5(b) of FMVSS No. 225, a vehicle may be equipped with a built-in child restraint system conforming to the requirements of FMVSS No. 213, Child restraint systems , instead of one of the required tether anchorages or child restraint anchorage systems. These LATCH requirements provide a more uniform method of securing a child restraint system and reduce the likelihood that a child restraint will be installed incorrectly.

In its petition for rulemaking, the ADA stated that compliance with LATCH requirements would possibly not be feasible for businesses modifying motor vehicles to accommodate disabled drivers and passengers. The ADA explained that:

Modifying a vehicle to accommodate a wheelchair could result in seating configurations that would take the vehicle out of compliance with FMVSS No. 225. If a vehicle with three rows of seating were to have LATCH systems in the second and third rows, removal of that second row to permit wheelchair access to the driver's seat would remove the vehicle from compliance with FMVSS No. 225. Beyond this example, there are a myriad of van seating arrangements, desired wheelchair restraint positions, and vehicle entry/exit applications that could remove a vehicle from compliance with FMVSS No. 225.

Since the agency could not anticipate all of these potential combinations and provide modifiers specific instructions for each situation, NHTSA proposed in the NPRM an amendment that would establish flexibility in the modification configurations and still allow a child seat to be restrained safely. NHTSA proposed an exemption be added to 49 CFR 595.7, to read as follows:

A child seat could still be installed in a modified vehicle through the use of the vehicle's seat belt system and still have the advantage of the tether.

The proposed exemption was based on the approach suggested by the ADA. The ADA suggested that if a vehicle complies with FMVSS No. 225 by having two LATCH systems and a tether anchorage in the second row of seating and no LATCH anchorages in the third row of seating, any modification resulting in the removal of the second row of seating would require the modifier to install complete LATCH systems in the third row of seating. Under the agency's proposal, the modifier was only required to install a tether anchorage. NHTSA noted that if the proposal were made final, the tether anchorage(s) attached to any relocated seat would be required to remain compliant with 49 CFR 571.225 S6, S7 and S8 upon relocation. NHTSA tentatively concluded that this requirement was within the capabilities of modifiers.

FMVSS No. 225 requires that vehicles manufactured on or after September 1, 2002, that do not have any forward-facing rear designated seating positions must have a compliant tether anchorage at each front passenger designated seating position (S4.4(c)). In the September 17, 2004 NPRM, NHTSA stated that if a vehicle were to be modified such that only front designated seating positions remained, the agency expected that modifiers would be able to install conforming tether anchorages at the front forward-facing passenger designated seating positions (if not already provided by the original vehicle manufacturer).

NHTSA sought comment on whether modifiers should be required to add tether anchorages to designated seating positions that were not so equipped by the original vehicle manufacturer.

On August 18, 1995, the agency issued a final rule amending FMVSS No. 201 to improve head protection in impacts with upper interior components of certain vehicles (60 FR 43031). The final rule significantly expanded the scope of FMVSS No. 201. Previously, the standard applied to the instrument panel, seat backs, interior compartment doors, arm rests and sun visors only. To determine compliance with the upper interior impact requirements, the final rule added procedures for a new in-vehicle component test in which a Free Motion Headform (FMH) is fired at certain target locations on the upper interior of a vehicle at an impact speed of up to and including 24 km/h (15 mph). The resultant data must not exceed a Head Injury Criterion score of 1000.

The standard, as further amended on April 8, 1997 (67 FR 16718), provided manufacturers with four alternate phase-in schedules for complying with the upper interior impact requirements. Twice, the agency extended the effective date for manufacturers of vehicles built in two or more stages, which now must comply with the expanded FMVSS No. 201 requirements on and after September 1, 2006 (68 FR 51706; August 28, 2003).

In the rulemaking that established the make inoperative exemption, NHTSA recognized that compliance with FMVSS No. 201 at some target points could be problematic for certain modifications, specifically the installation of a platform lift. Thus, currently, Part 595 includes an exemption to FMVSS No. 201 with respect to:

(a) Targets located on the right siderail, the right B-pillar and the first right side “other” pillar adjacent to the stowed platform of a lift or ramp that stows vertically, inside the vehicle.

(b) Targets located on the left siderail, the left B-pillar and the first left side “other” pillar adjacent to the stowed platform of a lift or ramp that stows vertically, inside the vehicle.

(c) Targets located on the rear header and the rearmost pillars adjacent to the stowed platform of a lift or ramp that stows vertically, inside the vehicle (49 CFR 595.7(c)(7)).

The ADA and NMEDA each submitted a separate petition for rulemaking requesting that NHTSA expand the exemption of FMVSS No. 201 to include the provisions pertaining to upper interior head protection. The ADA requested that 49 CFR 595.7 be amended to include exemptions for requirements related to: (1) Targets located on any hand grip or vertical stanchion bar; and (2) all of S6 of 571.201 in any case in which accommodating a person's disability necessitates raising the roof or door, or lowering the floor of the vehicle.

In the NPRM, the agency proposed to amend the exemption from the make inoperative provision by adding a limited exemption from the upper interior head protection requirements of FMVSS No. 201. This amendment would facilitate the raising of a vehicle roof and the lowering of a vehicle floor in order to accommodate individuals with disabilities. Also, in instances where a vehicle is not equipped with a grab bar, or the originally equipped grab bar is insufficient to accommodate an individual with a disability, the proposal would facilitate the installing of handles or stanchion bars.

In the NPRM, the agency stated that it has already recognized the potential impact of the upper interior head protection requirements on manufacturers of vehicles manufactured in two or more stages and has provided additional lead time for compliance. The potential impacts of the upper interior head protection requirements on vehicle modifiers are analogous to those on manufacturers of vehicles manufactured in two or more stages.

The agency also proposed to amend the title of Part 595 from “Retrofit On-Off Switches for Air Bags,” to “Make Inoperative Provisions.” In the NPRM, NHTSA stated that this amendment would reflect the fact that 49 CFR Part 595 addresses more matters than the retrofit of motor vehicles with on-off switches for air bags.

In response to the NPRM, NHTSA received comments from: the Adaptive Driving Alliance (ADA); the California Department of Vocational Rehabilitation (CDVR), the National Automobile Dealers Association (NADA); and the National Mobility Equipment Dealers Association (NMEDA). The commenters supported the proposed changes, as discussed below.

In supporting the NPRM, the NADA stated that the proposed exemptions “would facilitate vehicle alterations and modifications designed to satisfy the needs of disabled customers.” The NMEDA provided specific comments regarding the proposed changes regarding the LATCH requirements. NMEDA stated that requiring a tether anchorage in the second row will provide a means to secure a child seat in the vehicle, and that NMEDA will be able to provide guidance to the modifiers for installation of a tether anchorage in the event that the existing seat does not have one installed at the original equipment manufacturer's level. NMEDA further stated that considering the allowable area in which the tether anchorage may be installed, it did not foresee difficulty in locating or safely installing such an anchor. Since most of the “concerned vehicles” have a second row seat, NMEDA stated that it did not anticipate that the front row seat would have to be equipped with a tether anchorage.

Although it supported the rulemaking, the ADA commented on the proposed changes affecting FMVSS No. 208 and No. 225. Regarding FMVSS No. 208, the ADA stated its belief that since S14 of FMVSS No. 208 “mandates compliance with the advanced air bag requirements,” S14 should be added to the list of sections set forth in 49 CFR 595.7(c)(14). NHTSA agrees. We note that S14.5 of FMVSS No. 208 specifies differing requirements for meeting barrier test requirements using 50th percentile adult male dummies, depending on which S14 provision a vehicle is certified as meeting. Since some provisions mandate compliance, this final rule amends 49 CFR 595.7(c)(14) to include S14 of FMVSS No. 208.

The ADA also addressed the proposed inclusion in Part 595 of FMVSS No. 225 requirements, questioning whether the final sentence proposed for 49 CFR 595.7(c)(16): “Any tether anchorage attached to a seat that is relocated shall continue to comply with the requirements of 49 CFR 571.225 S6, S7 and S8” is appropriate. The ADA commented that:

NHTSA's response is that the ADA's comment appears to assume that after modification, only one tether anchorage will remain in the rear. Therefore, if a vehicle must have a compliant tether anchorage and there is only one tether anchorage present, the last sentence of the proposed regulatory language would be redundant. However, there may be other tether anchorages in the vehicle, in addition to the tether anchorage in the relocated seat, that comply with S6, S7, and S8 at rear seating positions. Without the last sentence, if there are other tether anchorages, the relocated tether(s) would not have to comply with the applicable provisions of FMVSS No. 225. It is NHTSA's position, (with which NMEDA agreed in its comments) that vehicle modifiers should have the technical capability to relocate a tether anchorage such that the relocated tether anchorage complies with S6, S7, and S8 of FMVSS No. 225. Further, all tether anchorages should meet the requirements of FMVSS No. 225, since they will likely be used with the child restraint. For these reasons, in the final rule, the last sentence of 595.7(c)(16) is retained.

NHTSA received no public comments in response to the proposed exemption from the make inoperative provision by adding limited exemptions from the upper interior head protection requirements of FMVSS No. 201. Therefore, NHTSA adopts as final the language proposed at 595.7(c)(7)(iv) and (v).

The California Department of Vocational Rehabilitation (CDVR) sought to bring attention to issues involving side air bags and “transfer seat bases.” The CDVR explained that these seat bases move the original equipment manufacturers' (OEM) seat back to allow a wheelchair user to move more easily from the wheelchair into the OEM seat. The OEM seat is then powered back into the driver's position. The CDVR noted that some of the OEM seats have side air bags in the seat backs, but there appeared to be nothing in the NPRM requiring the OEM wiring to the seat backs to be retained to maintain the functioning of the airbag.

Agency response: The “make inoperative” exemptions proposed in the NPRM did not include exemptions for the side air bags in the seat backs. Provisions relating to side air bags in seat backs is outside the scope of the rulemaking.

The comments supported the changes to Part 595. This final rule makes final the language (with the exception of adding an exception for S14 to S595.7(c)(14)) proposed in the NPRM of September 17, 2004. Further, since we received no comments on the proposed change to the title of Part 595, in this final rule, we are changing the title of Part 595 to: “Make Inoperative Provisions.”

In the NPRM, NHTSA proposed an effective date of 60 days after the final rule is published. None of the public comments addressed the effective date issue. NHTSA notes that this final rule removes a restriction on the modification of vehicles for persons with disabilities. To further the interest of providing vehicle modifiers the flexibility required to accommodate these individuals, since good cause has been shown to do so, and since NHTSA has determined it would be in the public interest to do so, the changes in this final rule becomes effective 60 days after the publication in the Federal Register .

NHTSA has considered the impact of this final proposed rule under Executive Order 12866 and the Department of Transportation's regulatory policies and procedures. This rulemaking document was not reviewed under E.O. 12866, “Regulatory Planning and Review.” This action has been determined to be “nonsignificant” under the Department of Transportation's regulatory policies and procedures. NHTSA has determined that the impacts of this rule are so minimal that a full regulatory evaluation is not warranted.

The agency believes that the expanded exemptions will not have any avoidable adverse safety effects on individuals with disabilities. The exemptions allow an individual with a disability to operate or ride in a motor vehicle, while maintaining the benefit of all of the compatible safety standards. Absent the modifications permitted by this rulemaking, individuals with disabilities might not be able to use the vehicles in question, resulting in less freedom of mobility.

Furthermore, NHTSA does not expect many individuals without a disability to use seating positions specially modified for individuals with a disability. As previously noted above, the number of affected standards remains small and the number of vehicles that modified in accordance with this final rule is relatively small.

We have considered the effects of this rulemaking action under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) Most motor vehicle modifiers affected by this final rule are considered small entities. I hereby certify that this final rule will not have a significant economic impact on a substantial number of small entities. The statement of the factual basis for this certification is that, as explained above, this final rule adds several occupant crash protection requirements, vehicle LATCH requirements, and upper interior head protection requirements to the current list of requirements exempted from the Make Inoperative Provision. While most modifiers are considered small entities, the final rule results in no significant economic impact on small entities since the final rule permits greater flexibility when modifying a vehicle to accommodate an individual with a disability. There may be slight economically beneficial effects of this final rule, because the affected small manufacturers would not have to ensure that they “make inoperative” compliance of a vehicle with provisions of the occupant crash protection requirements, vehicle LATCH requirements, and upper interior head protection requirements, when the vehicles are modified to accommodate an individual with a disability.

The collection of information burden under the labeling and recordkeeping requirements of 49 CFR 595.7, OMB clearance numbers 2127-0512 and 2127-0635, respectively, will not increase as a result of this final rule. The agency anticipates that any vehicle modification using one of the exemptions will be made in conjunction with one or more modifications based on the current exemptions. A vehicle modifier using one of the exemptions permitted in this final rule will only be required to list the exemption along with the other exemptions on the required disclosure label to the consumer. The vehicle labeling and recordkeeping requirements vary not according to the number of exemptions per vehicle, but by the total number of vehicles modified.

NHTSA has analyzed this final rule for the purposes of the National Environmental Policy Act and determined that it will not have any significant impact on the quality of the human environment.

Executive Order 13132 requires NHTSA 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.” The phrase “policies that have federalism implications” is defined in the Executive Order to include regulations that 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.” Under Executive Order 13132, the agency may not issue a regulation with Federalism implications, that imposes substantial direct costs, and that is not required by statute, unless the Federal Government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or the agency consults with State and local officials early in the process of developing the proposed regulation. NHTSA may also not issue a regulation with federalism implications and that preempts State law unless the agency consults with State and local officials early in the process of developing the proposed regulation.

The agency has analyzed this rulemaking action in accordance with the principles and criteria contained in Executive Order 13132 and has determined that it will not have sufficient federalism implications to warrant consultation with State and local officials or the preparation of a federalism summary impact statement. The final rule will have no substantial effects on the States, or on the current Federal-State relationship, or on the current distribution of power and responsibilities among the various local officials.

Pursuant to Executive Order 12988 “Civil Justice Reform,” we have considered whether this final rule would have any retroactive effect. NHTSA concludes that this final rule will not have any retroactive effect. Under 49 U.S.C. 30103, whenever a Federal motor vehicle safety standard is in effect, a State may not adopt or maintain a safety standard applicable to the same aspect of performance which is not identical to the Federal standard, except to the extent that the State requirement imposes a higher level of performance and applies only to vehicles procured for the State's use. 49 U.S.C. 30161 sets forth a procedure for judicial review of final rules establishing, amending, or revoking Federal motor vehicle safety standards. That section does not require submission of a petition for reconsideration or other administrative proceedings before parties may file suit in court.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272) directs us to use voluntary consensus standards in regulatory activities unless doing 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, such as the Society of Automotive Engineers (SAE). The NTTAA directs us to provide Congress, through OMB, explanations when we decide not to use available and applicable voluntary consensus standards. We have sought for but did not find any voluntary consensus standard bearing on this rulemaking.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires Federal agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of more than $100 million in any one year (adjusted for inflation with base year of 1995). Before promulgating a rule for which a written statement is needed, section 205 of the UMRA generally requires NHTSA 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 NHTSA to adopt an alternative other than the least costly, most cost-effective, or least burdensome alternative if the agency publishes with the final rule an explanation why that alternative was not adopted.

This final rule will not impose any unfunded mandates under the Unfunded Mandates Reform Act of 1995. This final rule will not result in the expenditure by State, local or tribal governments, in the aggregate, or by the private sector of more than $100 million annually. Accordingly, this final rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 12866 requires each agency to write all rules in plain language. Application of the principles of plain language includes consideration of the following questions:

If you have any responses to these questions, please address them to the persons listed in the For Further Information Contact: section at the beginning of this document.

The Department of Transportation assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda.

You can get an electronic copy using the Internet by—

(1) Searching the Department of Transportation's electronic Docket Management System (DMS) Web page ( http://dms.dot.gov/search );

(2) Accessing the Government Printing Office's Web page at http://www.access.gpo.gov/su_docs/aces/aces140.html ; or

(3) Visiting TSA's Law and Policy Web page at http://www.tsa.gov and accessing the link for “Law and Policy” at the top of the page.

In addition, copies are available by writing or calling the individual in the FOR FURTHER INFORMATION CONTACT section. Make sure to identify the docket number of this rulemaking.

TSA is an agency in the Department of Homeland Security (DHS), operating under the direction of the Assistant Secretary for Homeland Security (Transportation Security Administration). TSA is responsible for security in all modes of transportation, including aviation. See 49 U.S.C. 114(d). Under TSA's regulation on acceptance and screening of individuals and accessible property, 49 CFR 1540.111, an individual (other than a law enforcement or other authorized individual)—

On February 14, 2003, TSA published an interpretive rule that provided guidance to the public on the types of property TSA considers to be weapons, explosives, and incendiaries prohibited on an individual's person or accessible property, items permitted on an individual's person or accessible property, and items prohibited in checked baggage (68 FR 7444). On March 3, 2003, TSA subsequently published technical corrections to the interpretive rule at 68 FR 9902.

On December 17, 2004, the President signed into law the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA) (Pub. L. 108-458). Section 4025 of IRTPA in part requires TSA to add butane lighters to its list of prohibited items and to make any other modifications to the prohibited items list that TSA considers appropriate. Accordingly, on March 1, 2005, TSA published an amendment to the interpretive rule (70 FR 9877) adding all lighters to the list of prohibited items. TSA now is modifying the interpretive rule to provide an exception for certain scissors used by ostomates.

Under the interpretive rule, TSA presently considers all metal scissors with pointed tips to be weapons. Therefore, individuals are prohibited from carrying these types of scissors in an airport sterile area or in the cabin of an aircraft. Metal scissors with blunt tips and plastic scissors are permitted.

TSA is modifying the interpretive rule to exempt from the prohibited items list ostomy scissors. An ostomate is a person who has undergone a surgical procedure known as ostomy, which involves creating an opening in the person's abdomen. The opening is called a stoma. Human waste passes through the stoma into a collection pouch. An ostomy appliance consists of a positioning plate (or wafer or flange) that attaches to the collection pouch surrounding the stoma. Because no two stomas are alike, few ostomates can use manufactured pre-cut wafers. The ostomate, by using a chart provided with the collection pouch, must use pointed scissors to cut out the appropriate size of the cut-to-fit positioning plate. Round or dull scissors will not easily penetrate or cut through the positioning plate's heavy rubber or neoprene material. The adhesive backing that attaches the plate to the skin around the stoma increases the solidity of the material.

The collection pouch must be changed, and the stoma cleaned, each time the pouch fills up. The schedule for changing collection pouches varies for each person, from every 3 to 24 hours. If the collection pouch is not emptied when it fills, and the stoma cleaned thoroughly and timely, the accumulation of waste can lead to infection.

There are estimated to be 750,000 ostomates in the United States. While there are no statistics on the number of ostomates who use air transportation, it is likely that a large proportion of these individuals currently are unable to travel by air because they cannot carry scissors needed to care for their condition. TSA has heard from individuals with ostomies that they avoid air travel in part because they cannot have the scissors they need.

Allowing this limited exception to TSA's prohibition on metal pointed scissors removes a significant barrier to ostomates traveling by air without weakening aviation security. There have been a number of enhancements to civil aviation security since TSA first assumed responsibility for security screening. These improvements include improved screening procedures and equipment as well as better and more thorough training for security screeners. As mandated by the Federal Aviation Administration, domestic and foreign air carriers serving the United States have installed hardened cockpit doors on aircraft in order to protect and secure the flight deck. The Bureau of Immigration and Customs Enforcement has greatly increased the deployment of Federal Air Marshals to detect, deter, and defeat hostile acts onboard flights. Under the Federal Flight Deck Officer Program (FFDO) there are an increasing number of volunteer pilots who are trained and equipped to defend the flight decks of passenger aircraft against acts of criminal violence and air piracy. Based on these and other improvements to civil aviation security, TSA has determined that measures are in place to mitigate any threat posed by the limited number of scissors that may be carried aboard aircraft by ostomates.

This action is consistent with other exceptions TSA has created to address medical needs in other situations, such as the exception for syringes, jet injectors, lancets, and needles used by individuals in the treatment of diabetes. In recognition of the special needs of ostomates and in light of the additional security measures now in place, TSA is creating an exception to the prohibition against carrying metal pointed scissors. In general, metal scissors with pointed tips will continue to be prohibited. However, TSA will no longer prohibit ostomy scissors with pointed tips with an overall length, including blades and handle, of four inches or less, when accompanied by an ostomate supply kit containing related supplies, such as collection pouches, wafers, positioning plates, tubing, or adhesives.

TSA also is making three technical changes to the interpretive rule. First, we are removing section III.5 (now section III. E.), because it duplicates section III.1 (now section III A.). Second, we are amending section II.B(2), which makes clear that toy Transformer( TM ) robots are permitted. The amendment broadens the current category to cover similar toys and adds a trademark designation. Finally, we are adjusting the format of section III in order to make it consistent with the other sections.

Changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866, Regulatory Planning and Review (58 FR 51735, October 4, 1993), directs each Federal agency to propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq. , as amended by the Small Business Regulatory Enforcement Fairness Act of 1996) requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Office of Management and Budget directs agencies to assess the effect of regulatory changes on international trade. Fourth, the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation).

This rule explains to the public, airport personnel, screeners, and airlines how TSA interprets certain terms used in an existing rule, 49 CFR 1540.111. This interpretative rule is not considered an economically significant regulatory action for purposes of Executive Order 12866. However, there has been significant public interest in aviation security issues since the terrorist attacks of September 11, 2001. Therefore, this rule is significant for purposes of Executive Order 12866 and has been reviewed by the Office of Management and Budget (OMB).

The Regulatory Flexibility Act (RFA) of 1980 requires that agencies perform a review to determine whether a proposed or final rule will have a significant economic impact on a substantial number of small entities. If the determination is that it will, the agency must prepare a regulatory flexibility analysis as described in the RFA. For purposes of the RFA, small entities include small businesses, not-for-profit organizations, and small governmental jurisdictions. Individuals and States are not included in the definition of a small entity.

The RFA does not apply to this interpretive rule and TSA is not preparing an analysis for the Act, since under 5 U.S.C. 553, TSA is not required to publish a notice of proposed rulemaking. Nonetheless, because this rule will not impose any costs on the public, we have determined and certify that this rule does not have a significant economic impact on a substantial number of small entities.

The Trade Agreement Act of 1979 prohibits Federal agencies from establishing any standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Legitimate domestic objectives, such as safety, are not considered unnecessary obstacles. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards. TSA has assessed the potential effect of this interpretative rule and has determined that it will impose the same costs on domestic and international entities and thus has a neutral trade impact.

The Unfunded Mandates Reform Act of 1995 is intended, among other things, to curb the practice of imposing unfunded Federal mandates on State, local, and tribal governments. Title II of the Act requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in a $100 million or more expenditure (adjusted annually for inflation) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.”

This rulemaking does not contain such a mandate. The requirements of Title II of the Act, therefore, do not apply and TSA has not prepared a statement under the Act.

TSA has analyzed this interpretive rule under the principles and criteria of Executive Order 13132, Federalism. We have determined that this action 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, and therefore will not have federalism implications.

TSA has reviewed this action for purposes of the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4347) and has determined that this action will not have a significant effect on the human environment.

The energy impact of this action has been assessed in accordance with the Energy Policy and Conservation Act (EPCA) Public Law 94-163, as amended (42 U.S.C. 6362). We have determined that this rulemaking is not a major regulatory action under the provisions of the EPCA.

TSA is making the following changes to the prohibited items list:

1. Section I.B(10) is amended to read “Scissors, metal with pointed tips, except ostomy scissors with pointed tips with an overall length, including blades and handle, of four inches or less, when accompanied by an ostomate supply kit containing related supplies, such as collection pouches, wafers, positioning plates, tubing, or adhesives.”

2. Section II.A(17) is amended to read “Scissors, plastic or metal with blunt tips; and ostomy scissors with pointed tips with an overall length, including blades and handle, of four inches or less, when accompanied by an ostomate supply kit containing related supplies, such as collection pouches, wafers, positioning plates, tubing, or adhesives.”

3. Section II.B(2) is amended to read “Toy Transformer® robots and the like.”

4. Section III(5) (now section III E.) is amended to read “Reserved.”

5. Sections III(1) through (5) are redesignated as Sections III.A. through E.

The following is the list of prohibited items and permitted items reprinted in its entirety, with the changes inserted.

I. Prohibited Items. For purposes of 49 U.S.C. 40101 et seq. and 49 CFR 1540.111, TSA interprets the terms “weapons, explosives, and incendiaries” to include the items listed below. Accordingly, passengers may not carry these items as accessible property or on their person through passenger screening checkpoints or into airport sterile areas and the cabins of a passenger aircraft.

A. Guns and Firearms.

(1) BB guns.

(2) Compressed air guns.

(3) Firearms.

(4) Flare pistols.

(5) Gun lighters.

(6) Parts of guns and firearms.

(7) Pellet guns.

(8) Realistic replicas of firearms.

(9) Spear guns.

(10) Starter pistols.

(11) Stun guns/cattle prods/shocking devices.

B. Sharp Objects.

(1) Axes and hatchets.

(2) Bows and arrows.

(3) Drills, including cordless portable power drills.

(4) Ice axes/Ice picks.

(5) Knives of any length, except rounded-blade butter and plastic cutlery.

(6) Meat cleavers.

(7) Razor-type blades, such as box cutters, utility knives, and razor blades not in a cartridge, but excluding safety razors.

(8) Sabers.

(9) Saws, including cordless portable power saws.

(10) Scissors, metal with pointed tips, except ostomy scissors with pointed tips with an overall length, including blades and handle, of four inches or less, when accompanied by an ostomate supply kit containing related supplies, such as collection pouches, wafers, positioning plates, tubing, or adhesives.

(11) Screwdrivers (except those in eyeglass repair kits).

(12) Swords.

(13) Throwing stars (martial arts).

C. Club-Like Items.

(1) Baseball bats.

(2) Billy clubs.

(3) Blackjacks.

(4) Brass knuckles.

(5) Cricket bats.

(6) Crowbars.

(7) Golf clubs.

(8) Hammers.

(9) Hockey sticks.

(10) Lacrosse sticks.

(11) Martial arts weapons, including nunchucks, and kubatons.

(12) Night sticks.

(13) Pool cues.

(14) Ski poles.

(15) Tools including, but not limited to, wrenches and pliers.

D. All Explosives, Including

(1) Ammunition.

(2) Blasting caps.

(3) Dynamite.

(4) Fireworks.

(5) Flares in any form.

(6) Gunpowder.

(7) Hand grenades.

(8) Plastic explosives.

(9) Realistic replicas of explosives.

E. Incendiaries.

(1) Aerosol, any, except for personal care or toiletries in limited quantities.

(2) Fuels, including cooking fuels and any flammable liquid fuel.

(3) Gasoline.

(4) Gas torches, including micro-torches and torch lighters.

(5) Lighter fluid.

(6) Strike-anywhere matches.

(7) Turpentine and paint thinner.

(8) Realistic replicas of incendiaries.

(9) All lighters.

F. Disabling Chemicals and Other Dangerous Items.

(1) Chlorine for pools and spas.

(2) Compressed gas cylinders (including fire extinguishers).

(3) Liquid bleach.

(4) Mace.

(5) Pepper spray.

(6) Spillable batteries, except those in wheelchairs.

(7) Spray Paint.

(8) Tear gas.

II. Permitted Items. For purposes of 49 U.S.C. 40101 et seq. and 49 CFR 1540.111, TSA does not consider the items on the following lists as weapons, explosives, and incendiaries because of medical necessity or because they appear to pose little risk if, as is required, they have passed through screening. Therefore, passengers may carry these items as accessible property or on their person through passenger screening checkpoints and into airport sterile areas and the cabins of passenger aircraft.

A. Medical and Personal Items.

(1) Braille note taker, slate and stylus, and augmentation devices.

(2) Cigar cutters.

(3) Corkscrews.

(4) Cuticle cutters.

(5) Diabetes-related supplies/equipment (once inspected to ensure prohibited items are not concealed), including: insulin and insulin loaded dispensing products; vials or box of individual vials; jet injectors; pens; infusers; and preloaded syringes; and an unlimited number of unused syringes, when accompanied by insulin; lancets; blood glucose meters; blood glucose meter test strips; insulin pumps; and insulin pump supplies.

Insulin in any form or dispenser must be properly marked with a professionally printed label identifying the medication or manufacturer's name or pharmaceutical label.

(6) Eyeglass repair tools, including screwdrivers.

(7) Eyelash curlers.

(8) Knives, round-bladed butter or plastic.

(9) [Reserved]

(10) Matches (maximum of four books, strike on cover, book type).

(11) Nail clippers.

(12) Nail files.

(13) Nitroglycerine pills or spray for medical use, if properly marked with a professionally printed label identifying the medication or manufacturer's name or pharmaceutical label.

(14) Personal care or toiletries with aerosols, in limited quantities.

(15) Prosthetic device tools and appliances (including drill, Allen wrenches, pullsleeves) used to put on or remove prosthetic devices, if carried by the individual with the prosthetic device or his or her companion.

(16) Safety razors (including disposable razors).

(17) Scissors, plastic or metal with blunt tips; and ostomy scissors with pointed tips with an overall length, including blades and handle, of four inches or less, when accompanied by an ostomate supply kit containing related supplies, such as collection pouches, wafers, positioning plates, tubing, or adhesives.

(18) Tweezers.

(19) Umbrellas (once inspected to ensure prohibited items are not concealed).

(20) Walking canes (once inspected to ensure prohibited items are not concealed).

B. Toys, Hobby Items, and Other Items Posing Little Risk.

(1) Knitting and crochet needles.

(2) Toy Transformer(R) robots and the like.

(3) Toy weapons (if not realistic replicas).

III. Items Prohibited in Sterile and Cabin Areas, but that May Be Placed in Checked Baggage. Passengers may place prohibited items other than explosives, incendiaries, disabling chemicals and other dangerous items (other than individual self-defense sprays as noted below), and loaded firearms in their checked baggage, subject to any limitations provided in DOT's hazardous materials regulation. 49 CFR part 175.

A. Pepper spray or mace. A passenger may have one self-defense spray, not exceeding 4 fluid ounces by volume that incorporates a positive means to prevent accidental discharge. See 49 CFR 175.10(a)(4)(ii).

B. Small arms ammunition. A passenger may place small arms ammunition for personal use in checked baggage, but only if securely packed in fiber, wood or metal boxes, or other packaging specifically designed to carry small amounts of ammunition. 49 CFR 175.10(a)(5).

C. Unloaded firearms. A passenger may place an unloaded firearm or starter pistol in a checked bag if the passenger declares to the airline operator, either orally or in writing, before checking the baggage, that the passenger has a firearm in his or her bag and that it is unloaded; the firearm is carried in a hard-sided container; and the container is locked, and only the passenger has the key or combination. 49 CFR 1540.111(c).

D. Club-like items. A passenger also may transport club-like objects and sharp objects in checked baggage, as long as they do not contain explosives or incendiaries.

E. [ Reserved. ]

IV. Lists are not Exclusive. Neither the prohibited items list nor the permitted items list contains all possible items. A screener has discretion to prohibit an individual from carrying an item into a sterile area or onboard an aircraft if the screener determines that the item is a weapon, explosive, or incendiary, regardless of whether the item is on the prohibited items list or the permitted items list. For example, if a cigar cutter or other article on the permitted list appears unusually dangerous, the screener may refuse to allow it in sterile areas. Similarly, screeners may allow individuals to bring items into the sterile area that are not on the permitted items list. In addition, items may be prohibited from the cabin of an aircraft, or allowed in only limited quantities, by Department of Transportation regulations governing hazardous materials. Individuals with questions about the carriage of hazardous materials on passenger aircraft may call the Hazardous Materials Information Center at 1-800-467-4922 for more information.

This emergency rule is accessible via the Internet at the Office of the Federal Register 's website at www.gpoaccess.gov/fr/index.html . Background information and documents are available at the NMFS Northwest Region website at www.nwr.noaa.gov/1sustfsh/gdfsh01.htm .

Pacific whiting ( Merluccius productus ) is a very productive species with highly variable recruitment (the biomass of fish that mature and enter the fishery each year) and a relatively short life span when compared to other groundfish species. Whiting has the largest (by volume) annual allowable harvest levels of the 90+ groundfish species managed under the FMP. The coastwide whiting stock is managed by both the United States and Canada, and mature whiting are commonly available to vessels operating in U.S. waters from April through October. Background on the stock assessment for and the establishment of the 2005 acceptable biological catch (ABC) and optimum yield (OY) for Pacific whiting is provided in the final rule for the 2005 whiting harvest specifications, published May 3, 2005 (70 FR 22808).

Whiting is taken by vessels using mid-water trawl gear in four commercial sectors: tribal trawl vessels (Makah Tribe); non-tribal trawl catcher boats delivering whiting to shore-based processing plants; non-tribal trawl catcher boats delivering whiting to motherships at sea; and, non-tribal catcher-processors. For 2005, using the sliding scale allocation method described in the final rule on the 2005 whiting harvest specifications, the tribal whiting allocation is 35,000 mt. The 2005 non-tribal commercial OY for whiting is 232,069 mt. This is calculated by deducting the 35,000-mt tribal allocation and 2,000 mt for research catch and bycatch in non-groundfish fisheries from the 269,069 mt total catch OY. Regulations at 50 CFR 660.323(a)(24) divide the commercial OY into separate allocations for the non-tribal catcher/processor, mothership, and shore-based sectors of the whiting fishery. Each sector receives a portion of the commercial OY, with the catcher/processors getting 34 percent (78,903 mt in 2005), motherships getting 24 percent (55,696 mt in 2005), and the shore-based sector getting 42 percent (97,469 mt in 2005).

The best available information as of August 11, 2005, indicates that the following amounts of whiting have been taken by the four whiting sectors participating in the 2005 primary whiting season: tribal, 28,325 mt (80.9 percent of allocation); non-tribal shore-based, 70,176 mt (71.9 percent of allocation); non-tribal mothership, 37,659 mt (67.6 percent of allocation); non-tribal catcher/processor, 48,006 mt (60.8 percent of allocation).

Primary seasons for the non-tribal whiting fishery are provided at 50 CFR 660.373(b). In 2005, the primary seasons for the non-tribal whiting fishery started on the following dates: Catcher/processor sector May 15; Mothership sector May 15; Shore-based sector June 15; north of 42° N. lat., April 1 between 42° and 40°30′ N. lat., and April 15 south of 40°30′ N. lat. The tribal fishery, conducted by Makah Tribe members, began on May 1, 2005. The Makah Tribe's U&A fishing area is located within the U.S. West Coast exclusive economic zone (EEZ) north of 48°02′15″ N. lat. and east of 125°44′00″ W. long.

NMFS tracks catch levels of target and non-target species in the at-sea catcher-processor and mothership sectors inseason. The agency also receives inseason catch and bycatch data from the states of Oregon, California, and Washington on the shore-based sector and from the Makah Tribe on its whiting fishery. NMFS is responsible for closing the non-tribal fishing sectors when it estimates the whiting allocations for these sectors will be met.

Chinook bycatch in the non-tribal at-sea and tribal whiting fisheries is closely monitored. As in previous years, most shore-based whiting vessels were issued exempted fishing permits (EFPs) for landing unsorted whiting during the primary season. EFPs allow vessels delivering to shore-based harvesters to delay sorting the catch until offload. Delaying sorting until offload allows state biologists and industry-hired monitors to collect information on the incidental catch of prohibited species at the processing facilities. Since 2004, all EFP participants have been required to carry video cameras for monitoring catch retention at sea. To provide total catch data monitoring in the at-sea processing sectors of the fishery, all at-sea processing vessels carry two NMFS-trained observers while participating in the fishery. Total catch data from the whiting fisheries is available more swiftly for use in management decisions than data from many other West Coast groundfish fisheries.

The incidental take statement prepared pursuant to the Endangered Species Act requires reinitiation of consultation if the fishery exceeds an 11,000-Chinook salmon annual bycatch amount. In early July of the 2005 fisheries, NMFS first saw data on higher than expected salmon bycatch rates. By the end of July, primary whiting season data indicated that the fishery would likely exceed a bycatch of 11,000 salmon in 2005. The best available information as of August 11, 2005, indicates that the following numbers of Chinook salmon have been taken as bycatch in the whiting fishery by the four whiting sectors participating in the 2005 primary whiting season: tribal, 3,911 fish; non-tribal shore-based, 3,622 fish; non-tribal mothership, 2,143 fish; non-tribal catcher/processor, 1,607 fish. Therefore, NMFS has reinitiated consultation on the effect of the primary whiting fishery on salmon ESUs listed as endangered or threatened, and is taking this emergency action to reduce the effect of the whiting fishery on salmon for the remainder of the 2005 primary season.

NMFS reviewed 2001-2004 salmon bycatch data from the primary whiting season to determine if there were a depth at which whiting fishery participants could catch whiting, yet have lower salmon bycatch rates. Fishery data from those years indicate that salmon bycatch rates in the August-November period decline notably from the May-July bycatch rates and decrease for vessels fishing offshore of the 100- fm (183- m) depth contour. Therefore, NMFS is implementing an emergency rule that creates a salmon conservation zone for West Coast EEZ waters shoreward of a boundary line approximating the 100-fm (183-m) depth contour, wherein fishing for whiting is prohibited. Federal regulations at 50 CFR 660.393(a) provide latitude/longitude coordinates that define a boundary line at the 100-fm (183-m) depth contour; this boundary line is used, as necessary, to define the boundaries of trawl or non-trawl Rockfish Conservation Areas for the non-whiting groundfish fisheries. This same boundary line is used as the offshore boundary of the Ocean Salmon Conservation Zone established by this rule.

Federal regulations at 50 CFR 660.373(c) establish two closed areas for the Pacific whiting fishery that are intended to constrain the effects of the fishery on Klamath and Columbia River salmon. Additional salmon protection is provided at 50 CFR 660.373(d), which sets whiting trip limits for vessels operating shoreward of the 100-fm (183-m) depth contour in the Eureka management area (from 43°00′ to 40°30′ N. lat.) This emergency rule temporarily establishes a third salmon conservation zone for all West Coast waters shoreward of a boundary line approximating the 100-fm (183-m) depth contour. The latitude/longitude coordinates defining the boundary line that approximates the 100-fm (183-m) depth contour are provided at § 660.393(a).

This emergency rule establishes a coastwide salmon conservation zone for the Pacific whiting fishery. It is issued under the authority of the Magnuson-Stevens Fishery Conservation and Management Act at section 305(c)(1) and is consistent with the regulations implementing the FMP at 50 CFR part 660.

The Assistant Administrator for Fisheries, NOAA (AA) finds good cause to waive the requirement to provide prior notice and comment on this action pursuant to 5 U.S.C. 553(b)(B)., because Pproviding prior notice and opportunity for public comment would be impracticable and contrary to the public interest for the following reasons. The information on which this action is based was not available to NMFS until July 2005 and the closed area implemented by this rule needs to be in place as soon as possible in August 2005 in order to provide additional protection for ESA-listed endangered and threatened salmon during the remainder of the 2005 primary primary whiting season, as well as during the ESA consultation that is currently ongoing for these salmon. If the agency were to conductundergo a proposed and final rulemaking for this action, the rule would not likely be finalized until after the whiting fisheries had achieved their 2005 whiting quotas. The bycatch of ESA-listed salmon could continue unabated during this time. Providing prior notice and comment would be impracticable because affording prior notice and opportunity for public comment would impede the agency's mandated duty to manage fisheries to protect endangered and threatened salmon.

For the reasons described above, pursuant to 5 U.S.C. 553(d)(3), the AA also finds good cause to waive the 30-day delay in effectiveness, so that this rule may become effective as soon as possible to provide immediate protection for ESA-listed endangered and threatened salmon.

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

This action is within the scope of the October 2004 Environmental Impact Statement (EIS) prepared by the Council for the 2005-2006 Pacific Coast groundfish ABCs, OYS, and management measures. Copies of this EIS are available from the Pacific Council (See ADDRESSES .)

This emergency rule is exempt from the procedures of the Regulatory Flexibility Act because the rule is issued without opportunity for prior notice and opportunity for public comment.

The proposed and final rules to implement the 2005-2006 groundfish harvest specifications and management measures were developed after meaningful consultation and collaboration with tribal officials from the area covered by the FMP, per Executive Order 13175. Under the Magnuson-Stevens Act at 16 U.S.C. 1852(b)(5), one of the voting members of the Pacific Council must be a representative of an Indian tribe with federally recognized fishing rights from the area of the Council's jurisdiction. The tribal representative on the Council made a motion to adopt the 2005-2006 tribal management measures, which was passed by the Council. Of the four groundfish treaty tribes, only the Makah Tribe conducts a whiting fishery. NMFS consulted with the Makah Tribe on salmon bycatch in their whiting fishery and on implementing a fishery closure shoreward of a boundary line approximating the 100-fm (183-m) depth contour. The Makah Tribe is implementing tribal fishery regulations to close the tribal whiting fishery shoreward of 100- fm (183- m) and is beginning testing a salmon bycatch excluder device that has been successfully used to exclude salmon bycatch in Alaska pollock fisheries.

NMFS manages the groundfish fishery in the BSAI exclusive economic zone according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The 2005 pollock incidental catch allowance in the BS was established as 44,577 metric tons by the 2005 and 2006 final harvest specifications for groundfish in the BSAI (70 FR 8979, February 24, 2005), in accordance with § 679.20(a)(5)(i)(A)(1) and the American Fisheries Act (AFA) (Public Law 105-277, Division C, Title II).

As of August 22, 2005, the Administrator, Alaska Region, NMFS, has determined that approximately 11,525 metric tons (mt) of pollock remain in the incidental catch allowance. Based on projected harvest rates of other groundfish species and the expected incidental catch of pollock in those fisheries, the Regional Administrator has determined that 7,000 mt of pollock specified in the incidental catch allowance will not be necessary as incidental catch. Therefore, NMFS is apportioning the projected unused amount, 7,000 mt, of pollock from the incidental catch allowance to the directed fishing allowances established pursuant to § 679.20(a)(5)(i)(A). Pursuant to the pollock allocation requirements set forth in § 679.20(a)(5)(i), this transfer will increase the allocation to catcher vessels harvesting pollock for processing by the inshore component by 3,500 mt, to catcher/processors and catcher vessels harvesting pollock for processing by catcher/processors in the offshore component by 2,800 mt and to catcher vessels harvesting pollock for processing by motherships in the offshore component by 700 mt. Pursuant to § 679.20(a)(5)(i)(A)(4), no less than 8.5 percent of the 2,800 mt allocated to catcher/processors in the offshore component, 238 mt, will be available for harvest only by eligible catcher vessels delivering to listed catcher/processors. Pursuant to § 679.20(a)(5)(i)(A)(4)(iii), an additional 14 mt or 0.5 percent of the catcher/processor sector allocation of pollock will be available to unlisted AFA catcher/processors.

Pursuant to § 679.20(a)(5)(I) (A), Tables 3 and 10 are revised for the 2005 B season consistent with this reallocation. Footnote 1 continues to state the allocations under regulations at § 679.20(a)(5).

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA, (AA) finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) and 679.20(b)(3)(iii)(A) as such a requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the reallocation of projected unused amounts of BS pollock from the incidental catch allowance to the directed fisheries. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of August 22, 2005.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

This action is taken under 50 CFR 679.20, and is exempt from review under Executive Order 12866.