This rule is issued under Marketing Order No. 922 (7 CFR 922), as amended, regulating the handling of apricots grown in designated counties in Washington, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

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

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, apricot handlers in designated counties in Washington are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate as proposed herein would be applicable to all assessable Washington apricots beginning April 1, 2007, 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 would increase the assessment rate established for the Committee for the 2007-2008 and subsequent fiscal periods from $1.00 to $1.50 per ton for Washington apricots handled under the order.

The 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 apricots in designated counties in Washington. 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 at a public meeting. Thus, all directly affected persons have an opportunity to participate and provide input.

For the 2005-2006 and subsequent fiscal periods, the Committee recommended, and the USDA approved, an assessment rate of $1.00 per ton of apricots handled. This rate continues 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 May 24, 2007, and unanimously recommended 2007-2008 expenditures of $6,743. In comparison, last year's budgeted expenditures were $6,400. In addition, the Committee recommended that the current $1.00 per ton assessment rate be increased by $0.50 to $1.50 per ton of apricots handled. The Committee recommended the higher assessment rate to cover budgeted expenses while increasing its monetary reserve to a level commensurate with program objectives and requirements.

The major expenditures recommended by the Committee for the 2007-2008 fiscal period include $4,800 for management fees, $1,000 for Committee travel, $500 for the annual financial audit, and $100 for compliance. Budgeted expenses for these items in 2006-2007 were $4,800, $1,000, $600, and $100, respectively. The Committee added $343 to its budgeted expenses this year for equipment maintenance, insurance, bonds, and miscellaneous expenses.

The assessment rate recommended by the Committee was derived by dividing its anticipated expenses of $6,743 by the projected apricot crop of 5,400 tons. Applying the $1.50 per ton assessment rate to the Committee's 5,400 ton crop estimate should provide $8,100 in assessment income. Income derived from handler assessments would not only adequately cover budgeted expenses, but would also add approximately $1,357 to the current $3,980 reserve fund. As a consequence, the projected fiscal year-end reserve balance of $5,337 would be within the maximum permitted by the order of approximately one fiscal period's operational expenses.

The proposed assessment rate would 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 would be effective for an indefinite period, the Committee would 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 the Committee's meetings are available from the Committee or USDA. The Committee's meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate the Committee's 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 2007-2008 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 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.

There are approximately 300 apricot producers within the regulated production area and approximately 22 regulated handlers. Small agricultural producers are defined by the Small Business Administration (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 $6,500,000.

The Washington Agricultural Statistics Service has prepared a report showing that the total 5,400 ton apricot utilization sold for an average of $1,150 per ton in 2006 with a total value of approximately $6,200,000. Based on the number of producers in the production area (300), the average annual producer revenue from the sale of apricots in 2006 can thus be estimated at approximately $20,700. In addition, based on information from the Committee and USDA's Market News Service, 2006 f.o.b. prices ranged from $15.00 to $20.00 per 24-pound loose-pack container, and from $16.00 to $18.00 for 2-layer tray pack containers. Of the approximate 3,728 tons of the 2006 season fresh apricots packed-out, about 1,569 tons were packed in loose-pack containers and about 2,159 tons in tray-pack containers (weighing an average of about 20 pounds each). The total receipts for 2006 were less than $6,500,000. Thus, the majority of producers and handlers of Washington apricots may be classified as small entities.

This rule would increase the assessment rate established for the Committee and collected from handlers for the 2007-2008 and subsequent fiscal periods from $1.00 to $1.50 per ton for apricots handled under authority of the order. The Committee also unanimously recommended 2007-2008 expenditures of $6,743. With the 2007-2008 Washington apricot crop estimate of 5,400 tons, the Committee anticipates assessment income of $8,100. The Committee recommended the assessment rate increase to cover budgeted expenses and to increase the monetary reserve. With this proposed assessment rate and budget, the Committee would be in a position to add about $1,357 to its monetary reserve, with a projected balance on March 31, 2008, of approximately $5,337—an amount within the maximum permitted by the order of approximately one fiscal period's operational expenses.

The major expenditures recommended by the Committee for the 2007-2008 fiscal period include $4,800 for management fees, $1,000 for Committee travel, $500 for the annual financial audit, and $100 for compliance. Budgeted expenses for these items in 2006-2007 were $4,800, $1,000, $600, and $100, respectively. The Committee added $343 to its budgeted expenses this year for equipment maintenance, insurance, bonds, and miscellaneous expenses.

The Committee discussed alternatives to this recommended assessment increase. Leaving the assessment rate at the current $1.00 per ton was discussed, but not seriously considered since such a rate would have further eroded the Committee's reserves. Higher and lower rates were also considered but not recommended because the $1.50 rate would not only meet the Committee's objectives for the 2007-2008 season, but also increase the reserve to a level commensurate with order provisions.

A review of historical information and preliminary information pertaining to the upcoming crop year indicates that the producer price for the 2007-2008 season could average about $1,000 per ton for fresh Washington apricots. Therefore, the estimated assessment revenue for the 2007-2008 fiscal period as a percentage of total producer revenue is 0.15 percent for Washington apricots.

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

In addition, the Committee's meeting was widely publicized throughout the Washington apricot industry and all interested persons were invited to attend and participate in Committee deliberations on all issues. Like all Committee meetings, the May 24, 2007, meeting was a public meeting and all entities, both large and small, were able to express views on the issues. Finally, interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.

This proposed rule would impose no additional reporting or recordkeeping requirements on either small or large Washington apricot 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. Furthermore, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

AMS is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and order 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.

A 10-day comment period is provided to allow interested persons to respond to this proposed rule. Ten days is deemed appropriate because: (1) The 2007-2008 fiscal period began on April 1, 2007, and the order requires that the assessment rate for each fiscal period apply to all assessable apricots handled during such fiscal period; (2) the Washington apricot harvest and shipping season is expected to begin as early as the last week of June; (3) the Committee needs to have sufficient funds to pay its expenses, which are incurred on a continuous basis; and (4) handlers are aware of this action, which was recommended by the Committee at a public meeting and is similar to other assessment rate actions issued in past years.

For the reasons set forth in the preamble, 7 CFR part 922 is proposed to be amended as follows:

Prior documents in this proceeding: Notice of Hearing issued on April 18, 2006, and published in the April 24, 2006, issue of the Federal Register (71 FR 20902) and a Recommended Decision issued on March 19, 2007, and published in the March 27, 2007, issue of the Federal Register (72 FR 14368).

This action is governed by the provisions of sections 556 and 557 of Title 5 of the United States Code and, therefore, is excluded from the requirements of Executive Order 12866.

The proposed amendments are based on the record of a public hearing held on May 17 and 18, 2006, in Modesto, California. The hearing was held to consider the proposed amendment of the order. The hearing was held pursuant to the provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601 et seq. ) hereinafter referred to as the “Act,” and the applicable rules of practice and procedure governing the formulation of marketing agreements and marketing orders (7 CFR Part 900).

Notice of this hearing was published in the Federal Register on April 24, 2006 (71 FR 20902). The notice of hearing contained proposals submitted by the Walnut Marketing Board (Board), which is responsible for local administration of the order, and by the Agricultural Marketing Service (AMS).

The proposed amendments to marketing order 984 would:

1. Change the marketing year from August 1 through July 31 to September 1 through August 31. This proposal would amend § 984.7, Marketing year, and would result in conforming changes being made to § 984.36, Term of office, and § 984.48, Marketing estimates and recommendations.

2. Specify that the act of packing walnuts is considered a handling function. This proposal would amend § 984.13, to handle, as well as clarify the definition of “pack” in § 984.15 by including the term “shell” as a function of “pack.”

3. (a) Amend all parts of the order that refer to cooperative seats on the Board, redistribute member seats among districts, and provide designated seats for a handler handling 35 percent or more of production, if such handler exists. This proposal would amend § 984.35, Walnut Marketing Board, and § 984.14, Handler.

3. (b) Amend the Board member nomination process to reflect proposed changes in the Board structure, as outlined in 3(a). This proposal would amend § 984.37, Nominations, and § 984.40, Alternate.

4. Require Board nominees to submit a written qualification and acceptance statement prior to selection by USDA. This proposal would amend § 984.39, Qualify by acceptance.

5. Change the name of the Walnut Marketing Board to the California Walnut Board. This proposal would amend § 984.6, Board, and § 984.35, Walnut Marketing Board.

6. Add authority to reestablish districts, reapportion members among districts, and revise groups eligible for representation on the Board. This proposal would add a new paragraph (d) to § 984.35, Walnut Marketing Board.

7. Add percentage requirements to Board quorum and voting requirements, add authority for the Board to vote by “any other means of communication” (including facsimile) and add authority for Board meetings to be held by telephone or by “any other means of communication”, providing that all votes cast at such meetings shall be confirmed in writing. This proposal would amend § 984.45, Procedure, and would result in a conforming change in § 984.48(a), Marketing estimates and recommendations.

8. Add authority to carry over excess assessment funds. This proposal would amend § 984.69, Assessments.

9. Add authority to accept voluntary financial contributions. This proposal would add a new § 984.70, Contributions.

10. Clarify that members and alternate members may be reimbursed for expenses incurred while performing their duties and that reimbursement includes per diem. This proposal would amend § 984.42, Expenses.

11. Add authority for the Board to appoint more than one inspection service as long as the functions performed by each service are separate and do not duplicate each other. This proposal would amend § 984.51, Inspection and certification of in-shell and shelled walnuts.

12. (a) Broaden the scope of the quality control provisions by adding authority to recommend different regulations for different market destinations. This proposal would amend § 984.50, Grade and size regulations.

12. (b) Add authority that would allow for shelled walnuts to be inspected after having been sliced, chopped, ground, or in any other manner changed from shelled walnuts, if regulations for such walnuts are in effect. This proposal would amend § 984.52, Processing of shelled walnuts.

13. Add authority for marketing promotion and paid advertising. This proposal would amend § 984.46, Research and development.

14. Replace the terms “carryover” with “inventory,” and “mammoth” with “jumbo,” to reflect current day industry practices. This proposal would amend § 984.21, Handler inventory, and § 984.67, Exemption, and would also result in conforming changes being made to § 984.48, Marketing estimates and recommendations, and § 984.71, Reports of handler carryover.

15. (a) Clarify to simplify the interhandler transfer provision, and add authority for the Board to recommend to USDA regulations, including necessary reports, for administrative oversight of such transfers. This proposal would amend § 984.59, Interhandler transfers.

15. (b) Clarify that the Board may require reports from handlers or packers that place California walnuts into the stream of commerce. This proposal would amend § 984.73, Reports of walnut receipts.

16. Update and simplify the language in § 984.22, Trade demand, to state “United States and its territories,” rather than name “Puerto Rico” and “The Canal Zone”.

17. Amend the order by adding language that would acknowledge that the Board may deliberate, consult, cooperate, and exchange information with the California Walnut Commission. Any information sharing would be kept confidential. This would add a new § 984.91, Relationship with the California Walnut Commission.

In addition, USDA proposed adding two provisions that would help assure that the operation of the program conforms to current Department policy and that USDA can make any necessary conforming changes. These provisions would:

18. Establish tenure requirements for Board members. This proposal would amend § 984.36, Term of office.

19. Require that continuance referenda be conducted on a periodic basis to ascertain industry support for the order and add more flexibility in the termination provisions. This proposal would amend § 984.89, Effective time and termination.

20. Make changes as may be necessary to the order, if any of the proposed changes are adopted, so that all of the order's provisions conform to the effectuated amendments. To the extent necessary, conforming changes have made to the amendments. These conforming changes have been identified in the above list of proposed amendments.

Upon the basis of evidence introduced at the hearing and the record thereof, the Administrator of AMS on March 19, 2007, filed with the Hearing Clerk, U.S. Department of Agriculture, a Recommended Decision and Opportunity to File Written Exceptions thereto by April 16, 2007.

Fifteen exceptions were filed during the exception period. The exceptions expressed concern over the discussion in the Recommended Decision regarding Material Issue No. 11. This proposal would add authority for the Board to appoint more than one inspection service as long as the functions performed by each service are separate and do not duplicate each other. Comments stated that, if this authority were implemented, private sector entities, in addition to USDA, should be able to offer non-traditional inspection services. Persons filing these comments claimed that the proposed amendatory language would prevent any service other than USDA from offering non-traditional inspection. The specifics of these exceptions are further discussed in the Findings and Conclusions; Discussion of Exceptions section of this document. One of the exceptions also offered a comment of general support for the proposal to implement term limits as a method to encourage participation of industry members that have not previously served on the Board.

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

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions so that small businesses will not be unduly or disproportionately burdened. Marketing orders and amendments thereto are unique in that they are normally brought about through group action of essentially small entities for their own benefit.

Small agricultural growers are defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts of less than $750,000. Small agricultural service firms, which include handlers regulated under the order, are defined as those with annual receipts of less than $6,500,000.

Interested persons were invited to present evidence at the hearing on the probable regulatory and informational impact on growers and handlers of the proposed amendments, and in particular the impact on small businesses. The record evidence shows that the proposed amendments are designed to enhance industry efficiencies and streamline administrative operations of the marketing order. The record evidence is that while some minimal costs may occur, those costs would be outweighed by the benefits expected to accrue to the California walnut industry.

According to the record, the California walnut industry currently has 44 handlers and approximately 5000 producers. The crop is produced in a region that spans approximately 400 miles in California's Central Valley.

Fifteen grower witnesses and 7 handler witnesses testified at the hearing. Using the SBA definition ($750,000 in gross annual walnut sales), 7 of the grower witnesses identified themselves as large business entities and 6 as small business entities. All 7 handler witnesses identified themselves as being large business entities according to the SBA definition. Some of the handler witnesses were also growers. According to witnesses, 37 out of an industry total of 44 handlers would qualify as small business entities under the SBA definition. Also, under the order amendments contained herein, it is estimated that five packers would be considered handlers, the majority of whom would be considered small entities.

Based on information presented at the hearing, calculations describing an average California walnut producer provide the following: Dividing 219,000 bearing acres in 2005 by 5,000 producers indicates an average of 44 bearing acres per producer. Dividing the two-year average crop value for 2003 and 2004 ($414,950,000) by 5,000 producers yields an average walnut revenue per producer estimate of about $83,000. According to the hearing record, more than 70 percent of California walnut producers would be classified as small producers according to the SBA definition.

According to a study presented at the hearing, entitled “Cost to Produce Walnuts in California” (prepared by Dr. Karen Klonsky, Department of Agriculture and Resource Economics, University of California Davis, 2006), typical average costs for a walnut orchard in the Sacramento Valley are $2,460 per acre in full production. The costs are broken down as follows: (a) Land and trees, $678 (28 percent), (b) cultural costs, $667 (27 percent), (c) harvest, $538 (22 percent), (d) equipment and buildings, $302 (12%), and (e) cash overhead, $275 (11 percent).

At an average grower price in recent years of $0.62 per pound, a grower would need a yield of 2 tons per acre to break even, according to the study. The breakeven price at the State average yield of 1.5 tons per acre is about $0.70 per pound, which is above the actual price received in most recent years, but equal to the 2004 average price received by growers.

Individual grower costs can vary considerably due to such variables as horticultural practices and varieties grown, and also due to orchard location and year of acquisition, and water availability and cost.

Although a majority of producers are considered small business entities, record evidence also indicates that producer revenue has increased over time. The National Agricultural Statistical Service (NASS) crop value estimate for 2004, $451.75 million, was 38 percent higher than in 1995, and was the sixth successive yearly increase. Average revenue per acre in 2004 reached a record $2,082.

Record evidence also indicates that acreage and production are trending upward. Production did not exceed 300,000 tons until 2001, but has exceeded that level for 4 out of the last 5 years. Witnesses stated that the five-year average production for 1996-2000 was 244,000 tons, compared to the five-year average production (2001-2005), which was 318,600 inshell tons.

According to the hearing record, a number of factors have contributed to increased production in recent years. New acres have been planted at a rate of three to five thousand acres per year, some of which are new varieties with higher yields. Witnesses explained that older varieties may yield 1,500 to 3,000 pounds per acre, due to both planting patterns and the typical yield of the variety. New varieties, such as the Chandler, will yield up to 6,000 pounds per acre. Newer plantings have led to a reduction in the cyclical peaks and valleys associated with the alternate-bearing characteristic of tree nuts. This, in turn, has facilitated better inventory management and has made the walnut industry a more reliable ingredient supplier to the food-processing industry.

According to the hearing record, the growing season commences in March of each year with harvest occurring between September and November, depending upon the variety. Inshell California walnuts are a seasonal item with 95 percent of the volume shipped between the months of September and December. This represents roughly 25 percent of the industry's production. Inshell walnuts are marketed primarily as a winter holiday food. According to the hearing record, the purchase of significant quantities of inshell walnuts occurs due to the tradition in many markets of displaying them with other inshell nuts as part of winter holiday decor.

Shelled walnuts are marketed on a year-round basis, and represent about 75 percent of utilization. Large handler infrastructure investments have contributed substantially to the growth of the year-round shelled business, as well as the inshell business.

Over the past ten years sophisticated laser-sorting equipment and new varieties such as the Chandler have contributed to improved quality. Higher customer expectations have accompanied the improvements in technology and quality, with more demand for high-quality, high-specification California walnuts. Marketing success in Japan is cited as a prime example of this trend.

According to the hearing record, shelled walnuts are utilized in a variety of ways, with commercial baking believed to be the single largest utilization category. Retail consumption of walnuts packaged for use in the home has increased dramatically over the past several years. Shelled walnuts may be sold in packages ranging from 2.75 ounce retail packages to large bulk containers of 25 pounds or more for industrial users, wholesalers, and distributors. The last 12 years have seen substantial increases in snack food uses of walnuts, in addition to expansion of ingredient use beyond baking and confectionery items to include usage with salads, rice, and pasta.

A high degree of mechanization in the harvest has reduced the deleterious impact on nut quality from rain and other weather conditions. Once harvested, walnuts are taken to holding stations where a fibrous husk is removed, and the walnuts are then dried to approximately eight percent moisture. They are delivered to handlers for further processing, which includes cleaning, sorting, and shelling.

According to the hearing record, California walnuts rank eighth in exports over all the commodities grown in the state. The top three inshell export markets are Spain, Italy, and Germany. Five-year average export value (2000/01-2004/05) is approximately $52 million, representing 63 percent of total export value for that five-year period. The key export markets for shelled-walnut utilization are: Japan, Germany, Spain, Israel, Korea, and Canada. Five-year average export value for those six countries is $91.8 million, which is about 76 percent of the total value of shelled walnut exports.

California walnuts compete with walnuts grown in China, Turkey, France, Italy, Chile, North Korea, India, Vietnam, Argentina, Brazil, and many areas within the former Soviet Union including Kazakhstan, Ukraine, Hungary, and Moldova. Within the European Union the major competition comes from France and Eastern Europe. In the Pacific Rim, major competitors include China and India.

The amendments included in this decision would: Change the marketing year; include “pack” as a handler function; restructure the Board and revise nomination procedures; rename the Board and add authority to change Board composition; modify Board meeting and voting procedures; add authority for marketing promotion and paid advertising; add authority to accept contributions, and to carry over excess assessment funds; broaden the scope of the quality control provisions and add the authority to recommend different regulations for different market destinations; add authority for the Board to designate more than one inspection service; replace outdated order language with current industry terminology; and other related amendments.

The USDA proposed three additional amendments: To establish tenure limitations for Board members, to require that continuance referenda be conducted on a periodic basis to ascertain producer support for the order, and to make any changes to the order as may be necessary to conform with any amendment that may result from the hearing.

All of the proposals are intended to streamline and improve the administration, operation, and functioning of the program. Many of the proposed amendments would update the language of the order, thus better representing and conforming to current practices in the industry. The proposed amendments are not expected to result in any significant cost increases for growers or handlers. More efficient administration of program activities may result in cost savings for the Board. A description of the proposed amendments and their anticipated economic impact on large and small entities is outlined below.

Proposal 11 would amend the order to add authority for the Board to designate more than one inspection service, as long as the functions performed by each service are separate and do not conflict with each other.

To ensure that walnuts are properly graded and meet marketing order minimum standards, the Board currently arranges for inspection of walnuts prior to shipping for all walnut handlers. The marketing order currently authorizes contracting with one agency, the California based Dried Fruit and Nut Association (DFA).

DFA inspects all walnuts that leave California to certify that they meet marketing order minimum standards. Operating as an out-going inspection service, samples of packed walnuts are examined and certified by licensed DFA inspectors at the end of the handling and packing process.

The following data representing current inspection costs, summarizing actual inspection cost data for 2004-05 for the entire industry (44 handlers), was presented at the hearing by Board representatives. According to the record, the 2004-05 cost to serve the 44 handlers was $1.857 million, which is an average cost of just over $42,000 per handler.

Since inspection costs depend largely on volume handled, the four largest handlers account for $1.282 million, or 69% of total inspection expenditure in the 2004-05 crop year. The 37 smaller handlers account for $412,172 in expenditure, about 22 percent of the total, averaging about $11,000 per handler.

The Federal-State Inspection Service (FSIS) has developed effective, less costly alternative inspection programs.

The Partners in Quality Program, or PIQ, is a documented quality assurance system. Under this program, individual handlers must demonstrate and document their ability to handle and pack product that meets all relevant quality requirements. Effectiveness of the program is verified through periodic, unannounced audits of each handler's system by USDA-approved auditors.

Under the Customer-Assisted Inspection Program, or CAIP, USDA inspectors oversee the in-line sampling and inspection process performed by trained company staff. USDA oversight ranges from periodic visits throughout the day to a continuous on-site presence.

DFA does not offer inspection services that operate similarly to the PIQ and CAIP programs.

Cost savings would occur by reducing the prevalence of double inspections under the current system. Currently, one inspection is undertaken to meet minimum USDA quality requirements specified in the marketing order. A second inspection is often necessary to meet the considerably higher standards of specific customers. Moving to a PIQ or CAIP program would greatly reduce inspection costs, because meeting higher standards under PIQ or CAIP would also ensure that an inspected lot met minimum marketing order standards.

Witnesses at the hearing testified that the California walnut industry should allow handlers to take advantage of USDA's alternative inspection programs such as the CAIP and the PIQ. Handlers who do not wish to use the alternative inspection services offered by USDA would continue to use the services of the DFA for traditional inspection services, such as end-line and lot inspections.

The proposal also specifies that “each service shall be separate so as to not conflict with each other,” meaning that each inspection service would offer distinct and different services (i.e. PIQ vs. lot inspections) so that the integrity of both programs can be maintained.

Witnesses speaking in favor of this proposal explained the importance of a handler's ability to take advantage of inspection services that would most economically fit the size and functions of his or her operation. Currently, all walnut product is inspected by DFA. While this inspection service has worked well for the industry for many years, the DFA inspection service does not accommodate inspection procedures that support larger handler economies of scale. Witnesses stated that USDA programs, such as PIQ and CAIP, are designed to fit larger scale handling operations, and therefore offer cost saving advantages that the DFA service does not. This proposal, if implemented, would allow handlers to use the alternative inspection programs offered by USDA.

Several witnesses indicated that lowering costs to handlers would benefit growers because they expect that the cost reduction would be reflected in increased payments to growers.

Financial impact calculations provided by the Board (shown in the table below) indicate that introducing the option of using PIQ or CAIP programs could result in savings of $1.09 million, an average per handler savings of $156,067 for the industry's seven largest handlers. Due to the high volumes handled, most of the savings accrue to the four largest handlers, estimated at $1.05 million, or an average per handler of $263,169.

Data from NASS indicate that the two-year average value of the 2003 and 2004 crops was about $415 million. The current DFA inspection cost ($1.857 million) represents a very small proportion of crop value, about 0.4 percent. If the largest 7 handlers used USDA for inspection at a cost of $352,380 and the remaining 37 handlers continue to work with DFA at an estimated cost of $412,172, then the combined cost of $764,552 would represent 0.2 percent of the recent-year crop value.

Witnesses emphasized the cost effectiveness of having an additional inspection agency. If implemented, this proposal would facilitate the streamlining of handler operations to utilize the inspection service best suited to their operations.

Since potential savings are correlated with economies of scale, record evidence indicates that PIQ and CAIP programs would be most beneficial for large handlers. It is unlikely that the smaller handlers would initially opt for these programs. Smaller handlers that expand their operations in the future may realize benefits from switching to PIQ or CAIP. Witnesses stated that no change in inspection costs is expected for handlers remaining with traditional DFA inspection services. Therefore, no financial disadvantages are expected to result from this proposed amendment. If implemented, this proposal may result in an overall decrease in costs of inspection to the industry.

Proposal 12b would add authority for shelled walnuts to be inspected after having been sliced, chopped, or ground or in any manner changed from being shelled walnuts, if regulations for such walnuts are in effect.

New walnut product forms are regularly requested by both domestic and foreign customers. In the last 20 years, the industry has become much more capable of producing at a considerably higher level quality and of developing more specific types of products that meet the differing needs of individual customers. To capitalize on this growing capability, a number of witnesses expressed the view that an important tool for increasing sales is the ability to establish standards for these walnut products.

The order currently requires shelled product to be certified as merchantable, that is, meeting the minimum USDA requirements prior to further processing. When handlers are processing for end users that require further processing, this certification represents a costly extra step. After the initial shelled walnut certification, the handlers employ their own quality control procedures to meet the higher customer specifications. This proposal would allow a single inspection at the end of the process that would serve both purposes. If implemented, this proposal would allow the Board to recommend modifications to allow certification of product after it has been modified or chopped, leading to cost savings in the handling process.

Witnesses contended that current standards focus on visually observed characteristics that are significant for consumer acceptance, but often do not adequately address specific quality concerns important to various export markets, including Europe. Such concerns include, for example, moisture content or aflatoxin tolerances. If implemented, this proposal would allow the Board to review scientific data and develop inspection procedures for recommendation and approval by USDA to assure customers that walnuts meet their specified criteria.

Any new quality standards recommended by the Board would be subject to thorough review prior to seeking approval from USDA. Witnesses supported this amendment as it would give the Board authority to pursue quality regulations in addition to existing grade standards, both of which are important to industry customers.

Witnesses emphasized that this proposal would grant authority to the Board to recommend quality standards that could exceed current standards or to develop new standards for product characteristics not currently covered. Witnesses also stated that no specific modifications are currently requested, just flexibility to create them in the future.

While this proposed amendment may result in some cost increases associated with administration and oversight of new quality regulations, it is also expected that some handlers may benefit from lower inspection costs if the inspection requirements for specific markets were modified. Any costs associated with the implementation of this proposal are expected to be outweighed by the overall benefits accrued to the industry.

Proposal 13 would amend the order by adding authority for marketing promotion and paid advertising.

Current promotional activities for California walnuts are undertaken by the California Walnut Commission (CWC). Witnesses stated that the CWCs activities have led to considerable success in increasing demand for the industry's product.

Witnesses explained that with price inelastic demand for walnuts, recent increases in production could have driven down prices and total grower revenue. The CWC's successful promotional activities have helped mitigate that potential impact, keeping average grower prices and grower revenue steady or increasing for several years.

According to the hearing record, adding authority for paid advertising and promotion under the order would benefit the industry by allowing the Board to engage in activities that are currently supported by the Commission. Small businesses would be the greatest beneficiaries of an expanded generic advertising program, because they have the least financial resources to devote to selling their products, according to a witness.

While an increase in advertising and promotional activities may result in increased Board expenditures, witnesses were confident that the positive results of the Board's promotional activities on consumer demand for California walnuts would more than outweigh any increases in costs to the industry.

Remaining amendment proposals are largely administrative in nature and would impose no new significant regulatory burdens on California walnut growers or handlers. They should benefit the industry by improving the operation of the program and making it more responsive to industry needs.

Proposal 1 would amend the order to change the marketing year from August 1 through July 31 to September 1 through August 31. Under the current definition of the order, the California walnut marketing year begins August 1 and continues through July 31. Witnesses explained that, over time, new varieties of walnuts have been introduced, and the areas in which walnuts are cultivated have shifted. The newer varieties mature later than the varieties grown at the time of the program's inception. At the same time, cultivation has slowly moved into areas that previously were not suited for walnut production. With differences in climate, soil, and water, witnesses explained that these new production areas have slightly later growing cycles. The proposed change in the marketing year would better reflect current crop cycles.

Proposed conforming changes would ensure that Board member terms of office and marketing estimates calculated by the Board would conform to the modified marketing year. This amendment is not expected to result in any increases in costs to growers or handlers.

Proposal 2 would amend the order by specifying that the act of packing walnuts is considered a handling function. In addition, the term “pack” would be amended to include shelling, and would be modified so that packing is applicable to both inshell and shelled walnuts.

According to the hearing record, the order currently defines “to handle” as to “sell, consign, transport, or ship, or in any other way, to put walnuts into the current of commerce”. The definition does not include the specific act of packing. “To pack”, as currently defined in the order means, “to bleach, clean, grade or otherwise prepare inshell walnuts for market”. Pack is not currently applicable to shelled walnuts. Witnesses stated that the proposed amendments to the definitions of “handle” and “pack” would more accurately reflect current industry operations.

This amendment is not expected to result in any increases in costs to growers. If implemented, this proposal may result in some packing entities previously not considered to be handlers under the order to be redefined as handlers. According to witnesses, there are roughly five packer entities that would qualify as handlers under the new definition. While some increases in administration costs on the part of handlers could arise as a result of reporting requirements, record evidence indicates that the benefit of more accurate industry information would merit that expense.

Proposal 3(a) seeks to amend all parts of the order that refer to cooperative seats on the Board, to redistribute member seats among districts, and to provide designated seats for a major handler, if such handler existed. A major handler would have to handle 35 percent or more of the crop.

According to the hearing record, the recent transition of the industry's largest cooperative from a cooperative entity to a publicly held company was the impetus for this proposal. Witnesses expressed the need to modify the Board structure to provide for representation that accurately reflects the current industry. Witnesses advocated that the Board structure should maintain the current number of Board members and alternates, and that the allocation of member seats between grower and handler positions should remain the same (meaning 4 handler member seats, five grower member seats and one public member).

Witnesses also recommended modifying the allocation of Board representation according to two possible scenarios. The two scenarios include: (1) Membership allocation that acknowledges the existence of a handler handling 35 percent or more of production and, (2) membership allocation in the absence of such handler. According to record evidence, these proposed amendments would not result in any increases in costs.

Proposal 3(b) would amend the Board member nomination process to reflect proposed changes in the Board structure, as outlined in 3(a). Current nomination procedures allow for all cooperative seat nominees to be selected by the cooperative and forwarded to the Secretary for approval and appointment. The cooperative nominee selection process is independent of the Board. All non-cooperative seat nominees are selected through a ballot nomination process overseen by the Board staff, and forwarded to the Secretary for approval and appointment.

According to the hearing record, the revised nomination procedures would allow a handler who handles 35 percent or more of the crop to nominate persons to fill its designated seats (as described in 3(a)) and to forward them to the Secretary for approval and appointment. Nomination of persons to fill all other seats would be conducted by the Board staff.

In the event a handler handling 35 percent or more of the crop does not exist, all Board nominees would be selected through a ballot nomination process conducted by the Board staff.

While some increases in administration costs could arise as a result of an increased number of ballots to be mailed by the Board if a major handler does not exist, record evidence indicates that the expense would be minor and would not directly burden growers or handlers.

Proposal 4 would require Board nominees to submit a written qualification and acceptance statement prior to selection by USDA. Currently, the acceptance procedure for persons nominated and selected to serve on the Board involves a two-step process. If this amendment were implemented, the two steps could be combined into one, thus resulting in less paperwork, a shorter acceptance procedure and improved efficiency in the acceptance process. This amendment is not expected to result in any increases in costs to growers or handlers.

Proposal 5 would change the name of the Walnut Marketing Board to the California Walnut Board. Witnesses stated that the proposed name of “California Walnut Board” would more accurately represent the Board's responsibilities. This amendment is not expected to result in any significant increases in costs to growers or handlers.

Proposal 6 would add authority to reestablish districts, to reapportion members among districts, and to revise groups eligible for representation on the Board. The intent of this proposal is to provide the Board with a tool to more efficiently respond to the changing character of the California walnut industry. In recommending any such changes, the following would be considered: (1) Shifts in acreage within districts and within the production area during recent years; (2) the importance of new production in its relation to existing districts; (3) the equitable relationship between Board apportionment and districts; (4) changes in industry structure and/or the percentage of crop represented by various industry entities resulting in the existence of two or more handlers handling 35 percent or more of the crop; and (5) other relevant factors. This amendment is not expected to result in any increases in costs to growers or handlers.

Proposal 7 would amend Board quorum and voting requirements to add percentage requirements, add authority for the Board to vote by “any other means of communication” (including facsimile) and add authority for Board meetings to be held by telephone or by “any other means of communication”.

Witnesses stated that references to the meeting quorum requirements should be amended to include a percentage equivalent of the current six-out-of-10-member minimum, or sixty percent. In addition, witnesses supported modifying the order language regarding voting requirements to state that a sixty-percent super-majority vote of the members present at a meeting should be required of all Board decisions, except where otherwise specifically provided. The order currently states that a majority vote is needed, with no percentage equivalent specified.

According to the record, the order currently requires that all Board meetings be held at a physical location. Witnesses stated that the order should be amended to allow for some meetings to be held using “other means of communication”, such as telephone or videoconferencing. Witnesses stated that use of new communication technology would result in timesavings while still allowing the Board to conduct its business. Witnesses stated that it is the intent of the Board that voting procedures for all types of non-traditional meetings can be recommended and adopted as appropriate for each type of technology used.

Amendments proposed under this material issue are not expected to result in any significant changes in costs to growers or handlers.

Proposal 8 would amend the order to add authority to carry over excess assessment funds. According to the hearing record, the order currently states that any assessment funds held in excess of the marketing year's expenses must be refunded to handlers. Refunds are returned to handlers in accordance with the amount of that handler's pro rata share of the actual expenses of the Board.

This proposed amendment would allow the Board, with the approval of the Secretary, to establish an operating monetary reserve. This would allow the Board to carry over to subsequent production years any excess funds in a reserve, provided that funds already in the reserve do not exceed approximately two years' expenses. If reserve funds do exceed that amount, the assessment rate could be reduced so as to cause reserves to diminish to a level below the two-year threshold.

According to the record, reserve funds could be used to defray expenses during any production year before assessment income is sufficient to cover such expenses, or to cover deficits incurred during any fiscal period when assessment income is less than expenses. Additionally, reserve funds could be used to defray expenses incurred during any period when any or all of the provisions of the order are suspended, or to meet any other such costs recommended by the Board and approved by the Secretary. This proposal is not expected to result in any significant increases in costs to growers or handlers.

Proposal 9 would amend the order by adding authority to accept contributions. If implemented, this proposed amendment would grant authority to the Board to accept voluntary contributions. Contributions could only be used to pay for research and development activities, and would be free from any encumbrances by the donor. According to the hearing record, the Board would retain oversight of the application of such contributions.

Witnesses supported this proposal by stating that it would provide the Board and the industry with valuable resources to enhance research and development activities. It is not expected that this proposal would result in any additional costs to growers or handlers.

Proposal 10 would amend the order to clarify that members and alternate members may be reimbursed for expenses incurred while performing their duties and that reimbursement includes per diem. According to the hearing record, this proposed amendment would not have any impact on the current expense reimbursement activities of the Board. Rather, it would clarify and update order language to more clearly state that while Board members and alternates serve without compensation, expenses incurred while performing the duties of a Board member that have been authorized by the Board will be reimbursed. It is not expected that this proposal would result in any additional costs to growers or handlers.

Proposal 12a would broaden the scope of the quality control provisions by adding authority to recommend different regulations for different market destinations. Witnesses emphasized the usefulness in terms of market development of being able to establish different regulations for individual markets and/or regions. Witnesses stated that allowing the Board to make such recommendations would help the walnut industry adapt to changing international market conditions.

Proposal 14 would amend the order by replacing the terms “carryover” with “inventory,” and “mammoth” with “jumbo,” to reflect current day industry procedures. This proposal would also result in conforming changes being made to the “Marketing estimates and recommendations” and “Reports of handler carryover” sections of the order.

Handler carryover, defines the amount of California walnuts (both merchantable as well as the estimated quantity of merchantable walnuts to be produced from shelling stock and unsorted material), wherever located, held by California walnut handlers at any given time.

Witnesses explained that the current term “carryover” is misleading in that the term implies the amount of inventory held by handlers from one marketing year to the next. Witnesses stated that the term “inventory” would more accurately convey the intent of this definition, and would also reflect current day calculations of walnut availability.

Section 984.67, Exemptions, of the order provides for situations under which California walnuts may be exempted from complying with order regulations. One exemption is applicable to lots of merchantable inshell walnuts that are mammoth size or larger, as defined by the United States Standards for Walnuts in the Shell.

Witnesses stated that given the new varieties currently being produced in the industry, the term “mammoth” no longer applies. According to record evidence, the current production's equivalent to “mammoth” size is “jumbo” size, as defined by the United States Standards for Walnuts in the Shell. Thus, witnesses stated that the order language should be updated to reflect the industry's current terminology and size of walnuts being produced. This proposal is not expected to result in any increases in costs to growers or handlers.

Proposal 15(a) would amend the order to clarify the term “transfer” and to add authority for the Board to recommend methods and procedures, including necessary reports, for administrative oversight of such transfers.

Witnesses stated that it would be beneficial to simplify current order language so that all interhandler transfers were considered a “sale of inshell and shelled walnuts within the area of production by one handler to another.” Witnesses explained that the proposed language restated the current application of this provision in walnut transactions in simpler terms. This proposal is not expected to result in any increases in costs to growers or handlers.

Proposal 15(b) would amend the order to clarify that the Board may require reports from handlers and packers to include interhandler transfers or any other activity that involves placing California walnuts into the stream of commerce.

According to the hearing record, current authority provided in this section only applies to the reporting of handler walnut receipts from growers. Witnesses stated that this authority should be broadened to include interhandler transfers, or receipts from any other entity as recommended by the Board and approved by the Secretary. This proposal is not expected to result in any increases in costs to growers or handlers.

Proposal 16 would update and simplify the language in § 984.22, Trade demand, to state “United States and its territories,” rather than name “Puerto Rico” and “The Canal Zone”. Witnesses explained that the reference to “Puerto Rico” and “The Canal Zone” in the order is outdated and should be updated to reference “United States and its territories”.

According to record evidence, this amendment would not impact trade demand calculations under the order since the purpose of the reference is to accurately identify the amount of shelled or inshell walnuts demanded by the United States, including its territories. Thus, while the terminology identifying the geographic regions included in the calculation would change, the intent of the original language would remain unchanged. This proposal is not expected to result in any increases in costs to growers or handlers.

Proposal 17 would amend the order by adding language that would acknowledge that the Board may deliberate, consult, cooperate and exchange information with the California Walnut Commission (CWC). Any information sharing would be kept confidential.

Recorded evidence indicates the CWC and the Federal marketing order program are currently administered out of the same office location and employ the same staff. Thus, this proposal, if implemented, would formalize the relationship that currently exists between the two entities. Witnesses stated that collaboration between the two programs leads to reduced administrative costs, as much of the information collected by each entity can be shared. This amendment is not expected to result in any increases in costs to growers or handlers.

In addition, USDA proposed adding two provisions that would help assure that the operation of the program conforms to current Department policy.

Proposal 18 would establish tenure requirements for Board members. Currently, the term of office of each member and alternate member of the Board is 2 years. There are no provisions related to term limits in the marketing order.

The recorded evidence suggests that term limits for Board members could increase industry participation on the Board, provide for more diverse membership, provide the Board with new perspectives and ideas, and increase the number of individuals in the industry with Board experience. This amendment is not expected to result in any increases in costs to growers or handlers.

Proposal 19 would require that continuance referenda be conducted on a periodic basis to ascertain industry support for the order and add more flexibility in the termination provisions.

Currently, there is no requirement in the order that continuance referenda be conducted on a periodic basis. The USDA believes that growers should have an opportunity to periodically vote on whether a marketing order should continue. Continuance referenda provide an industry with a means to measure grower support for the program. Experience has shown that programs need significant industry support to operate effectively. This amendment is not expected to result in any increases in costs to growers or handlers.

The proposals put forth at the hearing would streamline program organization, but are not expected to result in a significant change in industry production, handling or distribution activities. In discussing the impacts of the proposed amendments on growers and handlers, recorded evidence indicates that the changes are expected to be positive because the administration of the programs would be more efficient, and therefore more effective, in executing Board duties and responsibilities. There would be no significant cost impact on either small or large growers or handlers.

Interested persons were invited to present evidence at the hearing on the probable regulatory and informational impact of the proposed amendments to the order on small entities. The recorded evidence is that the amendments are designed to increase efficiency in the functioning of the order.

USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this proposed rule. These amendments are designed to enhance the administration and functioning of marketing order 984 to benefit of the California walnut industry.

Current information collection requirements for Part 984 are approved by OMB under OMB No. 0581-0178, Vegetable and Specialty Crops. Any changes in those requirements as a result of this proceeding would be submitted to OMB for approval. Witnesses stated that existing forms could be adequately modified to serve the needs of the Board. While conforming changes to the forms would need to be made (such as changing the name of the Board), the functionality of the forms would remain the same.

As with other similar marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

AMS is committed to complying with the Government Paperwork Elimination Act (GPEA), which requires Government agencies in general to provide the public the option of submitting information or transacting business electronically to the maximum extent possible.

The AMS is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

The amendments to Marketing Order No. 984 proposed herein have been reviewed under Executive Order 12988, Civil Justice Reform. They are not intended to have retroactive effect. If adopted, the proposed amendments would not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this proposal.

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.

The findings and conclusions, rulings, and general findings and determinations included in the Recommended Decision set forth in the March 27, 2007, issue of the Federal Register (72 FR 14368) are hereby approved and adopted subject to the following additions and modifications:

Based upon the briefs and exceptions filed, the findings and conclusions in material issue number 11 of the Recommended Decision concerning whether or not to add authority to designate more than one inspection service are amended by adding the following six paragraphs to read as follows:

Exceptions to the Recommended Decision stated that if the authority to designate more than one inspection service were implemented, private sector entities, in addition to USDA, should be able to offer non-traditional inspection services, such as the PIQ and the CAIP. Exceptions further stated that the current proposed language (meaning, “each service shall be separate so as to not duplicate each other”) would prevent any private sector company from offering those services.

The proposed amendment, if implemented, would not prevent any private sector company from offering traditional or non-traditional inspection services, as long as the services were recommended by the Board and approved by USDA.

The Agricultural Marketing Service is responsible for ensuring that all handlers regulated under a marketing order program are in compliance with any regulations that are in effect. Under the marketing order for California walnuts, the Board is responsible for locally administering the program, which includes monitoring industry's compliance with order requirements, and reporting any violations to USDA for enforcement measures.

While the USDA supports and encourages cost-saving measures, it is important that the program maintains its integrity and that any quality or size regulations in effect are not compromised. Furthermore, it is important that inspection of product is conducted with uniformity and consistency. For this reason, it is important that the language stating that “each service shall be separate so as to not duplicate each other” be maintained.

Finally, the proposed order language would provide authority for the Board to recommend the use of alternative inspection methods and services as they are developed and accredited. The proposed authority is intended to allow industry to benefit from cost-saving advances in technology while also ensuring uniform application of inspection methodology and standards industry wide.

Based upon the exception filed, the findings and conclusions in material issue number 18 of the Recommended Decision concerning whether or not to establish a limit on the number of consecutive terms a person may serve as a member of the Board are amended by adding the following paragraph to read as follows:

One of the exceptions filed offered a comment of general support for the proposal to implement term limits as a method to encourage participation of industry members that have not previously served on the Board.

In arriving at the findings and conclusions and the regulatory provisions of this decision, the exceptions to the Recommended Decision were carefully considered in conjunction with the recorded evidence. To the extent that the findings and conclusions and the regulatory provisions of this decision are at variance with the exceptions, such exceptions are denied.

Annexed hereto and made a part hereof is the document entitled “Order Amending the Order Regulating the Handling of Walnuts Grown in California.” This document has been decided upon as the detailed and appropriate means of effectuating the foregoing findings and conclusions.

It is hereby ordered, That this entire decision be published in the Federal Register .

It is hereby directed that a referendum be conducted in accordance with the procedure for the conduct of referenda (7 CFR part 900.400 et seq. ) to determine whether the annexed order amending the order regulating the handling of walnuts grown in California is approved or favored by growers, as defined under the terms of the order, who during a representative period were engaged in the production of walnuts in the production area.

The representative period for the conduct of such referendum is hereby determined to be August 1, 2006, through July 31, 2007.

The agents of the Secretary to conduct such referendum are hereby designated to be Shereen Marino and Kurt Kimmel, California Marketing Field Office, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 Monterey Street, Suite 102B, Fresno, California 93721; telephone (559) 487-5901.

The findings and determinations hereinafter set forth are supplementary to the findings and determinations which were previously made in connection with the issuance of the marketing agreement and order; and all said previous findings and determinations are hereby ratified and affirmed, except insofar as such findings and determinations may be in conflict with the findings and determinations set forth herein.

(a) Findings and Determinations Upon the Basis of the Hearing Record. Pursuant to the provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601 et seq. ), and the applicable rules of practice and procedure effective thereunder (7 CFR part 900), a public hearing was held upon the proposed amendments to Marketing Agreement and Order No. 984 (7 CFR part 984), regulating the handling of walnuts grown in California. Upon the basis of the evidence introduced at such hearing and the record thereof, it is found that:

(1) The marketing agreement and order, as amended, and as hereby proposed to be further amended, and all of the terms and conditions thereof, would tend to effectuate the declared policy of the Act;

(2) The marketing agreement and order, as amended, and as hereby proposed to be further amended, regulate the handling of walnuts grown in the production area in the same manner as, and are applicable only to, persons in the respective classes of commercial and industrial activity specified in the marketing agreement and order upon which a hearing has been held;

(3) The marketing agreement and order, as amended, and as hereby proposed to be further amended, are limited in their application to the smallest regional production area that is practicable, consistent with carrying out the declared policy of the Act, and the issuance of several orders applicable to subdivisions of the production area would not effectively carry out the declared policy of the Act;

(4) The marketing agreement and order, as amended, and as hereby proposed to be further amended, prescribe, insofar as practicable, such different terms applicable to different parts of the production area as are necessary to give due recognition to the differences in the production and marketing of walnuts grown in the production area; and

(5) All handling of walnuts grown in the production area as defined in the marketing agreement and order is in the current of interstate or foreign commerce or directly burdens, obstructs, or affects such commerce.

It is therefore ordered, That on and after the effective date hereof, all handling of walnuts grown in California shall be in conformity to, and in compliance with, the terms and conditions of the said order as hereby proposed to be amended as follows:

The provisions of the proposed marketing agreement and order amending the order contained in the Recommended Decision issued by the Administrator on March 19, 2007, and published in the Federal Register on March 27, 2007, will be and are the terms and provisions of this order amending the order and are set forth in full herein.

Executive Order 12866

This proposed rule is exempted from the Office of Management and Budget (OMB) review for purposes of Executive Order 12866 and, therefore has not been reviewed by OMB.

It has been determined that the Regulatory Flexibility Act is not applicable to this rule since Rural Development is not required by 5 U.S.C. 551 et seq. or any other provision of law to publish a notice of proposed rulemaking with respect to the subject matter of this rule.

This rule contains no new reporting or recordkeeping burdens under OMB control number 0572-0003 that would require approval under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

It has been determined by Rural Development that this proposed rule will not significantly affect the quality of the human environment as defined by the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq. ). Therefore, this action does not require an environmental impact statement or assessment.

The program described by this proposed rule is listed in the Catalog of Federal Domestic Assistance Program under numbers 10.850—Rural Electrification Loans and Loan Guarantees. This catalog is available on a subscription basis from the Superintendent of Documents, the United States Government Printing Office, Washington, DC 20402-9325, (202) 512-1800.

This proposed rule is excluded from the scope of Executive Order 12372, Intergovernmental Consultation, which may require a consultation with State and local officials. See the final rule related notice entitled, “Department Programs and Activities Excluded from Executive Order 12372” (50 FR 47034) advising that Rural Development loans and loan guarantees were not covered by Executive Order 12372.

In order to facilitate the effective and economical operation of a business enterprise, adequate and reliable financial records must be maintained. Accounting records must provide a clear, accurate picture of current economic conditions from which management can make informed decisions in charting the company's future. The rate regulated environment in which an electric utility operates causes an even greater need for financial information that is accurate, complete, and comparable with that of other electric utilities.

Rural Development, as a Federal lender and mortgagee, and in furthering the objectives of the Rural Electrification Act (RE Act) (7 U.S.C. 901 et seq. ), has a legitimate programmatic interest and a substantial financial interest in requiring adequate records to be maintained. In order to provide Rural Development with financial information that can be analyzed and compared with the operations of other borrowers in the Rural Development program, all Rural Development borrowers must maintain financial records that utilize uniform accounts and uniform accounting policies and procedures. The standard Rural Development security instrument, therefore, requires borrowers to maintain their books, records, and accounts in accordance with methods and principles of accounting prescribed by Rural Development in the Rural Development Uniform System of Accounts (USoA) for its electric borrowers.

The Uniform System of Accounts promulgated by the Federal Energy Regulatory Commission (FERC) serves as a basis for this part. When new or revised accounting guidance is provided by FERC for electric utilities, Rural Development must review this guidance within the framework of this part for applicability to our borrowers. FERC issued Order 627, Accounting and Reporting of Financial Instruments, Comprehensive Income, Derivatives and Hedging Activities, on October 10, 2002. A review of this Order has determined that this guidance should be adopted with modification. Order 627 established Account 219, Accumulated Other Comprehensive Income, an account number already in use in this part and identified as Other Margins and Equities. Therefore, Rural Development proposes to establish Account 209, Accumulated Other Comprehensive Income, and modifies Section 1767.15(w) Accounting for Other Comprehensive Income, accordingly. All other accounts and instructions will be adopted as set forth in Order 627.

On April 9, 2003, FERC issued Order 631, Accounting, Financial Reporting and Rate Filing Requirements for Asset Retirement Obligations. The purpose of this order was the incorporation of the requirements of Statement of Financial Accounting Standard No. 143, Accounting for Asset Retirement Obligations, issued in June 2001 by the Financial Accounting Standards Board. A review of this Order has determined that this guidance should be adopted with modification. In addition to a number of changes in instructions and account descriptions to accommodate the prescribed accounting for Asset Retirement Obligations, FERC established new accounts to record transactions associated with asset retirement obligations. One of the new accounts created by this Order was Account 403.1, Depreciation expense for asset retirement costs. This account number is already used within the mandated subaccounts of 403 to represent Depreciation Expense—Steam Production Plant. Therefore, Rural Development is proposing to establish Account 403.8, Depreciation Expense—Asset Retirement Obligations, and modifies paragraph (C) of the description for Account 103, Experimental Electric Plant Unclassified, accordingly. All other accounts and instructions will be adopted as set forth in Order 631 with one exception. Rural Development does not intend to require that separate subsidiary records be maintained for the amount of accrued cost of removal other than legal obligations for the retirement of plant recorded in Account 108, Accumulated Provision for Depreciation of Electric Utility Plant.

Order 668, Accounting and Financial Reporting for Public Utilities Including Regional Transmission Organizations (RTO), issued by FERC on December 16, 2005, amended the USoA and established standard accounting guidance for RTO costs to provide better comparability between utilities and to improve the transparency of financial information pertaining to RTOs along with a better understanding of RTO costs. The new accounts established by FERC in this Order and the instructions are proposed for adoption by Rural Development. In 1997, in response to FERC Orders 888 and 889 on open access, Rural Development revised its USoA to require borrowers to allocate employee pensions and benefits expense, as well as payroll taxes and insurance costs to the appropriate functional operations, maintenance, and administrative expense accounts to which labor charges are accrued to make available to management reliable financial information concerning the actual cost of products and services it provides. To ensure comparable results, Rural Development must modify the newly added accounts accommodate to this allocation.

To ensure that borrowers consistently account for their financial operations and to keep pace with the changing environment in which they operate, the Rural Development USoA must be revised and updated from time to time. Rural Development is, therefore, proposing to amend and revise several accounting interpretations found in Section 1767.41, Accounting Methods and Procedures required of all Rural Development Borrowers. Interpretation 119, Special Equipment, is revised to conform to guidance provided in a Rural Development letter dated November 14, 2000, providing guidelines for requesting a waiver from the special equipment accounting procedures. Interpretation 136, Storm Damage, is revised to provide new guidance on accounting for reimbursements of storm damage by the Federal Emergency Management Administration. Interpretation 626, Rural Economic Development Loan and Grant Program, is revised to include accounting guidance for recording the default on the repayment of economic development loans made by borrowers to local economic development projects. Interpretation 404, Consolidated Financial Statements, is revised to clarify the requirements for reporting consolidated subsidiaries on Forms 7 and 12. Rural Development is also proposing to set forth new accounting interpretations that establish uniform accounting and reporting procedures for Cushion of Credit Accounts and Renewable Energy Credits. Although the Cushion of Credits Payments Program was added to the RE Act in 1987, accounting requirements have not been formalized through inclusion in this part. Rural Development seeks to rectify this oversight with this proposed rule. Conversely, renewable energy credits (REC) are a new and emerging phenomenon. There is no authoritative guidance available for recording and reporting for RECs. The guidance provided in this proposal is our first attempt at establishing guidance. Comments in this area are specifically requested and will be instrumental in developing the final guidelines.

Bulletin 180-2, Record Retention Recommendations for Rural Development Electric Borrowers, effective June 26, 2003, currently provides the Agency's recommendations for record retention. This rule proposes to codify these requirements with modifications in subpart D.

This proposed rule contains a number of other revisions to make administrative corrections to addresses for submitting requests, position titles, update current version of forms, change publication names, and to correct for errors found in the previously codified version of this part.

For the reason set forth in the preamble, Rural Development hereby proposes to amend 7 CFR chapter XVII as follows:

Comments Invited

We invite you to submit any written data, views, or arguments regarding this proposed AD. Send your comments to the address listed under the caption ADDRESSES . Include the docket number “FAA-2007-28690, Directorate Identifier 2006-SW-21-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed rulemaking. Using the search function of our docket Web site, you can find and read the comments to any of our dockets, including the name of the individual who sent or signed the comment. You may review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you may visit http://dms.dot.gov .

You may examine the docket that contains the proposed AD, any comments, and other information in person at the Docket Management System (DMS) Docket Office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone 1-800-647-5527) is located in Room W12-140 on the ground floor of the West Building, 1200 New Jersey Avenue SE., Washington, DC. Comments will be available in the AD docket shortly after the DMS receives them.

This document proposes adopting a new AD for BHTC Model 206A and 206B helicopters, S/N 0004 through 3906, with fin supports, part numbers (P/N) 206-031-417-003 or -007, or 206-031-418-001 or -005, installed. This proposal would require inserting a revision into the Scheduled Inspection section, chapter 5, of the applicable maintenance manual, implementing a recurring inspection at intervals not to exceed 100 hours time-in-service (TIS) or at each annual inspection, whichever occurs first, of the torque on the fin supports' attachment hardware, and inspecting the fin support for damage. Inspecting for paint on the mating surfaces of the fin support bracket and vertical fin; inspecting the vertical fin attaching hardware for proper torque and the amount of gap between the vertical fin support bracket and the vertical fin doubler; inspecting the fin support bracket for cracking using a 10× or higher power magnifying glass; and if either the torque or gap is out of limits or paint is present, fluorescent penetrant inspecting the vertical fin support for cracking would also be required. If a crack is found, replacing the vertical fin support with a one-piece casting support, P/N 206-033-426-003, would be required. This proposal is prompted by an accident in which the fin supports failed, allowing the lower part of the fin to contact the tail rotor blades, which resulted in subsequent separation of the gearbox and tail rotor from the helicopter. The actions specified by this proposed AD are intended to detect improper torque of the fin support attachment hardware, gaps between the fin support bracket and the doubler, painted mating surfaces of the fin supports, vertical fin, and fin inserts, and cracking in the fin supports, to prevent the vertical fin from rotating into the tail rotor, separation of the tail rotor, and subsequent loss of control of the helicopter.

Transport Canada, the airworthiness authority for Canada, notified the FAA that an unsafe condition may exist on BHTC Model 206A and 206B helicopters, S/N 004 through 3906, with fin supports, P/N 206-031-417-003 or -007, or 206-031-418-001 or -005, installed. Transport Canada advises that a one-time inspection of the vertical fin mating surfaces is required to ensure an appropriate surface finish. In addition, they advise that a recurring torque check of the vertical fin attaching hardware is required to maintain the structural integrity of the joint. They also advise that the initial inspection be performed at the next scheduled 100 hour TIS or annual inspection, but within three (3) months in accordance with BHTC Alert Service Bulletin No. 206-06-107, dated April 26, 2006, or later revisions approved by Transport Canada.

BHTC has issued Alert Service Bulletin No. 206-06-107, Revision A, dated June 15, 2006, which specifies a series of inspections of the two-piece fin supports, and also introduces revisions to Chapters 5 and 53 of the BHT-206A/B Series Maintenance Manual. The revision to Chapter 5 introduces a recurring vertical fin attaching hardware torque check and inspecting the fin supports for damage, which are to be accomplished at the next scheduled 100 hour TIS or annual inspection. The revision to Chapter 53 updates the procedures for removal, installation, and inspection of the vertical fin. Transport Canada classified this alert service bulletin as mandatory and issued AD No. CF-2006-12, dated June 5, 2006, to ensure the continued airworthiness of these helicopters in Canada.

These helicopter models are manufactured in Canada and are type certificated for operation in the United States under the provisions of 14 CFR 21.29 and the applicable bilateral agreement. Pursuant to the applicable bilateral agreement, Transport Canada has kept us informed of the situation described above. We have examined the findings of the Transport Canada, reviewed all available information, and determined that AD action is necessary for products of these type designs that are certificated for operation in the United States.

This previously described unsafe condition is likely to exist or develop on other helicopters of the same type designs registered in the United States. Therefore, the proposed AD would require, at the next scheduled 100 hour TIS inspection, but no later than 90 days from the effective date of this AD, unless accomplished previously, and thereafter at intervals not to exceed 100 hours TIS or at each annual inspection, whichever occurs first, verifying the torque on the fin support attachment hardware. Inspecting the fin support bracket and vertical fin for paint or gaps, inspecting the fin support bracket for cracking using a 10x or higher power magnifying glass, and if needed, fluorescent penetrant inspecting for cracking would also be required, as well as replacing any two-piece fin support on which a crack is found with a one-piece casting support. Inserting a revision into the applicable maintenance manual would also be required. The actions would be required to be accomplished by following the specified portions of the alert service bulletin described previously.

We estimate that this proposed AD would affect 1,466 helicopters of U.S. registry and the proposed inspections would take approximately 4 work hours per helicopter at an average labor rate of $80 per work hour. If needed, replacing a fin support would take approximately 30 work hours. Required parts would cost approximately $3,260 for each fin support. Based on these figures, we estimate the total cost impact of the proposed AD on U.S. operators to be $3,300,820 for the fleet during the first year, assuming 7 inspections per helicopter are conducted, and assuming that replacing the fin support is required on 3 helicopters.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. Additionally, this proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a draft economic evaluation of the estimated costs to comply with this proposed AD. See the DMS to examine the draft economic evaluation.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

Comments Invited

We invite you to submit any written data, views, or arguments regarding this proposed AD. Send your comments to the address listed under the caption ADDRESSES . Include the docket number “FAA-2007-28691, Directorate Identifier 2006-SW-22-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed rulemaking. Using the search function of our docket Web site, you can find and read the comments to any of our dockets, including the name of the individual who sent or signed the comment. You may review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78) or you may visit http://dms.dot.gov.

You may examine the docket that contains the proposed AD, any comments, and other information in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Operations office (telephone (800) 647-5527) is located in Room W12-140 on the ground floor of the West Building at the street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the DMS receives them.

On May 24, 2006, we issued AD 2003-21-09 R1, Amendment 39-14621 (71 FR 31070, June 1, 2006), to revise AD 2003-21-09. The revised AD required the same actions as AD 2003-21-09 but limited the applicability to ECF helicopters with a pump, part number (P/N) 355A32-0700-01, with a serial number (S/N) 5731 or higher or with a S/N below 5731 if the pump has been overhauled or repaired after June 1, 1995. AD 2003-21-09 R1 was prompted by an investigation that revealed a malfunction occurred after modifying the pump case on certain pumps and after major overhaul and repairs. The requirements of that AD limited the applicability to certain pumps and were intended to detect sludge on the chip detector and dark oil in the MGB, to prevent failure of the MGB pump, seizure of the MGB, loss of drive to an engine and main rotor, and subsequent loss of control of the helicopter.

Since issuing that AD, ECF has issued Revision 1 to Alert Service Bulletin (ASB) No. 05.00.40, dated January 5, 2006, which adds pumps, P/N 355A32-0700-01, with a S/N SAR 1, SAR 2, or SAR 5 to its effectivity. Also, Eurocopter has issued Emergency ASB No. 05.00.40, Revision 2, dated December 20, 2006, which supersedes the instructions in Revision 1 and extends the effectivity of these instructions to all serial-numbered pumps, P/N 355A32-0700-01, 355A32-0700-02, and 355A32-0701-00. Revision 2 states that a further incident of MGB pump malfunction has been reported since the original four cases and shows that the machining modification of the earlier pumps is not the only reason for early deterioration of the oil pumps. The DGAC classified these ASBs as mandatory and issued AD No. F-2006-027, Revision A, dated February 1, 2006, and Emergency AD No. 2006-0378-E, effective December 27, 2006, which supersedes and cancels AD No. F-2006-027.

These helicopter models are manufactured in France and are type certificated for operation in the United States under the provisions of 14 CFR 21.29 and the applicable bilateral agreement. Pursuant to the applicable bilateral agreement, the DGAC has kept the FAA informed of the situation described above. The FAA has examined the findings of the DGAC, reviewed all available information, and determined that AD action is necessary for products of these type designs that are certificated for operation in the United States.

This previously described unsafe condition is likely to exist or develop on other helicopters of the same type designs. Therefore, the proposed AD would supersede AD 2003-21-09 R1 and retain the requirements in that AD but would also require adding pumps, P/N 355A32-0700-01, 355A32-0700-02, and 355A32-0701-00, any S/N, to the applicability.

The FAA estimates that this proposed AD would affect 84 helicopters of U.S. registry, assuming they all have MGB pumps with applicable S/Ns. It would take about:

• 10 minutes to check the chip detector and the MGB oil sight glass,

• 4 work hours to remove the MGB and pump,

• 1 work hour to inspect the pump,

• 4 work hours to install a serviceable MGB and pump at an average labor rate of $80 per work hour, and

• $4,000 for an overhauled pump and up to $60,000 for an overhauled MGB per helicopter.

Based on these figures, we estimate the revised total cost impact of the AD on U.S. operators to be $355,920 per year, assuming replacement of one overhauled MGB and pump on one helicopter per year and a daily check on all helicopters for 260 days per year.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. Additionally, this proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a draft economic evaluation of the estimated costs to comply with this proposed AD. See the DMS to examine the draft economic evaluation.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

We invite you to submit any written data, views, or arguments regarding this proposed AD. Send your comments to the address listed under the caption ADDRESSES . Include the docket number “FAA-2007-28689, Directorate Identifier 2006-SW-17-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed rulemaking. Using the search function of our docket web site, you can find and read the comments to any of our dockets, including the name of the individual who sent or signed the comment. You may review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78) or you may visit http://dms.dot.gov.

You may examine the docket that contains the proposed AD, any comments, and other information in person at the Docket Management System (DMS) Docket Office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone 1-800-647-5527) is located in Room W12-140 on the ground floor of the West Building, 1200 New Jersey Avenue, SE., Washington, DC. Comments will be available in the AD docket shortly after the DMS receives them.

This document proposes adopting a new AD for the 2101 I/O Approach Plus system that would require a software upgrade. This proposal is prompted by an incident involving a Federal Republic of Germany military helicopter that led to the discovery of the following system malfunctions:

• Under certain conditions, when the system enters Dead Reckoning (DR) mode, the navigation and Super flags are removed from the display; however, the DR message and associated message light annunciation may fail to illuminate;

• The navigation and Super flags may not be removed from the display as required during approach mode after loss of a Receiver Autonomous Integrity Monitor (RAIM) condition; and

• When a RAIM error occurs (detects a satellite failure) and the system is unable to exclude the affected satellite, the unit may fail to enter DR mode and may fail to remove the navigation and Super flags from the display.

These malfunctions could result in the following unsafe conditions:

• System could fail when interfaced with Terrain Awareness Warning System (TAWS) and the TAWS can fail to annunciate terrain alerts;

• System could provide misleading heading information; or

• System may provide erroneous navigation fault annunciations.

These unsafe conditions are likely to exist or develop on any aircraft with a 2101 I/O Approach Plus system installed. Therefore, the proposed AD would require, within 180 days after the effective date of the AD for aircraft approved for instrument flight rule (IFR) flight, or 270 days after the effective date of the AD for aircraft approved for visual flight rule (VFR) flight, upgrading the 2101 I/O Approach Plus system software. This AD is applicable to the units that currently have software revision, part number (P/N) 81440-xx-241E, -241F, or -241G installed. The “xx” in the P/N is a place-holder for either 02, 03, 12, or 13. FreeFlight Systems Service Information Letter SIL 81440-xx-00-17, dated November 7, 2005, was issued when the manufacturer believed that revision, P/N 81440-xx-241H, would correct the erroneous information displays. However, since the Service Information Letter was issued, it was determined that software revision, P/N 81440-xx-241H, did not correct all the 2101 I/O Approach Plus system malfunctions. An additional software problem which can cause the system to enter Dead Reckoning (DR) mode unintentionally was subsequently discovered. System software revision, P/N 81440-xx-241J, has been approved to correct all the known malfunctions. Updating the system software with software revision, P/N 81440-xx-241J, would be required by the proposed AD.

We estimate that this proposed AD would affect 259 2101 I/O Approach Plus systems installed on aircraft of U.S. registry, and the software upgrade would take approximately 2 work hours per aircraft to accomplish at an average labor rate of $80 per work hour. FreeFlight Systems has stated that they would absorb some of the cost of the upgrade, including cost of the software upgrade and work hours for upgrading the existing software. Required parts would cost approximately $300 per aircraft. Based on these figures, the total cost impact of the proposed AD on U.S. operators would be $72,520, assuming one 2101 I/O Approach Plus system is installed on each aircraft, the manufacturer would provide all $300 in parts at no cost, and the only costs for these parts would be $120 for shipping costs for each unit.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. Additionally, this proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a draft economic evaluation of the estimated costs to comply with this proposed AD. See the DMS to examine the draft economic evaluation.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

The collection of information contained in these proposed regulations has been previously reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-1819. Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by September 11, 2007. Comments are specifically requested concerning the accuracy of the estimated burden associated with the collection of information and suggestions on how the burden may be minimized.

The collection of information is in § 31.3406(g)-1(f)(3). This information is necessary to notify a cardholder/payor that a merchant/payee is not a qualified payee for purposes of the regulations, and for cardholders/payors and merchant/payees to consent to receive notices electronically. This information will alert a cardholder/payor that backup withholding under section 3406 may apply for future reportable payments. The collection of information is voluntary to obtain a benefit. The likely respondents are business or other for-profit institutions.

Estimated Total Annual Reporting Burden: 37,239,570 hours.

Estimated Average Annual Burden Per Respondent: 1.19 hours.

Estimated Number of Respondents: 31,256,000.

Estimated Frequency of Responses: Monthly.

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

This document contains proposed amendments to 26 CFR part 31 relating to backup withholding under section 3406 of the Internal Revenue Code (Code) and proposed amendments to 26 CFR part 301 relating to waivers under Code section 6724 of information reporting penalties under Code sections 6721 and 6722.

Section 6041(a) of the Code requires persons engaged in a trade or business and making payment in the course of such trade or business to another person of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income of $600 or more in any one taxable year to file information returns with the IRS. Section 6041(d) requires the payor to furnish information statements to payees. Among other items, the payor must include the payee's name and taxpayer identification number (TIN) on the information return and the information statement. Section 6041A of the Code imposes similar requirements with respect to payments of remuneration for services and direct sales.

In general, section 6721(a)(1) imposes a $50 penalty for each failure to file an information return on or before the required filing date, for any failure to include all of the information required to be shown on the return, or for the inclusion of incorrect information. Section 6722(a)(1) imposes similar penalties with respect to the information statements required to be furnished to payees. Section 6724(a) provides that no penalty will be imposed under section 6721 or section 6722 if it is shown that the failure is due to reasonable cause and not to willful neglect.

Section 3406(a)(1) requires a payor to withhold on any reportable payment (as defined in section 3406(b)(1)) if (1) the payee fails to furnish the payee's TIN to the payor as required or (2) the Secretary notifies the payor that the TIN furnished by the payee is incorrect. Section 3406(a)(1) also requires withholding in certain other situations that are not addressed in these regulations. Section 3406(i) provides that the Secretary shall prescribe the regulations necessary or appropriate to carry out the purposes of section 3406.

A payment card transaction is a transaction in which a cardholder/payor uses a payment card to purchase goods or services and a merchant agrees to accept a payment card as a means of obtaining payment. A payment card is a card (or an account) that (1) is issued by a payment card organization or one of its members, affiliates, or licensees to a cardholder/payor and (2) represents, upon presentation to a merchant/payee, an agreement of the cardholder to pay the merchant through the payment card organization. A payment card organization is an entity that sets the standards and provides the mechanism, acting directly or indirectly through its members, affiliates, or licensees, for effectuating payment between a purchaser and a merchant in a payment card transaction.

Information reporting compliance is difficult in payment card transactions because an invoice may not be issued, and the employee representing the cardholder/payor in the transaction might not request and obtain the name/TIN combination of the merchant/payee at the time of the transaction. In addition, backup withholding may be difficult because a merchant receives payment from the payment card organization within a few days after the transaction, but the cardholder does not pay the payment card organization until after it receives a payment card monthly billing statement.

On July 13, 2004, final regulations relating to the information reporting requirements, information reporting penalties, and backup withholding requirements for payment card transactions effectuated through a Qualified Payment Card Agent (QPCA) were published in the Federal Register (TD 9136; 69 FR 41938). These regulations (the 2004 QPCA regulations) provide limited exceptions to the backup withholding requirements for payment card transactions. The principal exception in § 31.3406(g)-1(f)(1)(i) of the regulations applies if the payment is made through a QPCA and the payee is a qualified payee.

Section 31.3406(g)-1(f)(2)(vi) of the regulations provides that a payee is a qualified payee if, at the time of the payment, the QPCA has validated the payee's TIN through the IRS TIN Matching Program or if the payment is made during the six-month period following the date on which the QPCA first makes a payment to the payee (six-month grace period). Under the regulations, a QPCA must notify a cardholder/payor of any merchant/payees that are not qualified payees.

Section 31.3406(g)-1(f)(1)(ii) of the regulations provides a second exception for payments to persons other than qualified payees. Under this exception, reportable payments made through a QPCA are exempt from backup withholding if the purchase to which the payment relates is made no later than two months after the date by which the QPCA is required to provide notification to the payor that the payee is not a qualified payee.

In addition, the regulations provide in § 301.6724-1(e) and (f) that cardholder/payors may establish, based on good faith reliance on a QPCA, that a failure subject to penalty under section 6721 or 6722 is due to reasonable cause.

On July 14, 2004, the IRS issued Rev. Proc. 2004-42 (2004-2 CB 121) which establishes procedures to implement the rules contained in the 2004 QPCA regulations. The revenue procedure provides that a QPCA may act on behalf of a cardholder/payor for purposes of soliciting, collecting, and validating the names/TINs of the merchant/payees and on behalf of a merchant/payee for purposes of furnishing the payee's name and TIN to the cardholder/payor. The revenue procedure also sets forth the requirements that a payment card organization must satisfy to obtain an IRS determination that it is a QPCA. These requirements include requirements that the payment card organization provide certain notifications to cardholder/payors and merchant/payees and obtain the authorization of cardholder/payors and merchant/payees to act on their behalf for certain purposes. See § 601.601.(d)(2)(ii)(b).

Some taxpayers subject to the 2004 QPCA regulations and related procedures have requested that the regulations in § 31.3406(g)-1(f) be amended, and the procedures in Rev. Proc. 2004-42 be modified, to allow a merchant to accept a QPCA's payment card even if the merchant opts out of the QPCA program. Taxpayers subject to the 2004 QPCA regulations and related procedures have also requested that the regulations be amended, and the procedures in Rev. Proc. 2004-42 be modified, to reflect the current electronic business operations of the payment card industry. Specifically, payment card organizations have asked that they be permitted to furnish required notifications electronically, including by posting on a secure website.

The IRS and the Treasury Department agree that a merchant/payee should be allowed to accept a QPCA's payment card even if the merchant/payee opts out of the QPCA program. The IRS is issuing a proposed revenue procedure providing that a merchant/payee may opt out of the QPCA program by completing and returning a written statement to the payment card organization and that a nonparticipating merchant/payee may continue to accept the organization's payment card. If a merchant/payee opts out of the QPCA program, payments to the merchant/payee made after the six-month grace period are treated under § 31.3406(g)-1(f)(2)(vi) of the proposed regulations as payments to a person other than a qualified payee. In addition, the proposed regulations modify the rule permitting cardholders to rely on a QPCA to solicit, validate, and furnish a payee's TIN. Under proposed § 301.6724-1(e)(1)(vi)(H), such reliance generally would not be permitted after the cardholder is notified that the merchant is not a participating payee.

These proposed regulations also modify the notification requirements in § 31.3406(g)-1(f)(3) by adding notification requirements relating to payments to nonparticipating merchant/payees. Although QPCAs do not act on behalf of nonparticipating payees in furnishing payee data to cardholders, the proposed regulations provide that a QPCA is required to furnish certain information to cardholders that use the QPCA's card to make reportable payments to nonparticipating payees. Specifically, the QPCA would be required to inform the cardholder that the payee is not a participant in the QPCA program and is not a qualified payee. In addition, the QPCA must advise the cardholder/payor of the cardholder/payor's obligation to solicit the TIN of a nonparticipating merchant/payee to which it makes a reportable payment.

In the preamble to the 2004 QPCA regulations, the IRS and the Treasury Department indicated they were considering whether a QPCA should be allowed to furnish information regarding payee status electronically on a secure website. The IRS and the Treasury Department have concluded that it is appropriate to propose modifications to the QPCA regulations and related procedures to reflect the current electronic business operations of the payment card industry.

This is consistent with the precedent set in the electronic statement regulations issued under Code sections 6041, 6050S, and 6051 on February 18, 2004 (TD 9114; 2004-1 CB 589). In the electronic statement regulations, the IRS and Treasury Department allowed electronic furnishing of statements on Form W-2, “Wage and Tax Statement,” Form 1098-T, “Tuition Payments Statement,” and Form 1098-E, “Student Loan Interest Statement,” to individuals who consent to receive the statements electronically. The preamble to the electronic statement regulations explains that the regulations are consistent with the general goals of (1) Section 2001 of the Internal Revenue Service Restructuring and Reform Act of 1998 (Pub. L.105-206) to eliminate barriers, provide incentives, and use competitive forces to increase electronic filings and (2) the Electronic Signatures in Global and National Commerce Act (Pub. L. 106-229) to facilitate voluntary use of electronic records. The electronic statement regulations aimed at striking a balance between furnishers' desires to reduce costs and modernize business processes by furnishing statements electronically and the tax administration concern that individuals have secure access to the information they need to fulfill their Federal tax obligations.

The IRS and the Treasury Department have concluded that a similar balance is appropriate in this context and that payment card organizations should be allowed to furnish notifications of payee status and participation electronically, including by posting on a secure website, if certain requirements are met to assure consistency with the Electronic Signatures in Global and National Commerce Act. These proposed regulations provide that the notifications of payee status and participation may be furnished electronically if, among other things, the payment card organization (1) Obtains certain consents from cardholder/payors and merchant/payees and (2) provides certain disclosures to cardholder/payors and merchant/payees.

Section 31.3406(g)-1(f)(3)(ii) (relating to electronic furnishing of notifications) is proposed to be effective on the date it is published as a final regulation, and the other amendments to § 31.3406(g)-1 are proposed to be applicable to payments made after December 31, 2007. The amendments to § 301.6724-1 are proposed to be applicable to information returns and information statements relating to payments made after December 31, 2007.

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

When an Agency issues a rulemaking proposal, the Regulatory Flexibility Act (RFA) (5 U.S.C. chapter 6) requires the agency to “prepare and make available for public comment an initial regulatory flexibility analysis” which will “describe the impact of the proposed rule on small entities.” (5 U.S.C. 603(a)). Section 605 of the RFA provides an exception to this requirement if the agency certifies that the proposed rulemaking will not have a significant economic impact on a substantial number of small entities.

The proposed rule affects merchant/payees and cardholder/payors. The IRS estimates there are 5,200,000 merchant/payees and 26,054,000 cardholders/payors that qualify as small entities. Therefore, the IRS has determined that this proposed rule will have an impact on a substantial number of small entities.

The IRS has determined, however, that the impact on entities affected by the proposed rule will not be significant. The burden on a merchant/payee that opts out of the QPCA program by completing and returning a written statement to the payment card organization is minimal. The burden on cardholders/payees and merchant/payors that consent to electronic furnishing of notices by returning a consent form and confirming the consent electronically is also insignificant.

Although QPCAs have a reporting burden under the proposed rule to furnish certain notices to cardholder/payors, QPCAs are large businesses and do not fall under the definition of small entities.

Based on these facts, the IRS hereby certifies that the collection of information contained in these regulations will not have a significant economic impact on a substantial number of small entities. Accordingly, a Regulatory Flexibility Analysis is not required.

Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses. The IRS invites comments from members of the public who believe there will be a significant impact either on cardholder/payors or merchant/payees.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they may be made easier to understand. All comments will be available for public inspection and copying.

A public hearing has been scheduled for November 7, 2007 at 10:00 a.m. in the auditorium, Internal Revenue Service Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments must submit electronic or written comments and an outline of the topics to be discussed and the time to be devoted to each topic (a signed original and eight (8) copies) by October 9, 2007. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

The principal author of these regulations is Michael Hara, Office of Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division.

Accordingly, 26 CFR parts 31 and 301 are proposed to be amended as follows:

1. Submitting CBI. Do not submit this information to EPA through www.regulations.gov or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. Send or deliver information identified as CBI only to the following address: Roberto Morales, OAQPS Document Control Officer (C404-02), U.S. EPA, Research Triangle Park, NC 27711, Attention Docket ID No. EPA-HQ-OAR-2004-0439.

2. Tips for Preparing Your Comments. When submitting comments, remember to:

• Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

• Follow directions—The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

• Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

• Describe any assumptions and provide any technical information and/or data that you used.

• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concerns, and suggest alternatives.

• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

• Make sure to submit your comments by the comment period deadline identified.

The Federal Emergency Management Agency (FEMA) proposes to make determinations of BFEs and modified BFEs for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).

These proposed BFEs and modified BFEs, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by other Federal, State or regional entities. These proposed elevations are used to meet the floodplain management requirements of the NFIP and are also used to calculate the appropriate flood insurance premium rates for new buildings built after these elevations are made final, and for the contents in these buildings.

National Environmental Policy Act. This proposed rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. An environmental impact assessment has not been prepared.

Regulatory Flexibility Act. As flood elevation determinations are not within the scope of the Regulatory Flexibility Act, 5 U.S.C. 601-612, a regulatory flexibility analysis is not required.

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

Executive Order 13132, Federalism. This proposed rule involves no policies that have federalism implications under Executive Order 13132.

Executive Order 12988, Civil Justice Reform. This proposed rule meets the applicable standards of Executive Order 12988.

Accordingly, 44 CFR part 67 is proposed to be amended as follows:

The Federal Emergency Management Agency (FEMA) proposes to make determinations of BFEs and modified BFEs for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).

These proposed BFEs and modified BFEs, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by other Federal, State or regional entities. These proposed elevations are used to meet the floodplain management requirements of the NFIP and are also used to calculate the appropriate flood insurance premium rates for new buildings built after these elevations are made final, and for the contents in these buildings.

National Environmental Policy Act. This proposed rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. An environmental impact assessment has not been prepared.

Regulatory Flexibility Act. As flood elevation determinations are not within the scope of the Regulatory Flexibility Act, 5 U.S.C. 601-612, a regulatory flexibility analysis is not required.

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

Executive Order 13132, Federalism. This proposed rule involves no policies that have federalism implications under Executive Order 13132.

Executive Order 12988, Civil Justice Reform. This proposed rule meets the applicable standards of Executive Order 12988.

Accordingly, 44 CFR part 67 is proposed to be amended as follows:

DHS invites interested persons to participate in this rulemaking by submitting written data, views, or arguments on all aspects of the proposed rule. DHS also invites comments that relate to the economic, environmental, or federalism affects that might result from this proposed rule. Comments that will provide the most assistance to DHS in developing these procedures will reference a specific portion of the proposed rule, explain the reason for any recommended change, and include data, information, or authority that support such recommended change.

Instructions: All submissions received must include the agency name and docket number for this rulemaking. All comments received will be posted without change to http://www.regulations.gov, including any personal information provided.

You may submit your comments and material by one of the methods specified in the ADDRESSES section. Please submit your comments and material by only one means. If you submit them by mail, submit them in an unbound format, no larger than 8.5 by 11 inches, suitable for copying and electronic filing. If you want DHS to acknowledge receipt of comments by mail, include with your comments a self-addressed, stamped postcard that includes the docket number for this rulemaking. We will stamp the date on the postcard and mail it to you.

Docket: For access to the docket to read background documents or comments received, go to http://www.regulations.gov.

Currently, the Federal Acquisition Regulation (FAR) provides for Two-Phase Design-Build Selection Procedures. These procedures are used when the Government determines it is appropriate to combine design and construction in a single contract with one contractor. See 48 CFR 36.3, “Two-Phase Design-Build Selection Procedures.” Since the FAR does not allow for consideration of cost or price related factors until the second phase, the Two-Phase procedures require proposal evaluation at two separate points. See 48 CFR 36.303-2(b)). The existing two-phase selection procedures, whether one solicitation for both phases or two solicitations issued sequentially, require evaluation of technical approach and technical qualifications in phase one and evaluation of technical factors (such as design concepts or proposed solutions and price) in phase two. These procedures result in substantial completion time for both interested firms and the Government.

The proposed rule amends the HSAR to allow for one-step turnkey design-build contracting for United States Coast Guard facilities. This one-step design-build contracting method results in a single contractor for both design and construction services. The one-step turnkey selection procedures for design-build consist of a single price and technical evaluation for a single, firm fixed-price contract with one contractor. This approach, which works well for less complex facilities' construction projects requiring little design, provides for shortened procurement and execution stages when compared to the existing two-phase selection procedures.

The proposed rule adds a new section and subpart to the HSAR at 48 CFR 3036.104-90. DHS is amending the HSAR to implement changes resulting from section 205 of Public Law 109-241 (regarding one-step turnkey selection procedures for design-build contracts of the United States Coast Guard) and to incorporate the delegation of turnkey design-build authority from the Secretary of Homeland Security to the United States Coast Guard.

This proposed rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. The proposed rule reduces proposal submittal requirements for Design-Build contracts through a one-step turnkey selection process and, therefore, will not result in any additional cost to the government or private sector.

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

The less complex one-step turnkey selection procedures under this proposed rule would encourage small businesses to participate in the source selection process being implemented for United States Coast Guard Design-Build contracts. Therefore, the Department of Homeland Security certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a written comment to the contact information previously identified in this proposed rule. In your comment, explain why you think it qualifies and how and to what degree this rule would economically affect it.

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

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

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

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

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

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

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

We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy.

The Department of Homeland Security considered the proposed rule under Management Directive 5100.1, Environmental Planning Program, that provides DHS the implementing policy for complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f). DHS has determined that this rulemaking would not individually or cumulatively have a significant effect on the human environment and, therefore, neither an environmental assessment nor an environmental impact statement is required. This rulemaking is among the category of actions included in Categorical Exclusion A3 for promulgation of rules of an administrative or procedural nature.

Accordingly, DHS proposes to amend 48 CFR part 3036 as follows:

1. The authority citation for 48 CFR part 3036 continues to read as follows: