This final rule is issued under Marketing Order Nos. 916 and 917, both as amended (7 CFR parts 916 and 917), regulating the handling of nectarines and peaches grown in California, respectively, hereinafter referred to as the “orders.” The orders are effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

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

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing orders now in effect, California nectarine and peach handlers are subject to assessments. Funds to administer the orders are derived from such assessments. It is intended that the assessment rates will be applicable to all assessable nectarines and peaches beginning on March 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 decreases the assessment rates established for the Nectarine Administrative Committee (NAC) and the Peach Commodity Committee (PCC) for the 2007-08 and subsequent fiscal periods from $0.21 to $0.06 per 25-pound container or container equivalent of nectarines and peaches handled.

The nectarine and peach marketing orders provide authority for the committees, with the approval of USDA, to formulate annual budgets of expenses and collect assessments from handlers to administer the programs. The members of NAC and PCC are producers of California nectarines and peaches, respectively. They are familiar with the committees' needs, and with the costs for goods and services in their local area and are, therefore, in a position to formulate appropriate budgets and assessment rates. The assessment rates are formulated and discussed in public meetings. Thus, all directly affected persons have an opportunity to participate and provide input.

For the 2006-07 fiscal period, the NAC recommended, and USDA approved, an assessment rate of $0.21 per 25-pound container or container equivalent of nectarines that will continue in effect from fiscal period to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the committee or other information available to USDA.

The NAC met on May 1, 2007, and unanimously recommended 2007-08 expenditures of $1,446,654 and an assessment rate of $0.06 per 25-pound container or container equivalent of nectarines. In comparison, the budgeted expenditures for the 2006-07 fiscal period were $4,473,764. The assessment rate of $0.06 per 25-pound container or container equivalent of nectarines is $0.15 lower than the rate currently in effect. Combining expected assessment revenue of $1,140,000 with the $322,051 carryover available from the 2006-07 fiscal period and other income, such as interest and research grants, should be adequate to meet committee needs. The assessment rate is also likely to provide a $127,133 reserve, which may be used to cover administrative expenses prior to the beginning of the 2008-09 shipping season as provided in the order (§ 916.42). Funds in the reserve will be kept within the maximum permitted by the order, approximately one year's expenses.

The NAC recommended a substantially reduced 2007-08 fiscal period budget and assessment rate because promotional activities, as well as portions of the committee's administrative and inspection programs, have been discontinued. A new California State marketing program that will conduct such activities has been implemented. An interim final rule discussing the implementation of this marketing program was published on April 16, 2007, in the Federal Register at 72 FR 18847.

Expenditures recommended by the NAC for the 2007-08 fiscal period include $262,444 for administration, $37,476 for inspection and compliance, $196,147 for production research, and $950,587 for consumer and category research. Budgeted expenses for these items in 2006-07 were $567,856 for administration; $1,070,832 for inspection; $201,702 for production research; and $2,633,374 for promotions, which included consumer and category research.

The NAC 2007-08 fiscal period assessment rate was derived after considering anticipated fiscal year expenses; estimated assessable nectarines of 19,000,000 25-pound containers or container equivalents; the estimated income from other sources, such as interest; and the need for an adequate financial reserve to carry the NAC into the 2008-09 fiscal period. Therefore, the NAC recommended an assessment rate of $0.06 per 25-pound container or container equivalent.

For the 2006-07 fiscal period, the PCC recommended, and USDA approved, an assessment rate of $0.21 per 25-pound container or container equivalent of peaches that will continue in effect from fiscal period to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the committee or other information available to USDA.

The PCC met on May 1, 2007, and recommended 2007-08 expenditures of $1,486,971 and an assessment rate of $0.06 per 25-pound container or container equivalent of peaches. In comparison, budgeted expenditures for the 2006-07 fiscal period were $4,988,914. The assessment rate of $0.06 per 25-pound container or container equivalent of peaches is $0.15 lower than the rate currently in effect. Combining expected assessment revenues of $1,200,000 with the $420,386 carryover available from the 2006-07 fiscal period and other income such as interest and research grants should be adequate to meet committee needs. The assessment rate is also likely to provide a $188,222 reserve, which may be used to cover administrative expenses prior to the beginning of the 2008-09 shipping season as provided in the order (§ 917.38). Funds in the reserve will be kept within the maximum permitted by the order, approximately one year's expenses.

The PCC recommended a substantially reduced 2007-08 fiscal period budget and assessment rate because promotional activities, as well as portions of the committee's administrative and inspection programs, have been discontinued. A new California State marketing program that will conduct such activities has been implemented. An interim final rule discussing the implementation of this marketing program was published on April 16, 2007, in the Federal Register at 72 FR 18847.

Expenditures recommended by the PCC for the 2007-08 fiscal period include $267,025 for administration, $87,693 for inspection and compliance, $196,149 for production research, and $936,104 for consumer and category research. Budgeted expenses for these items in 2006-07 were $936,104 for administration; $1,299,211 for inspection; $210,718 for production research; and $2,849,961 for promotions, which included consumer and category research.

The PCC 2007-08 fiscal period assessment rate was derived after considering anticipated fiscal year expenses; estimated assessable peaches of 20,000,000 25-pound containers or container equivalents; the estimated income from other sources, such as interest; and the need for an adequate financial reserve to carry the PCC into the 2008-09 fiscal period. Therefore, the PCC recommended an assessment rate of $0.06 per 25-pound container or container equivalent.

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

Although these assessment rates will be in effect for an indefinite period, the committees will continue to meet prior to or during each fiscal period to recommend budgets of expenses and consider recommendations for modification of the assessment rates. The dates and times of committee meetings are available from the committees' Web site at http://www.eatcaliforniafruit.com or USDA. Committee meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate the committees' recommendations and other available information to determine whether modification of the assessment rate for each committee is needed. Further rulemaking will be undertaken as necessary. The committees' 2007-08 fiscal period budgets and those for subsequent fiscal periods would be reviewed and, as appropriate, approved by USDA.

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

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

There are approximately 676 producers of nectarines and peaches in the production area and approximately 175 handlers subject to regulation under the orders. 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.

According to the committees' staff, approximately 85 percent of all the handlers within the industry may be classified as small entities. For the 2006 marketing season, staff estimated that the average handler price received was $9.00 per container or container equivalent of nectarines or peaches. A handler would have to ship at least 722,223 containers to have annual receipts of $6,500,000.

Also, the committees' staff has estimated that more than 90 percent of all the producers in the industry may be classified as small entities. For the 2006 marketing season, staff estimated the average producer price received was $4.50 per container or container equivalent for nectarines and peaches. A producer would have to produce at least 166,667 containers of nectarines and peaches to have annual receipts of $750,000.

With an average producer price of $4.50 per container or container equivalent, and a combined packout of nectarines and peaches of 36,388,996 containers, the value of the 2006 packout is estimated to be $163,750,482. Dividing this total estimated grower revenue figure by the estimated number of producers (676) yields an estimate of average revenue per producer of about $242,234 from the sales of peaches and nectarines.

This rule decreases the assessment rates established for NAC and PCC for the 2007-08 and subsequent fiscal periods from $0.21 to $0.06 per 25-pound container or container equivalent of nectarines or peaches.

The NAC recommended 2007-08 fiscal period expenditures of $1,446,654 for nectarines and an assessment rate of $0.06 per 25-pound container or container equivalent of nectarines. The PCC recommended 2007-08 fiscal period expenditures of $1,486,971 for peaches and an assessment rate of $0.06 per 25-pound container or container equivalent of peaches. The assessment rates of $0.06 are $0.15 lower than the rates currently in effect.

The quantity of assessable nectarines for the 2007-08 fiscal period is estimated at 19,000,000 25-pound containers or container equivalents. Thus, the $0.06 rate should provide $1,140,000 in assessment income.

The major expenditures recommended by the NAC for the 2007-08 year include $262,444 for administration; $37,476 for inspection and compliance; $196,147 for production research; and $950,587 for consumer and category research, which were previously included in the promotions budget. Budgeted expenses for these items in 2006-07 were $567,856, $1,070,832, $201,702, and $2,633,374, respectively.

The NAC recommended a decrease in the assessment rate to meet anticipated 2007-08 expenses and provide a financial reserve of $127,133, which is needed to fund expenses for the following year until assessments for that year are received.

The quantity of assessable peaches for the 2007-08 fiscal year is estimated at 20,000,000 25-pound containers or container equivalents. Thus, the $0.06 rate should provide $1,200,000 in assessment income.

The major expenditures recommended by PCC for the 2007-08 year include $267,025 for administration; $87,693 for inspection and compliance; $196,149 for production research; and $936,104 for consumer and category research, which were previously included in the promotions budget. Budgeted expenses for these items in 2006-07 were $629,024, $1,299,211, $210,718, and $2,849,961, respectively.

The PCC recommended a decrease in the assessment rate to meet anticipated 2007-08 fiscal period expenses and provide a financial reserve of $188,222, which is needed to fund expenses for the following year until assessments for that year are received.

Prior to arriving at these budgets, the committees considered information and recommendations from various sources, including, but not limited to: their Executive Committee, their Research Subcommittee, their International Programs Subcommittee, their Domestic Promotion Subcommittee, and the Nectarine and Peach Estimating Committees. Because fewer programs will be conducted under the Federal orders during this fiscal year compared to previous years, the committees decided the assessment rates should be reduced to prevent the accumulation of reserves beyond the levels allowed under the orders. Therefore, they recommended decreasing the assessment rates to $0.06 per 25-pound container or container equivalent. This will allow them to meet their 2007-08 fiscal period expenses and carry over necessary reserves to finance operations before 2008-09 fiscal period assessments are collected.

A review of historical and preliminary information pertaining to the upcoming fiscal period indicates that the grower price for nectarines and peaches for the 2007-08 season could range between $6.00 and $8.00 per 25-pound container or container equivalent. Therefore, the estimated assessment revenue for the 2007-08 fiscal period as a percentage of total grower revenue could range between .75 and 1 percent.

This action decreases the assessment obligation imposed on handlers. Assessments are applied uniformly on all handlers, and some of the costs may be passed on to producers. However, decreasing the assessment rate will reduce the burden on handlers, and may reduce the burden on producers. In addition, the committees' meetings were widely publicized throughout the California nectarine and peach industries and all interested persons were invited to attend the meetings and were encouraged to participate in the committees' deliberations on all issues. Like all committee meetings, the May 1, 2007, meetings were public meetings and entities of all sizes were able to express views on this issue.

This rule imposes no additional reporting or recordkeeping requirements on either small or large 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.

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.

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

A proposed rule concerning this action was published in the Federal Register on June 20, 2007 (72 FR 33919). Copies of the proposed rule were distributed via the committees' Web site. In addition, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 10-day comment period which ended July 2, 2007, was provided for interested persons to respond to the proposal. One comment supporting the proposal was received.

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

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

Pursuant to 5 U.S.C. 553, it is also found and determined that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because: (1) The 2007-08 fiscal period began on March 1, 2007, and the marketing orders require that the rates of assessment for each fiscal period apply to all assessable nectarines and peaches handled during such fiscal period; (2) this rule decreases the assessment rates for assessable nectarines and peaches beginning with the 2007-08 fiscal period; and (3) handlers are aware of this action, which was discussed by the committees at public meetings and recommended at their meetings on May 1, 2007, and is similar to other assessment rate actions issued in past years. Also, a 10-day comment period was provided for in the proposed rule.

Examining the Docket

You may examine the AD docket on the Internet at http://dms.dot.gov or 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 on the ground floor of the West Building at the DOT street address stated in the ADDRESSES section.

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that supersedes AD 2006-12-12, amendment 39-14638 (71 FR 33595, June 12, 2006). The existing AD applies to all Boeing Model 747-100, 747-100B, 747-100B SUD, 747-200B, 747-200C, 747-300, 747-400, 747-400D, and 747SR series airplanes. That NPRM was published in the Federal Register on April 26, 2007 (72 FR 20782). That NPRM proposed to continue to require repetitive inspections for cracking of the station 800 frame assembly, and repair if necessary. That NPRM also proposed to revise certain applicabilities and compliance times in the existing AD.

We provided the public the opportunity to participate in the development of this AD. We have considered the single comment that has been received on the NPRM. The commenter, Boeing, supports the NPRM.

We have revised this action to clarify the appropriate procedure for notifying the principal inspector before using any approved AMOC on any airplane to which the AMOC applies.

We have carefully reviewed the available data, including the comment that has been received, and determined that air safety and the public interest require adopting the AD with the change described previously. We have determined that this change will neither increase the economic burden on any operator nor increase the scope of the AD.

There are about 900 airplanes of the affected design in the worldwide fleet. This AD affects about 156 airplanes of U.S. registry.

The repetitive inspections take between 12 and 14 work hours per airplane, depending on the airplane configuration. The average labor rate is $80 per work hour. Based on these figures, the estimated cost of the currently required actions is between $149,760 and $174,720, or between $960 and $1,120 per airplane, per inspection cycle.

The repetitive inspections of the expanded area take between 18 and 20 work hours per airplane, at an average labor rate of $80 per work hour. Based on these figures, the estimated cost of the new actions specified in this AD for U.S. operators is between $224,640 and $249,600, or between $1,440 and $1,600 per airplane, per inspection cycle.

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.

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

For the reasons discussed above, I certify that this AD:

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

(2) Is not a “significant rule” under 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 regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

Discussion

The FAA is implementing a new process for streamlining the issuance of ADs related to MCAI. This streamlined process will allow us to adopt MCAI safety requirements in a more efficient manner and will reduce safety risks to the public. This process continues to allow all FAA AD issuance processes to meet legal, economic, Administrative Procedure Act, and Federal Register requirements. We also continue to meet our technical decision-making responsibilities to identify and correct unsafe conditions on U.S.-certificated products.

This AD references the MCAI and related service information that we considered in forming the engineering basis to correct the unsafe condition. The AD contains text copied from the MCAI and for this reason might not follow our plain language principles.

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in the Federal Register on March 30, 2007 (72 FR 15067). That NPRM proposed to require a repetitive special detailed inspection on the horizontal flange of the keel beam in the area of the first fastener hole aft of FR (frame) 40, follow-up actions (further inspections, installation of new fasteners, and sealing the fasteners), and repair if necessary. The MCAI states that during the A330 and A340 aircraft fatigue test, cracks appeared on the right and left sides between the crossing area of the keel beam fitting and the front spar on the center wing box (CWB). This situation if not corrected can lead in the worst case to keel beam rupture, which affects the structural integrity of the area.

We gave the public the opportunity to participate in developing this AD. We considered the comment received.

Airbus requests we refer to European Aviation Safety Agency (EASA) Airworthiness Directive 2006-0315 R1, dated October 26, 2006, in the AD. (We referred to EASA Airworthiness Directive 2006-0315, dated October 13, 2006, in the NPRM.) Airbus notes that Revision 1 of the EASA airworthiness directive adds an optional terminating action for the repetitive inspections.

We agree with Airbus, and have revised this AD to refer to Revision 1 of the EASA Airworthiness Directive. Revision 1 refers to the following Airbus Service Bulletins as the appropriate sources of service information for doing the optional terminating action: A330-57-3090, dated March 27, 2006; and A340-57-4098, dated March 27, 2006. The modification can be done only on airplanes without Airbus Modification 41652.

The optional terminating action is a modification that involves disconnecting one or more fasteners from the keel beam/bottom skin panel junction, removing two adjacent fasteners in order to perform cold working, and installing interference fit fasteners. The modification also involves inspections and repairing any cracking detected during the modification; in some instances the repair for cracking or for any bushing that has a diameter beyond certain limits specified in the service bulletin is contacting Airbus for repair instructions. We have added paragraph (e)(6) to this AD, and revised paragraph (d) of this AD to include the optional terminating action. We have revised paragraph (g) of this AD to refer to Revision 1 of the MCAI.

When we issued the NPRM we noted in paragraph (c)(3) that we were considering rulemaking regarding EASA airworthiness directive 2006-0314. EASA airworthiness directive 2006-0314 applies to Model A340-200 and -300 series airplanes repaired in accordance with certain Airbus repair drawings, and paragraph (c)(3) of the NPRM notes that those airplanes are not affected by the current action. We have since issued AD 2007-12-08, amendment 39-15086 (72 FR 31171, June 6, 2007), which is the parallel FAA AD to EASA airworthiness directive 2006-0314. We have changed paragraph (c)(3) of this AD to refer to AD 2007-12-08.

We reviewed the available data, including the comment received, and determined that air safety and the public interest require adopting the AD with the changes described previously. We determined that these changes will not increase the economic burden on any operator or increase the scope of the AD.

We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable in a U.S. court of law. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.

We might also have required different actions in this AD from those in the MCAI in order to follow our FAA policies. Any such differences are described in a separate paragraph of the AD. These requirements, if any, take precedence over the actions copied from the MCAI.

We estimate that this AD will affect about 9 products of U.S. registry. We also estimate that it will take about 12 work-hours per product to comply with this AD. The average labor rate is $80 per work-hour. Required parts will cost about $382 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these parts. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, we estimate the cost of this AD to the U.S. operators to be $12,078, or $1,342 per product.

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.

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

For the reasons discussed above, I certify that this AD:

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

(2) Is not a “significant rule” under 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 regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD Docket.

You may examine the AD docket on the Internet at http://dms.dot.gov ; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone (800) 647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

You may examine the AD docket on the Internet at http://dms.dot.gov or 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 on the ground floor of the West Building at the DOT street address stated in the ADDRESSES section.

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that supersedes AD 2005-23-14, amendment 39-14372 (70 FR 69075, November 14, 2005). The existing AD applies to all EMBRAER Model ERJ 170-100 LR, -100 STD, -100 SE, and -100 SU airplanes. That NPRM was published in the Federal Register on May 8, 2007 (72 FR 26008). That NPRM proposed to continue to require repetitively replacing the low-stage check valve and associated seals of the right-hand (RH) engine bleed system. That NPRM also proposed to add new airplanes to that existing requirement. For all airplanes, that NPRM also proposed to require repetitively replacing the low-stage check valve and associated seals of the left-hand (LH) engine bleed system with a new check valve and new seals.

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

We have reviewed Revision 01 of EMBRAER Service Bulletin 190-36-0004, dated November 14, 2006, and have determined that the accomplishment instructions of Revision 01 are the same as those in the original issue of the service bulletin. In the NPRM, we referred to the original issue of EMBRAER Service Bulletin 190-36-0004, dated October 18, 2006, as the appropriate source of service information for replacing the low-stage check valves and associated seals of the RH and LH engine bleed system, on Model ERJ 190-100 STD, -100 LR, and -100 IGW airplanes. Therefore, we have revised paragraphs (j) and (k) of this AD to also refer to Revision 01 of EMBRAER Service Bulletin 190-36-0004, dated November 14, 2006, as an appropriate source of service information. We have also revised paragraph (n) of this AD to specify that this AD does not require sending to the manufacturer any check valve removed in accordance with Revision 01 of EMBRAER Service Bulletin 190-36-0004.

We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD with the changes described previously. We have determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

This AD is considered to be interim action. The manufacturer has advised that it currently is developing a modification that will address the unsafe condition addressed by this AD. Once this modification is approved we might consider additional rulemaking.

The following table provides the estimated costs, at an average labor rate of $80 per work hour, for U.S. operators to comply with this AD. The parts manufacturer states that it will supply required parts to operators at no cost.

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.

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

For the reasons discussed above, I certify that this AD:

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

(2) Is not a “significant rule” under 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 regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

Discussion

The FAA is implementing a new process for streamlining the issuance of ADs related to MCAI. This streamlined process will allow us to adopt MCAI safety requirements in a more efficient manner and will reduce safety risks to the public. This process continues to allow all FAA AD issuance processes to meet legal, economic, Administrative Procedure Act, and Federal Register requirements. We also continue to meet our technical decision-making responsibilities to identify and correct unsafe conditions on U.S.-certificated products.

This AD references the MCAI and related service information that we considered in forming the engineering basis to correct the unsafe condition. The AD contains text copied from the MCAI and for this reason might not follow our plain language principles.

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in the Federal Register on April 30, 2007 (72 FR 21164). That NPRM proposed to require a set of modifications of the slide raft assembly of each door and the slide raft, as applicable, which consists of: continuous “speed lacing” cord and new soft covers with rounded grommets; and a new shorter firing cable, a new anchor block for the slide raft packboard and a new folding procedure. The MCAI states that several operators have reported non-automatic deployment of slide rafts during ground operational testing. In all cases, the slide raft released correctly from the door but did not inflate automatically. Pulling the manual backup handle correctly inflated the slide raft. Investigation conducted by the slide raft manufacturer showed that non-automatic deployments have two potential root causes: non-opening of the lacing; and stiffness and stiction (static friction) on the painted inflatable material. This situation, if not corrected, could delay the evacuation of passengers in case of an emergency. A new design solution has been developed to ensure the automatic slide raft deployment, which consists of: continuous “speed lacing” cord and new soft covers with rounded grommets (this modification ensures that the lacing opens); and a new shorter firing cable, a new anchor block for the slide raft packboard and a new folding procedure (this modification ensures automatic deployment regardless of the inflatable paint condition). Both modifications together ensure the automatic deployment function. The MCAI requires accomplishment of the set of modifications.

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM or on the determination of the cost to the public.

We have revised the applicability of this AD to match the MCAI and the current FAA type certification data sheet for the affected airplanes. The revision clarifies the applicability and does not add to or change the affected airplanes.

We reviewed the available data and determined that air safety and the public interest require adopting the AD with the change described previously. We determined that this change will not increase the economic burden on any operator or increase the scope of the AD.

We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable in a U.S. court of law. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.

We might also have required different actions in this AD from those in the MCAI in order to follow our FAA policies. Any such differences are described in a separate paragraph of the AD. These requirements, if any, take precedence over the actions copied from the MCAI.

Based on the service information, we estimate that this AD affects about 28 products of U.S. registry. We also estimate that it takes about 66 work-hours per product to comply with this AD. The average labor rate is $80 per work-hour. Required parts cost about $3,860 per product. Based on these figures, we estimate the cost of the AD on U.S. operators to be $255,920, or $9,140 per product.

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.

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

For the reasons discussed above, I certify that this AD:

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

(2) Is not a “significant rule” under 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 regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD Docket.

You may examine the AD docket on the Internet at http://dms.dot.gov; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone (800) 647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

You may examine the airworthiness directive (AD) docket on the Internet at http://dms.dot.gov or 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 on the ground floor of the West Building at the street address stated in the ADDRESSES section.

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to certain Boeing Model 757-200 and -300 series airplanes. That NPRM was published in the Federal Register on July 13, 2006 (71 FR 39597). That NPRM proposed to require changes to existing wiring; installation of new circuit breakers, relays, relay connectors, and wiring; and replacement of certain circuit breakers with higher-rated circuit breakers. For certain airplanes, that NPRM also proposed to require modification of wiring of the control module assembly for the electrical systems.

We provided the public the opportunity to participate in the development of this AD. We have considered the comments received.

Boeing, Northwest Airlines (NWA), and the Air Transport Association (ATA) agree with the intent of the NPRM.

The ATA, on behalf of its member US Airways, requests that we clarify which control module assemblies are required to be modified. US Airways states that it believes the intent of the NPRM would be to require concurrent modification of the control module assemblies identified in Boeing Service Bulletin 757-24-0093, dated August 14, 2003. However, US Airways points out that the effectivity of Boeing Component Service Bulletin 233N3209-24-04, Revision 1, dated August 14, 2003, identifies additional parts not found in Boeing Service Bulletin 757-24-0093.

We agree that the intent of paragraph (g) of the NPRM was to propose modification of certain control module assemblies identified in paragraph 2.C.3. of Boeing Service Bulletin 757-24-0093. The affected part numbers (P/Ns) are 233N3209-1025, -1026, -1028, -1300, and -1302. We have revised paragraph (g) of this AD to identify those affected part numbers. Further, we have revised paragraph (h) of this AD, “Credit for Accomplishment of Previous Service Bulletin,” to specify that doing the modification in accordance with the original issue of Boeing Component Service Bulletin 233N3209-24-04, dated April 10, 2003, is acceptable only for control module assembly, P/Ns 233N3209-1025, -1300, and -1302, since only these part numbers are referenced in the effectivity of the original issue of Boeing Component Service Bulletin 233N3209-24-04.

NWA states that Boeing Service Bulletin 757-24-0093, dated August 14, 2003, does not address the shedding of direct current (DC) power on Model 757-200 airplanes, variable numbers NE311 through NE325 inclusive. NWA further states that circuit breaker C9009, which controls 28-volt DC power on these airplanes, is also not addressed by the service bulletin. We infer that NWA would like Boeing to revise the service bulletin to provide instructions for addressing the unsafe condition on these specific airplanes.

We do not agree. The airplanes mentioned in NWA's comment above are identified as Group 40 airplanes in Boeing Service Bulletin 757-24-0093. Circuit breaker C9009 was not installed as part of the IFE system on Boeing airplanes. That circuit breaker was installed in accordance with a supplemental type certificate (STC), and we are currently evaluating that issue separately from this AD. This AD affects only IFE systems that were installed in production by Boeing. Therefore, we have not changed this AD in this regard.

NWA requests that we revise the NPRM to address the IFE system only. NWA states that, in addition to addressing the IFE systems, the NPRM and referenced Boeing service bulletins address other non-essential systems. As justification for its request, NWA states that the non-essential systems are unrelated to the Interim Policy Guidance for Certification of In-Flight Entertainment Systems on Title 14 CFR Part 25 Aircraft, Policy Number PS-ANM100-2000-00105, dated September 18, 2000.

We do not agree that the other non-essential electrical systems can be excluded from the requirements of this AD. If we excluded non-essential electrical systems from the requirements of this AD and electrical power to those systems had to be shut off due to smoke or fire, then power might also be shut off to other electrical systems that are essential for safe flight and landing. For this reason, control of the IFE and other non-essential electrical systems must be independent from other electrical systems essential for safe flight and landing. Therefore, we have determined that the actions required by this AD are necessary to ensure the continued safety of the affected fleet. We have revised the Summary section and paragraph (d) of this AD to clarify that the flightcrew's inability to turn off power to the IFE system and other non-essential electrical systems during a non-normal or emergency situation could result in the inability to control smoke or fumes in the airplane flight deck or cabin.

NWA requests that we revise this AD to allow use of a master “kill switch” in the airplane flight deck and/or cabin to shut off electrical power to the IFE system. As justification, NWA states that kill switches give the flightcrew or flight attendants the ability to shut off power to the IFE system without disturbing operation of flight essential systems. NWA further states that the kill switches in the flight deck should be positioned within easy reach of the flightcrew, and that kill switches in the cabin should be within easy access of the cabin crew. NWA asserts that adding kill switches meets and exceeds the intent of the NPRM.

We do not agree with use of a master “kill switch” in either the flight deck or the cabin, in general without understanding the specific design details. To adequately address the unsafe condition, it is necessary to supply power to all non-essential electrical systems through a utility bus and to provide the flightcrew with a means of deactivating all non-essential electrical systems to control smoke or fumes in the flight deck or cabin. Deactivation of non-essential electrical loads might not necessarily be achieved through use of a master “kill switch.” However, under the provisions of paragraph (i) of this AD, we may consider requests for approval of an AMOC if sufficient data are submitted to substantiate that such a design change would provide an acceptable level of safety. This AD affects only IFE systems that were installed in production by Boeing. We have not changed this AD in this regard.

NWA recommends that we revise this AD to include a waiver for IFE systems that have been permanently deactivated. NWA states that these systems would have all system power removed (capped and stowed) at the breaker. NWA asserts that, if power is removed at the breaker level, there is no possibility of the IFE system causing non-normal emergencies due to the IFE system.

We do not agree to exempt airplanes with deactivated IFE systems from the requirements of this AD. Since the IFE system has been identified as the source of the unsafe condition, we need to evaluate the method of deactivation with respect to its interaction with the unsafe condition. Therefore, any request to exempt airplanes with deactivated IFE systems should be submitted as an AMOC in accordance with the provisions of paragraph (i) of this AD. We have not changed this AD in this regard.

NWA requests that we extend the compliance time from 60 months to 72 months. NWA states that the work specified in the referenced Boeing service bulletins is complicated and accomplished best at a heavy check, which occurs at 72-month intervals.

We do not agree with the commenter's request to extend the compliance time. We have determined that the compliance time, as proposed in the NPRM, represents the maximum interval of time allowable for the affected airplanes to continue to safely operate before the modification is done. Since maintenance schedules vary among operators, there would be no assurance that the airplane would be modified during that maximum interval. However, paragraph (i) of this AD provides affected operators the opportunity to apply for an adjustment of the compliance time if the operator also presents data justifying the adjustment.

The Modification and Replacement Parts Association (MARPA) states that, typically, ADs are based on service information originating with the type certificate holder or its suppliers. MARPA adds that manufacturer service documents are privately authored instruments generally having copyright protection against duplication and distribution. MARPA notes that when a service document is incorporated by reference into a public document, such as an AD, it loses its private, protected status and becomes a public document. MARPA adds that if a service document is used as a mandatory element of compliance, it should not simply be referenced, but should be incorporated into the regulatory document; by definition, public laws must be public, which means they cannot rely upon private writings. MARPA adds that service documents incorporated by reference should be made available to the public by publication in the Department of Transportation's Docket Management System (DMS), keyed to the action that incorporates them. MARPA notes that the stated purpose of the incorporation by reference method is brevity, to keep from expanding the Federal Register needlessly by publishing documents already in the hands of the affected individuals; traditionally, “affected individuals” means aircraft owners and operators, who are generally provided service information by the manufacturer. MARPA adds that a new class of affected individuals has emerged, since the majority of aircraft maintenance is now performed by specialty shops instead of aircraft owners and operators. MARPA notes that this new class includes maintenance and repair organizations, component servicing and repair shops, parts purveyors and distributors, and organizations manufacturing or servicing alternatively certified parts under section 21.303 (“Replacement and modification parts”) of the Federal Aviation Regulations (14 CFR 21.303). MARPA adds that the concept of brevity is now nearly archaic as documents exist more frequently in electronic format than on paper. Therefore, MARPA asks that the service document deemed essential to the accomplishment of the NPRM be incorporated by reference into the regulatory instrument and published in DMS.

We acknowledge MARPA's comment concerning incorporation by reference. The Office of the Federal Register (OFR) requires that documents that are necessary to accomplish the requirements of the AD be incorporated by reference during the final rule phase of rulemaking. This AD incorporates by reference the documents necessary for the accomplishment of the requirements mandated by this AD. Further, we point out that while documents that are incorporated by reference do become public information, they do not lose their copyright protection. For that reason, we advise the public to contact the manufacturer to obtain copies of the referenced service information.

In regard to the commenter's request to post the service bulletin on DMS, we are currently in the process of reviewing issues surrounding the posting of service bulletins on DMS as part of an AD docket. Once we have thoroughly examined all aspects of this issue and have made a final determination, we will consider whether our current practice needs to be revised. No change to this AD is necessary in response to this comment.

MARPA states that the practice of requiring the replacement of a defective part with a certain part conflicts with 14 CFR 21.303. MARPA asserts that requiring installation of a certain part prevents installation of other good parts and prohibits the development of new parts. MARPA also states that the practice of requiring an AMOC to install a PMA part should be stopped. MARPA concludes that this practice presumes that all PMA parts are inherently defective and require an additional layer of approval.

MARPA further states the NPRM does not comply with FAA Order 8040.2; that order states that replacement or installation of certain parts could have replacement parts approved under 14 CFR 21.303 based on a finding of identicality. That order also states that any parts approved under this regulation and installed should be subject to the actions of the AD and included in the applicability.

MARPA states that if a PMA part is defective, then it must be addressed in an AD and not just simply implied by an AMOC requirement. MARPA suggests that we adopt language used in ADs issued by directorates other than the Transport Airplane Directorate, which specify installing an “FAA-approved equivalent part number” or “airworthy parts.” MARPA contends that the mandates contained in Section 1, paragraph (b)(1) of Executive Order 12866 are not being met because the directorates differ in their treatment of this issue. MARPA, therefore, requests that we revise the NPRM to allow use of PMA parts.

We do not agree to revise this AD. The NPRM does not address PMA parts, as provided in draft FAA Order 8040.2, because the Order was only a draft that was out for comment at the time. After issuance of the NPRM, the Order was revised and issued as FAA Order 8040.5 with an effective date of September 29, 2006. FAA Order 8040.5 does not address PMA parts in ADs.

We acknowledge the need to ensure that unsafe PMA parts are identified and addressed in ADs in a standardized way at the national level. We are currently examining all aspects of this issue, including input from industry. Once we have made a final determination, we will consider how our policy regarding PMA parts in ADs needs to be revised. However, the Transport Airplane Directorate considers that to delay this particular AD action would be inappropriate, since we have determined that an unsafe condition exists and that replacement of certain parts must be accomplished to ensure continued safety. Therefore, no change has been made to this AD in this regard.

We have revised this action to clarify the appropriate procedure for notifying the principal inspector before using any approved AMOC on any airplane to which the AMOC applies.

We have carefully reviewed the available data, including the comments received, and determined that air safety and the public interest require adopting the AD with the changes described previously. We have determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

There are about 548 airplanes of the affected design in the worldwide fleet. This AD affects about 332 Model 757-200 and -300 airplanes of U.S. registry. The following table provides the estimated costs, at an average labor rate of $80 per hour, for U.S. operators to comply with this AD. The estimated work hours and cost of parts in the following table depend on the relay and wiring configuration of an airplane.

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.

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

For the reasons discussed above, I certify that this AD:

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

(2) Is not a “significant rule” under 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 regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

Examining the Docket

You may examine the airworthiness directive (AD) docket on the Internet at http://dms.dot.gov or 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 on the ground floor of the West Building at the street address stated in the ADDRESSES section.

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to all Boeing Model 737-100, -200, -200C, -300, -400, and -500 series airplanes. The NPRM was published in the Federal Register on August 10, 2004 (69 FR 48424). That NPRM proposed to require repetitive inspections for discrepancies of the elevator tab control rod assemblies and/or damage to the surrounding structure, and related corrective action.

We provided the public the opportunity to participate in the development of this AD. We have considered the comments that have been submitted on the NPRM.

Airline Pilots Association International concurs with the NPRM and the proposed implementation schedule therein.

Air Transport Association (ATA) and Alaska Airlines (Alaska) generally support the intent of the AD.

ATA, on behalf of its member, Alaska, states that the inspection action specified in the NPRM is acceptable provided there are adequate parts available for replacement when discrepancies are discovered. Alaska adds that the proposed compliance intervals and repeat inspections are acceptable as proposed, as they will allow compliance at heavy check maintenance visits. We have verified with Boeing that adequate replacement parts are available.

Jet Airways asks that the FAA advise Boeing to revise the referenced service bulletin. Jet Airways states that since there is a difference between the NPRM and the service bulletin, in that the service bulletin recommends a one-time inspection of the control rod tab assemblies and the NPRM requires repetitive inspections, the service bulletin should be revised to include the repetitive inspections.

We agree with Jet Airways for the reasons provided. Since we issued the NPRM, Boeing has issued Alert Service Bulletin 737-27A1266, Revision 1, dated January 2, 2007. The procedures in Revision 1 are essentially the same as those in the original issue of the service bulletin; however, Revision 1 clarifies procedures for visually inspecting for the presence of inspection putty on each jam nut and ensuring that the inspection putty is intact and is not cracked or damaged. In addition, the one-time inspection for discrepancies of the elevator tab control rod assemblies and/or damage to the surrounding structure was changed to repetitive inspections. Therefore, Revision 1 eliminates the difference between this AD and the service bulletin that was noted in the NPRM. We have changed paragraph (f) of this AD to refer to Revision 1 and give credit for inspections and corrective action accomplished using the original issue of Boeing Alert Service Bulletin 737-27A1266, dated September 18, 2003.

Jet Airways also states that the repetitive inspection requirement is only needed because there is no locking provision for the jam nuts. Jet Airways adds that the FAA and Boeing should develop a provision for installation of lockwire to avoid looseness of the jam nuts and to terminate the repetitive inspection requirement.

We partially agree with Jet Airways, as follows:

We agree that locking provisions for certain elevator tab control rods with lockwire might be beneficial; however, we do not agree that the repetitive inspection requirement is needed only because there is no locking provision for the jam nuts. Repetitive inspections of the elevator control tab assemblies will identify discrepancies of the inspection putty, loose jam nuts, worn threads, and damage to surrounding structure that resulted from improperly torqued jam nuts. As previously described, Revision 1 of the service bulletin clarifies procedures for visually inspecting for the presence of inspection putty on each jam nut and ensuring that the inspection putty is intact and is not cracked or damaged. We have made no change to the AD in this regard.

Boeing states that the unsafe condition, as specified in the NPRM, is incorrect. That unsafe condition states, “We are proposing this AD to find and fix excessive freeplay in the tab control mechanism, which could result in elevator tab flutter and consequent loss of controllability of the airplane.” Boeing states that there is no freeplay check identified in the procedure specified in the referenced service information. Boeing asks that the wording be changed to read, “We are proposing this AD to prevent excessive thread wear in the rod ends of the elevator tab control rods as a result of loose jam nuts. Excessive rod end thread wear results in increased freeplay in the elevator tab control loop. Airframe vibration can occur with sufficient freeplay, leading to a degradation of handling characteristics of the airplane.”

Boeing also asks that the unsafe condition, as specified in the Discussion section of the NPRM, be changed for the same reason to read, “Excessive freeplay in the elevator tab control rods, if not found and fixed, could result in the loss of both load paths, leading to elevator tab flutter and consequent loss of controllability of the airplane.”

We agree to change the description of the unsafe condition because Boeing is accurate in the statement that there is no freeplay check identified in the procedure specified in the referenced service bulletin. We have changed the description of the unsafe condition to read, “We are issuing this AD to find and fix discrepancies of the elevator tab control rod assembly, which could result in excessive freeplay in the elevator tab control rods. Such freeplay could cause loss of both load paths, subsequent elevator tab flutter, and consequent reduced structural integrity and loss of controllability of the airplane.” We have changed the wording for the unsafe condition to include the intent of the information provided by Boeing. The discrepancies (loose jam nuts and/or thread wear at the rod ends) are referred to in the sentence immediately preceding the unsafe condition and do not need to be repeated. Concerning Boeing's comment on the Discussion section of the NPRM, since that section of the preamble does not reappear in the final rule, no change to the AD is necessary.

We have revised this AD to clarify the appropriate procedure for notifying the principal inspector before using any approved AMOC on any airplane to which the AMOC applies.

We have carefully reviewed the available data, including the comments received, and determined that air safety and the public interest require adopting the AD with the changes described previously. We have determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

There are about 2,878 airplanes of the affected design in the worldwide fleet. This AD affects about 1,078 airplanes of U.S. registry. The inspection takes about 2 work hours per airplane, at an average labor rate of $80 per work hour. Based on these figures, the estimated cost of the AD for U.S. operators is $172,480, or $160 per airplane, per inspection cycle.

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.

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

For the reasons discussed above, I certify that this AD:

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

(2) Is not a “significant rule” under 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 regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

The Civil Aviation Authority-The Netherlands (CAA-NL), which is the airworthiness authority for the Netherlands, notified us that an unsafe condition may exist on certain Fokker Model F27 Mark 050 airplanes equipped with Dowty Type R.352 or R.410 series propellers. The CAA-NL advises that there have been three events of propeller blade de-icer assembly boots debonding and detaching during flight. In two of the incidents, the boot impacted the fuselage causing considerable damage, but did not penetrate into the fuselage. In the third incident the boot hit a passenger cabin window shattering the pane and penetrating into the fuselage, and subsequently injuring two passengers. Investigation revealed that all of the affected boots had been attached using Minnesota Mining and Manufacture Co. (3M) 1300L adhesive. This condition, if not corrected, could result in debonding and separation of a boot from the airplane, consequent reduced structural integrity of the airplane, and possible injury to passengers and crew.

Dowty has issued Service Bulletin F50-61-158, including Appendix 1, dated September 30, 2005. The service bulletin describes procedures for checking the maintenance records to determine whether 3M 1300L adhesive has been applied to attach the de-icer assembly overshoes (boots) to the propeller blades, repetitive inspections of affected boots, and replacing boots attached with defective adhesive. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. The CAA-NL reviewed the service information and issued Dutch airworthiness directive NL-2005-016, dated December 16, 2005, to ensure the continued airworthiness of these airplanes in the Netherlands.

These airplanes are manufactured in the Netherlands and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the CAA-NL has kept the FAA informed of the situation described above. We have examined the CAA-NL's findings, evaluated all pertinent information, and determined that we need to issue an AD for products of this type design that are certificated for operation in the United States.

Therefore, we are issuing this AD to detect and correct boots with defective adhesive, which could result in separation of a boot from the airplane, possible injury to passengers and crew, and consequent reduced structural integrity of the airplane. This AD requires accomplishing the actions specified in the service information described previously.

None of the airplanes affected by this action are on the U.S. Register. All airplanes affected by this AD are currently operated by non-U.S. operators under foreign registry; therefore, they are not directly affected by this AD action. However, we consider this AD necessary to ensure that the unsafe condition is addressed if any affected airplane is imported and placed on the U.S. Register in the future.

If an affected airplane is imported and placed on the U.S. Register in the future, the required inspections would take about 1 work hour per airplane, at an average labor rate of $80 per work hour. Based on these figures, the estimated cost of the AD would be $80 per airplane, per inspection cycle.

No airplane affected by this AD is currently on the U.S. Register. Therefore, providing notice and opportunity for public comment is unnecessary before this AD is issued, and this AD may be made effective in less than 30 days after it is published in the Federal Register .

This AD is a final rule that involves requirements that affect flight safety and was not preceded by notice and an opportunity for public comment; however, we invite you to submit any relevant written data, views, or arguments regarding this AD. Send your comments to an address listed in the ADDRESSES section. Include “Docket No. FAA-2007-28911; Directorate Identifier 2007-NM-002-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the AD that might suggest a need to modify it.

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 AD. Using the search function of that Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). 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 AD docket on the Internet at http://dms.dot.gov , or 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 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 Docket Management System receives them.

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.

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

For the reasons discussed above, I certify that the 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 regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

Streamlined Issuance of AD

The FAA is implementing a new process for streamlining the issuance of ADs related to MCAI. This streamlined process will allow us to adopt MCAI safety requirements in a more efficient manner and will reduce safety risks to the public. This process continues to follow all FAA AD issuance processes to meet legal, economic, Administrative Procedure Act, and Federal Register requirements. We also continue to meet our technical decision-making responsibilities to identify and correct unsafe conditions on U.S.-certificated products.

This AD references the MCAI and related service information that we considered in forming the engineering basis to correct the unsafe condition. The AD contains text copied from the MCAI and for this reason might not follow our plain language principles.

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in the Federal Register on April 26, 2007 (72 FR 20785). That NPRM proposed to correct an unsafe condition for the specified products. The MCAI states:

Damage or corrosion of the specified areas could result in reduced structural integrity of the airplane. You may obtain further information by examining the MCAI in the AD docket.

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM or on the determination of the cost to the public.

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

We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.

We might also have required different actions in this AD from those in the MCAI in order to follow our FAA policies. Any such differences are highlighted in a NOTE within the AD.

Based on the service information, we estimate that this AD affects about 29 products of U.S. registry. We also estimate that it will take about 9 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $80 per work-hour. Required parts will cost about $886 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these costs. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, we estimate the cost of this AD on U.S. operators to be $46,574, or $1,606 per product.

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.

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

For the reasons discussed above, I certify this AD:

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

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

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

We prepared a regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket.

You may examine the AD docket on the Internet at http://dms.dot.gov; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone (800) 647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

Examining the Docket

You may examine the airworthiness directive (AD) docket on the Internet at http://dms.dot.gov or 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 on the ground floor of the West Building at the street address stated in the ADDRESSES section.

The FAA issued a supplemental notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to certain Airbus Model A319-100 and Model A320-200 series airplanes. That supplemental NPRM was published in the Federal Register on March 29, 2007 (72 FR 14715). That supplemental NPRM proposed to require repetitive inspections of the wing-tank fuel pumps, canisters, and wing fuel tanks for detached identification labels, and corrective action if necessary. That supplemental NPRM also proposed to mandate modification of the fuel strainers at the fuel pump and suction bypass intakes.

We provided the public the opportunity to participate in the development of this AD. We have considered the comments received.

Air Transport Association (ATA), on behalf of US Airways, asks that we update the service bulletin reference for the modification specified in paragraph (j) of the supplemental NPRM to Revision 01 of Airbus Service Bulletin A320-28-1149, dated October 9, 2006.

We agree with the request. Airbus has issued Service Bulletin A320-28-1149, Revision 01, dated October 9, 2006. We referred to the original issue of the service bulletin, dated June 14, 2006, as the appropriate source of service information for accomplishing the modification. The procedures in Revision 01 are essentially the same as those in the original issue; however, the procedures in Revision 01 add certain clarifications, and the work hours for accomplishing the modification have been increased. We have changed paragraph (j) of this AD to refer to Revision 01 of the service bulletin, added a new paragraph (k) to this AD to give credit for the original issue of the service bulletin, and re-identified subsequent paragraphs accordingly.

Airbus asks that we change the applicability specified in paragraph (c) of the supplemental NPRM. Airbus states that the applicability refers to Airbus Service Bulletins A320-28-1102, Revision 02, dated July 10, 2006; and A320-57-1117, Revision 02, dated March 13, 2006. Airbus notes that the service bulletins are being revised to remove manufacturer's serial numbers (MSNs) 1083, 1310, 1314, and 1360, because Airbus has confirmed that labels were never installed on these airplanes. Airbus also notes that European Aviation Safety Agency (EASA) airworthiness directive 2006-0236, also referred to in the supplemental NPRM, has been revised to remove the MSNs; however, due to an administrative error, MSN 1083 remains in the compliance section of the EASA airworthiness directive. In conclusion, Airbus asks that the applicability section be updated to reflect these changes.

We agree to change the applicability specified in paragraph (c) of this AD to exclude airplanes having MSNs 1083, 1310, 1314, and 1360. However, since the referenced service bulletins have not yet been revised to remove these airplanes, we will retain the reference to Revision 2 of the service bulletin in paragraph (c) as well as paragraph (f) of this AD, which is repetitive inspections and corrective actions of the four wing-tank fuel pumps and canisters.

Northwest Airlines (NWA) states that it is in the process of implementing the modification of the fuel pump strainers specified in Service Bulletin A320-28-1149. NWA adds that its work-hour estimate is 54 hours for implementation, after access to the tanks is gained. NWA does not provide a specific request.

We infer that NWA is asking that we increase the number of work hours for accomplishing the modification, as specified in the Costs of Compliance section of the supplemental NPRM. Revision 01 of Service Bulletin A320-28-1149 specifies an increase in the work hours for accomplishing the modification from 20 to 36; therefore, we have changed the work hours in the Costs of Compliance section of this AD to match the work hours specified in the subject service bulletin. However, modification costs will likely vary depending on the operator and the airplane configuration.

NWA agrees with the 3,000-flight-hour repetitive inspection interval after the initial label removal has been completed. However, NWA has not found any labels in the wing pumps on affected airplanes after the removal procedure has been done. NWA would like the exception “following any wing-tank fuel pump failure” removed from the repetitive inspection requirement specified in paragraph (g)(2) of the supplemental NPRM to simplify the continued inspections.

We do not agree with the NWA request. Accomplishment of the label removal procedure does not completely remove the risk of detached labels getting into the fuel system, since some of the labels are not accessible during the label removal procedure. The FAA-approved Master Minimum Equipment List prohibits dispatch with one wing-tank fuel pump inoperative on the airplanes affected by the requirements in this AD. Therefore, the fuel pump would have to be repaired before further flight, and inspecting for labels would not impose any additional burden. We have made no change to the AD in this regard.

We have carefully reviewed the available data, including the comments received, and determined that air safety and the public interest require adopting the AD with the changes described previously. We have determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

The following table provides the estimated costs for U.S. operators to comply with this AD.

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.

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

For the reasons discussed above, I certify that this AD:

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

(2) Is not a “significant rule” under 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 regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

Discussion

On May 26, 2005, we issued AD 2005-12-04, amendment 39-14120 (70 FR 34313, June 14, 2005). That AD applies to certain Boeing Model 757-200, -200PF, and -200CB series airplanes. That AD requires repetitive inspections of the shim installation between the vertical flange and bulkhead, and repair if necessary. That AD resulted from reports of cracks, loose and broken bolts, and shim migration in the joint between the aft torque bulkhead and the strut-to-diagonal brace fitting. The actions specified in that AD are intended to detect and correct such cracks, loose and broken bolts, and shim migration, which could result in damage to the strut and consequent separation of the strut and engine from the airplane.

Since we issued that AD, we have received reports of cracking in the pylon under bolts that appear to be undamaged during the existing AD inspections. Although the cracking was underneath non-discrepant bolts, it was adjacent to bolts subject to AD 2005-12-04 that were loose for a period of time long enough to cause this cracking.

On May 25, 2004, we issued AD 2004-12-07, amendment 39-13666 (69 FR 33561, June 16, 2004), for certain Boeing Model 757 series airplanes. That AD requires, for certain airplanes, repetitive detailed inspections of certain aft bulkhead fasteners for loose or missing fasteners, and corrective action if necessary. That AD also requires, for certain other airplanes, a one-time detailed inspection of the middle gusset of the inboard side load fitting for proper alignment and realignment if necessary; a one-time eddy current inspection of certain fastener holes for cracking, and repair if necessary; and a detailed inspection of certain fasteners for loose or missing fasteners; and replacement with new fasteners if necessary. Accomplishing the actions specified in this AD terminates the requirements specified in paragraphs (b) and (c) of AD 2004-12-07.

We have reviewed Boeing Alert Service Bulletin 757-54A0047, Revision 3, dated June 27, 2007 (we referred to Boeing Service Bulletin 757-54A0047, Revision 1, dated March 24, 2005, as the appropriate source of service information for accomplishing the required actions specified in AD 2005-12-04). The alert service bulletin describes basically the same procedures (as required by AD 2005-12-04) for repetitive detailed inspections of the shim installation between the vertical flange and bulkhead and repair if necessary; however, the description of the actions has been revised. The alert service bulletin specifies to do repetitive inspections as follows:

• Do detailed inspections of the shim installations between the vertical flange and bulkhead to determine if there are signs of movement.

• Do detailed inspections of the four fasteners in the vertical flange to determine if there are signs of movement or if there are gaps under the head or collar.

• Do detailed inspections of the fasteners that hold the strut to the horizontal flange of the strut-to-diagonal brace fitting to determine if there are signs of movement or if there are gaps under the head or collar.

The alert service bulletin specifies to do related investigative actions and repairs as follows:

• Repair the shim if cumulative movement is 0.50 inch or less.

• Replace the shim if cumulative movement is more than 0.50 inch and do the inspection and repair of the four critical fastener holes on the horizontal flange specified in Part IV of the alert service bulletin.

• If any fastener is rejected, inspect the fastener hole for cracking and repair if necessary, increase the diameter of the hole, install oversize fasteners, and do the inspection and repair of the four critical fastener holes on the horizontal flange specified in Part IV of the alert service bulletin.

In addition to the repetitive inspections, the alert service bulletin describes procedures for an additional one-time inspection as follows: If any findings from inspections done in accordance with the original issue or Revision 1 of the service bulletin led to a rejection of any fasteners, or if there were any equivalent findings prior to the original issue of the service bulletin (except for findings on airplanes identified as Group 1, Configuration 2 in Revision 3 of the alert service bulletin that are prior to the incorporation of Boeing Service Bulletin 757-54-0035), the alert service bulletin describes a high frequency eddy current (HFEC) inspection for cracking of the four critical fastener holes in the horizontal flange and repair if necessary.

Depending on the group and configuration specified in the alert service bulletin, the initial compliance time ranges from 90 days after the date on the service bulletin to 6,000 flight cycles or 36 months, whichever occurs first, after the incorporation of Boeing Service Bulletin 757-54-0035. Depending on the group and configuration specified in the alert service bulletin, the repetitive interval ranges from 6,000 flight cycles or 36 months, whichever occurs first, to 9,000 flight cycles or 54 months, whichever occurs first.

The unsafe condition described previously is likely to exist or develop on other airplanes of the same type design. For this reason, we are issuing this AD to supersede AD 2005-12-04. This new AD continues to require repetitive inspections of the shim installation between the vertical flange and bulkhead, and repair if necessary. This AD also requires, for certain airplanes, an inspection for cracking of the four critical fastener holes in the horizontal flange, and repair if necessary.

The alert service bulletin specifies to contact the manufacturer for instructions on how to repair certain conditions, but this AD requires repairing those conditions in one of the following ways:

• Using a method that we approve; or

• Using data that meet the certification basis of the airplane, and that have been approved by an Authorized Representative for the Boeing Commercial Airplanes Delegation Option Authorization Organization whom we have authorized to make those findings.

An unsafe condition exists that requires the immediate adoption of this AD; therefore, providing notice and opportunity for public comment before the AD is issued is impracticable, and good cause exists to make this AD effective in less than 30 days.

This AD is a final rule that involves requirements that affect flight safety and was not preceded by notice and an opportunity for public comment; however, we invite you to submit any relevant written data, views, or arguments regarding this AD. Send your comments to an address listed in the ADDRESSES section. Include “Docket No. FAA-2007-28920; Directorate Identifier 2007-NM-162-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the AD that might suggest a need to modify it.

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 AD. Using the search function of that Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). 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 AD docket on the Internet at http://dms.dot.gov , or 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 on the ground level of the West Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them.

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.

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

For the reasons discussed above, I certify that the 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 regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

The Commission is adopting new rule 206(4)-8 under the Investment Advisers Act of 1940 (“Advisers Act”). 1

On December 13, 2006, we proposed a new rule under the Advisers Act that would prohibit advisers to pooled investment vehicles from defrauding investors or prospective investors in pooled investment vehicles they advise. 2 We proposed the rule in response to the opinion of the Court of Appeals for the District of Columbia Circuit in Goldstein v. SEC, which created some uncertainty regarding the application of sections 206(1) and 206(2) of the Advisers Act in certain cases where investors in a pool are defrauded by an investment adviser to that pool. 3 In addressing the scope of the exemption from registration in section 203(b)(3) of the Advisers Act and the meaning of “client” as used in that section, the Court of Appeals expressed the view that, for purposes of sections 206(1) and (2) of the Advisers Act, the “client” of an investment adviser managing a pool is the pool itself, not an investor in the pool. As a result, it was unclear whether the Commission could continue to rely on sections 206(1) and (2) of the Advisers Act to bring enforcement actions in certain cases where investors in a pool are defrauded by an investment adviser to that pool. 4

In its opinion, the Court of Appeals distinguished sections 206(1) and (2) from section 206(4) of the Advisers Act, which is not limited to conduct aimed at clients or prospective clients of investment advisers. 5 Section 206(4) provides us with rulemaking authority to define, and prescribe means reasonably designed to prevent, fraud by advisers. 6 We proposed rule 206(4)-8 under this authority.

We received 45 comment letters in response to our proposal. 7 Most commenters generally supported the proposal. Eighteen endorsed the rule as proposed, noting that the rule would strengthen the antifraud provisions of the Advisers Act or that the rule would clarify the Commission's enforcement authority with respect to advisers. 8 Others, however, urged that we make revisions that would restrict the scope of the rule to more narrowly define the conduct or acts it prohibits. 9

Today, we are adopting new rule 206(4)-8 as proposed. The rule prohibits advisers from (i) making false or misleading statements to investors or prospective investors in hedge funds and other pooled investment vehicles they advise, or (ii) otherwise defrauding these investors. The rule clarifies that an adviser's duty to refrain from fraudulent conduct under the federal securities laws extends to the relationship with ultimate investors and that the Commission may bring enforcement actions under the Advisers Act against investment advisers who defraud investors or prospective investors in those pooled investment vehicles.

Rule 206(4)-8 prohibits advisers to pooled investment vehicles from (i) making false or misleading statements to investors or prospective investors in those pools or (ii) otherwise defrauding those investors or prospective investors. We will enforce the rule through civil and administrative enforcement actions against advisers who violate it.

Section 206(4) authorizes the Commission to adopt rules and regulations that “define, and prescribe means reasonably designed to prevent, such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative.” In adopting rule 206(4)-8, we intend to employ all of the broad authority that Congress provided us in section 206(4) and direct it at adviser conduct affecting an investor or potential investor in a pooled investment vehicle.

Some commenters questioned the scope of the rule, arguing that the Commission should define fraud. 10 We believe that we have done so, only more broadly than some commenters would have us do. As the Proposing Release indicated, our intent is to prohibit all fraud on investors in pools managed by investment advisers. Congress expected that we would use the authority provided by section 206(4) to “promulgate general antifraud rules capable of flexibility.”  11 The terms material false statements or omissions and “acts, practices, and courses of business as are fraudulent, deceptive, or manipulative” encompass the well-developed body of law under the antifraud provisions of the federal securities laws. The legal authorities identifying the types of acts, practices, and courses of business that are fraudulent, deceptive, or manipulative under the federal securities laws are numerous, and we believe that the conduct prohibited by rule 206(4)-8 is sufficiently clear and well understood. 12

Rule 206(4)-8 prohibits investment advisers from making false or misleading statements to, or engaging in other fraud on, investors or prospective investors in a pooled investment vehicle they manage. The scope of the rule is modeled on that of sections 206(1) and (2) of the Advisers Act, which make unlawful fraud by advisers against clients or prospective clients. Rule 206(4)-8 prohibits false or misleading statements made, for example, to existing investors in account statements as well as to prospective investors in private placement memoranda, offering circulars, or responses to “requests for proposals,” electronic solicitations, and personal meetings arranged through capital introduction services.

Some commenters argued that the rule should not prohibit fraud against prospective investors in a pooled investment vehicle, asserting that such fraud does not actually harm investors until they, in fact, make an investment. 13 We disagree. False or misleading statements and other frauds by advisers are no less objectionable when made in an attempt to draw in new investors than when made to existing investors. 14 For similar policy reasons that we believe led Congress to apply the protections of sections 206(1) and (2) to prospective clients, we have decided to apply those of rule 206(4)-8 to prospective investors. 15 We believe that prohibiting false or misleading statements made to, or other fraud on, any prospective investors is a means reasonably designed to prevent fraud.

Rule 206(4)-8 applies to both registered and unregistered investment advisers. 16 As we noted in the Proposing Release, many of our enforcement cases against advisers to pooled investment vehicles have been brought against advisers that are not registered under the Advisers Act, and we believe it is critical that we continue to be in a position to bring actions against unregistered advisers that manage pools and that defraud investors in those pools. 17 The two commenters that expressed an explicit view on this aspect of the proposal supported our application of the rule to advisers that are not registered with the Commission. 18

The rule we are adopting today applies to investment advisers with respect to any “pooled investment vehicle” they advise. The rule defines a pooled investment vehicle  19 as any investment company defined in section 3(a) of the Investment Company Act  20 and any privately offered pooled investment vehicle that is excluded from the definition of investment company by reason of either section 3(c)(1) or 3(c)(7) of the Investment Company Act. 21 As a result, the rule applies to advisers to hedge funds, private equity funds, venture capital funds, and other types of privately offered pools that invest in securities, as well as advisers to investment companies that are registered with us. 22

Several commenters supported applying the protection of the new antifraud rule to investors in all these kinds of pooled investment vehicles, noting, for example, that every investor, not just the wealthy or sophisticated that typically invest in private pools, should be protected from fraud. 23 Some other commenters urged us not to apply the rule to advisers to registered investment companies, arguing that the rule is unnecessary because other provisions of the federal securities laws prohibiting fraud are available to the Commission to address these matters. 24 They expressed concern that application of another antifraud provision with different elements would be burdensome. These commenters claimed that the rule would, for example, make it necessary for advisers to conduct extensive reviews of all communications with clients. But the other antifraud provisions available to us contain different elements because they were not specifically designed to address frauds by investment advisers with respect to investors in pooled investment vehicles. In some cases, the other antifraud provisions may not permit us to proceed against the adviser. 25 As a result, the existing antifraud provisions may not be available to us in all cases. As we discussed above, before the Goldstein decision we had brought actions against advisers to mutual funds under sections 206(1) and (2) for defrauding investors in mutual funds. 26 Because, before the Goldstein decision, advisers to pooled investment vehicles operated with the understanding that the Advisers Act prohibited the conduct that this rule prohibits, we believe that advisers that are attentive to their traditional compliance responsibilities will not need to alter their business practices or take additional steps and incur new costs as a result of this rule's adoption.

Rule 206(4)-8(a)(1) prohibits any investment adviser to a pooled investment vehicle from making an untrue statement of a material fact to any investor or prospective investor in the pooled investment vehicle, or omitting to state a material fact necessary in order to make the statements made to any investor or prospective investor in the pooled investment vehicle, in the light of the circumstances under which they were made, not misleading. 27

The provision is very similar to those in many of our antifraud laws and rules that, depending upon the circumstances, may also be applicable to the same investor communications. 28 Sections 206(1) and (2) have imposed similar obligations on advisers since 1940 and, before Goldstein , were commonly accepted as imposing similar requirements on communications with investors in a fund. For these reasons, and because the nature of the duty to communicate without false statements is so well developed in current law, we believe that commenters' concerns about the breadth of the prohibition or any chilling effect the new rule might have on investor communications are misplaced. 29 Advisers to pooled investment vehicles attentive to their traditional compliance responsibilities will not need to alter their communications with investors.

Rule 206(4)-8(a)(1) prohibits advisers to pooled investment vehicles from making any materially false or misleading statements to investors in the pool regardless of whether the pool is offering, selling, or redeeming securities. While the new rule differs in this aspect from rule 10b-5 under the Exchange Act, the conduct prohibited is similar. The new rule prohibits, for example, materially false or misleading statements regarding investment strategies the pooled investment vehicle will pursue, the experience and credentials of the adviser (or its associated persons), the risks associated with an investment in the pool, the performance of the pool or other funds advised by the adviser, the valuation of the pool or investor accounts in it, and practices the adviser follows in the operation of its advisory business such as how the adviser allocates investment opportunities. 30

Rule 206(4)-8(a)(2) makes it a fraudulent, deceptive, or manipulative act, practice, or course of business for any investment adviser to a pooled investment vehicle to “otherwise engage in any act, practice, or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in the pooled investment vehicle.”  31 As we noted in the Proposing Release, the wording of this provision is drawn from the first sentence of section 206(4) and is designed to apply more broadly to deceptive conduct that may not involve statements. 32

Some commenters asserted that section 206(4) provides us authority only to adopt prophylactic rules that explicitly identify conduct that would be fraudulent under the new rule. 33 We believe our authority is broader. We do not believe that the commenters' suggested approach would be consistent with the purposes of the Advisers Act or the protection of investors. That approach would have us adopt the rule prohibiting fraudulent communications but not fraudulent conduct. 34 But, section 206(4) itself specifically authorizes us to adopt rules defining and prescribing “acts, practices and courses of business,” ( i.e. , conduct), and does not explicitly refer to communications, which, nonetheless, represent a form of an act, practice, or course of business. In addition, rule 206(4)-8 as adopted would provide greater protection to investors in pooled investment vehicles.

Alternatively, commenters would have us adopt a rule prohibiting identified known fraudulent conduct or would have us provide detailed commentary describing specific forms of fraudulent conduct that the rule would prohibit. 35 Either approach would fail to prohibit fraudulent conduct we did not identify, and could provide a roadmap for those wishing to engage in fraudulent conduct. This approach would be inconsistent with our historical application of the federal securities laws under which broad prohibitions have been applied against specific harmful activity.

We noted in the Proposing Release that, unlike violations of rule 10b-5 under the Exchange Act, the Commission would not need to demonstrate that an adviser violating rule 206(4)-8 acted with scienter. 36 Commenters questioned whether the rule should encompass negligent conduct, arguing that it would “expand the concept of fraud itself beyond its original meaning.”  37 We read the language of section 206(4) as not by its terms limited to knowing or deliberate conduct. For example, section 206(4) encompasses “acts, practices, and courses of business as are * * * deceptive,” thereby reaching conduct that is negligently deceptive as well as conduct that is recklessly or deliberately deceptive. In addition, the Court of Appeals for the District of Columbia Circuit concluded that “scienter is not required under section 206(4).”  38 We believe use of a negligence standard also is appropriate as a method reasonably designed to prevent fraud. As the Supreme Court noted in U.S. v. O'Hagan , “[a] prophylactic measure, because its mission is to prevent, typically encompasses more than the core activity prohibited.”  39 In O'Hagan , the Court held that under section 14(e) “the Commission may prohibit acts, not themselves fraudulent under the common law or § 10(b), if the prohibition is ‘reasonably designed to prevent * * * acts and practices [that] are fraudulent.' ”  40 Along these lines, the prohibitions in rule 206(4)-8 are reasonably designed to prevent fraud. We believe that, by taking sufficient care to avoid negligent conduct, advisers will be more likely to avoid reckless deception. Since the Commission clearly is authorized to prescribe conduct that goes beyond fraud as a means reasonably designed to prevent fraud, prohibiting deceptive conduct done negligently is a way to accomplish this objective.

Rule 206(4)-8 does not create under the Advisers Act a fiduciary duty to investors or prospective investors in a pooled investment vehicle not otherwise imposed by law. Nor does the rule alter any duty or obligation an adviser has under the Advisers Act, any other federal law or regulation, or any state law or regulation (including state securities laws) to investors in a pooled investment vehicle it advises. 41 The rule, for example, will permit us to bring an enforcement action against an investment adviser that violates a fiduciary duty imposed by other law if the violation of such law or obligation also constitutes an act, practice, or course of business that is fraudulent, deceptive, or manipulative within the meaning of the rule and section 206(4). 42

Finally, the rule does not create a private right of action. 43

The Paperwork Reduction Act of 1995 does not apply because rule 206(4)-8 does not impose a new “collection of information” within the meaning of the Paperwork Reduction Act of 1995. The rule does not create any filing, reporting, recordkeeping, or disclosure requirements for investment advisers subject to the rule. Accordingly, there is no “collection of information” under the Paperwork Reduction Act that requires the approval of the Office of Management and Budget under 44 U.S.C. 3501.

The Commission is sensitive to costs imposed by our rules and the benefits that derive from them. In the Proposing Release, we encouraged commenters to discuss any potential costs and benefits that we did not consider in our discussion. Three commenters addressed the issue of cost. Two of them stated their belief that the rule would increase advisers' costs of compliance, by, for example, making it necessary for advisers to conduct extensive reviews of all communications with clients. 44 One stated that the rule would achieve a reasonable balance of providing important benefits to investors at an acceptable cost. 45 None of the three commenters, however, provided analysis or empirical data in connection with their statements.

The rule makes it a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of section 206(4) for any investment adviser to a pooled investment vehicle to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, to any investor or prospective investor in the pooled investment vehicle. The rule also makes it a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of section 206(4) for any investment adviser to a pooled investment vehicle to otherwise engage in any act, practice, or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in the pooled investment vehicle. For the reasons discussed, we do not believe that the rule will require advisers to incur new or additional costs.

Investment advisers to pooled investment vehicles should not be making untrue statements or omitting material facts or otherwise be engaged in fraud with respect to investors or prospective investors in pooled investment vehicles today, because federal authorities, state authorities, and private litigants often can, and do, seek redress from the adviser for the untrue statements or omissions or other frauds. In most cases, the conduct that the rule prohibits is already prohibited by federal securities statutes, 46 other federal statutes (including federal wire fraud statutes), 47 as well as state law. 48

We recognize that there are costs involved in assuring that communications to investors and prospective investors do not contain untrue or misleading statements and preventing other frauds. Advisers have incurred, and will continue to incur, these costs due to the prohibitions and deterrent effect of the law and rules that apply under these circumstances. While each of the provisions noted above may have different limitation periods, apply in different factual circumstances, or require the government (or a private litigant) to prove different states of mind than the rule, as discussed above we believe that the multiple prohibitions against fraud, and the consequences under both criminal and civil law for fraud, should currently cause an adviser to take the precautions it deems necessary to refrain from such conduct.

Furthermore, prior to Goldstein , advisers operated with the understanding that the Advisers Act prohibited the same conduct that would be prohibited by the rule. Accordingly, we do not believe that advisers to pooled investment vehicles attentive to their traditional compliance responsibilities will need to take steps or alter their business practices in such a way that will require them to incur new or additional costs as a result of the adoption of the rule.

We also recognize that the rule may cause some advisers to pay more attention to the information they present to better guard against making an untrue or misleading statement to an investor or prospective investor and to reevaluate measures that are intended to prevent fraud. As a consequence, some advisers might seek guidance, legal or otherwise, and more closely review the information that they disseminate to investors and prospective investors and the antifraud related policies and procedures they have implemented. While increased concern about making false statements or committing fraud could be attributable to the new rule, advisers should already be incurring these costs to ensure truthfulness and prevent fraud, regardless of the rule, because of the myriad of laws or regulations that may already apply.

The principal benefit of the rule is that it clearly enables the Commission to bring enforcement actions under the Advisers Act, if an adviser to a pooled investment vehicle disseminates false or misleading information to investors or prospective investors or otherwise commits fraud with respect to any investor or prospective investor. As noted above, the existing antifraud provisions may not be available to us in all cases. Through our enforcement actions we are able to protect fund investor assets by stopping ongoing frauds, 49 barring persons that have committed certain specified violations or offenses from being associated with an investment adviser, 50 imposing penalties, 51 seeking court orders to protect fund assets, 52 and to order disgorgement of ill-gotten gains. 53 Moreover, we believe that rule 206(4)-8 will deter advisers to pooled investment vehicles from engaging in fraudulent conduct with respect to investors in those pools and will provide investors with greater confidence when investing in pooled investment vehicles.

The Commission certified, pursuant to section 605(b) of the Regulatory Flexibility Act, that rule 206(4)-8 will not have a significant economic impact on a substantial number of small entities. 54 This certification was included in the Proposing Release. 55 While we encouraged written comment regarding this certification, none of the commenters responded to this request.

We are adopting new rule 206(4)-8 pursuant to our authority set forth in sections 206(4) and 211(a) of the Advisers Act (15 U.S.C. 80b-6(4) and 80b-11(a)).

New Rule 206(4)-8 under the Investment Advisers Act of 1940 (“Advisers Act”), 56 which we adopt today, prohibits advisors from (i) making false or misleading statements to investors or prospective investors in hedge funds and other pooled investment vehicles they advise, or (ii) otherwise defrauding these investors. 57 Although the SEC has other ways to reach fraud by advisors, this new rule will fill in gaps in the coverage of other transaction-based, anti-fraud provisions so that the SEC may pursue advisors of pooled investment vehicles who have defrauded investors and prospective investors in the course of their acting as fund advisors. I support the new rule, but I am writing separately to express my disagreement with the conclusions in the Adopting Release  58 related to the requisite mental state for violation of the rule. 59

In discussing the mental state required for violation of the rule, the Adopting Release states that “the Commission would not need to demonstrate that an adviser violating rule 206(4)-8 acted with scienter.”  60 According to the Adopting Release, therefore, the rule covers negligent conduct as well as intentional conduct. My objections to this interpretation of the rule's scope are twofold. First, I do not believe that a negligence standard is consistent with the Commission's authority under Section 206(4). Second, even if a negligence standard were within our authority, for policy reasons, we should require a finding of scienter  61 as part of establishing a violation under this anti-fraud rule.

The Adopting Release offers several arguments in support of a negligence standard. First, it argues that the language of section 206(4) is not limited to knowing or deliberate conduct. In support of this argument, it cites the decision by the United States Court of Appeals for the District of Columbia Circuit in SEC v. Steadman. 62 Second, the Adopting Release contends that use of a negligence standard is an appropriate method reasonably designed to prevent fraud. In support of this contention, it cites U.S . v. O'Hagan. 63 I will discuss each of these in turn.

The language of Section 206(4) does not reach negligent conduct. Section 206(4) makes it unlawful for an advisor “to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative” and directs the Commission “by rules and regulations [to] define, and prescribe means reasonably designed to prevent, such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative.”

The Adopting Release maintains that, because Section 206(4) “encompasses ‘acts, practices, and courses of business as are * * * deceptive,’ ” it reaches “conduct that is negligently deceptive as well as conduct that is recklessly or deliberately deceptive.”  64 As the Supreme Court has said, however, “it is a ‘familiar principle of statutory construction that words grouped in a list should be given related meaning.’ ”  65 Hence, it is inappropriate to base a conclusion that negligent conduct is reached by looking at the term “deceptive” apart from its companion terms.

In the Section 10(b) context, the Supreme Court has accorded special significance to the term “manipulative”:

The language of Section 206(4), like the language of Section 10(b), would seem then to suggest a scienter requirement.

The Adopting Release, however, cites for the contrary conclusion a decision by the United States Court of Appeals for the District of Columbia. Indeed, it is true that in SEC v. Steadman , the court held that “scienter is not required under section 206(4).”  67 The court reached its conclusion by comparing the language of Section 206(4) to the language of Section 17(a)(3) under the Securities Act of 1933, 68 which makes it unlawful “to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.”  69 The Steadman court drew a comparison between Section 17(a)(3)'s “transaction, practice, or course of business” and Section 206(4)'s “act, practice, or course of business.” The court, relying on the Supreme Court's decision in Aaron , held that, in both cases, the focus was on effect.  70 The Supreme Court in Aaron , however, placed considerable weight on the terms “operate” or “would operate,” neither of which appears in Section 206(4). 71 In fact, Section 206(4) instead uses the affirmative word “is,” which would seem to de-emphasize effect. 72 Further, while Section 17(a)(3) speaks of only “fraud” and “deceit,” Section 206(4) also includes “manipulative.”

It is also helpful to note that Section 206(4), which was adopted in 1960, 73 was modeled on Section 15(c)(2) under the Securities Exchange Act of 1934. 74 Section 15(c)(2) makes it unlawful for brokers and dealers to effect transactions in or induce the purchase or sale of securities in connection with which they “engage[] in any fraudulent, deceptive, or manipulative act or practices, or make[] any fictitious quotation.”  75 Hence, as the legislative history of Section 206(4) noted, Section 206(4) “is comparable to section 15(c)(2).”  76 The Steadman opinion did not address the link between Sections 206(4) and 15(c)(2).

Section 14(e) under the Exchange Act, which relates to tender offers, also follows the Section 15(c)(2) pattern. 77 Section 14(e), like Section 206(4), includes both a proscription against “engag[ing] in any fraudulent, deceptive, or manipulative acts or practices” and a directive that the SEC “by rules and regulations define, and prescribe means reasonably designed to prevent such acts and practices as are fraudulent, deceptive, or manipulative.” Because of the similarities, it is useful to look at the Supreme Court's interpretation of Section 14(e). In Schreiber v. Burlington Northern, the Supreme Court relied on Hochfelder's interpretation of the term “manipulative” in the Section 10(b) context to interpret that term in the Section 14(e) context. 78 The Schreiber Court noted that the addition of the rulemaking authorization to Section 14(e) did not “suggest[] any change in the meaning of `manipulative' itself.”  79 In U.S. v. O'Hagan, The Supreme Court again looked at Section 14(e). This time, it considered whether Rule 14e-3(a), which prohibits trading on undisclosed information in connection with a tender offer, exceeds the SEC's authority under Section 14(e) given that the prohibition applies regardless of whether there is a duty to disclose. The Court held that Rule 14e-3(a) was within the SEC's authority under Section 14(e) because Section 14(e) allows the SEC to “prohibit acts, not themselves fraudulent under the common law or § 10(b), if the prohibition is ‘reasonably designed to prevent * * * acts and practices [that] are fraudulent.’ ”  80 The lesson from both of these cases is that the SEC cannot effect a change in the meaning of specific statutory terms under its comparable Section 206(4) rulemaking authority.

The Adopting Release asserts that, under O'Hagan, a negligence standard is a means reasonably designed to prevent fraud. As the Adopting Release notes, conduct outside of the bounds of the statutory prohibition can be prohibited by Commission rule under Section 206(4). The rule that we are adopting here, however, differs markedly from the rules at issue in O'Hagan and Steadman. 81 Both of those rules were narrowly targeted rules that covered clearly-defined behavior. They were designed to prohibit conduct, that, although outside of the “core activity prohibited” by the statute, were designed to “assure the efficacy” of the statute. 82

Rule 206(4)-8(a)(2), by contrast, is as broad as the statute itself. It essentially repeats the statutory prohibition. It does not logically follow, therefore, that lowering the standard of care would be the type of “means reasonably designed to prevent” within the contemplation of the regulatory mandate within Section 206(4). Lowering the standard of care is instead an attempt to rewrite the statute by assigning new definitions to the words of the statute. A potential unfortunate consequence of the Adopting Release's change in mental state is that it is now arguably contrary to statute and therefore might interfere with the SEC's ability to use the rule effectively. 83 Congress included a rulemaking directive in order to give the SEC the necessary authority to provide clarity in this area about the types of practices covered by the statute's broad prohibition, 84 not to alter the standard of care that Congress selected through the language it used. 85 Imposing a negligence standard is particularly improper given that, as the Adopting Release notes, “Rule 206(4)-8 does not create under the Advisers Act a fiduciary duty to investors and prospective investors in a pooled investment vehicle.”  86

Finally, from a purely practical perspective, I dispute the regulatory approach underlying the contention that “by taking sufficient care to avoid negligent conduct, advisers will be more likely to avoid reckless deception.”  87 By an extension of that same logic, a strict liability standard would evoke even more care by advisors. Even if the SEC is authorized to pick the standard of care that applies broadly to all “fraudulent, deceptive, or manipulative” acts and practices, arbitrarily selecting a higher standard of care “just to be on the safe side” has the potential of misdirecting enforcement and inspection resources and chilling well-intentioned advisors from serving their investors.

The electronic file of this document is available on the date of publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html .

We are dedicated to providing high-quality service to the American public. Today and for the foreseeable future, we face significant challenges in our ability to provide the level of service that disability benefit claimants deserve because of the significantly increased number and complexity of these benefit claims. Consequently, we are publishing a temporary modification to the procedures we follow in the administrative law judge (ALJ) hearings process in claims for Social Security disability benefits or SSI payments based on disability or blindness. This temporary modification will help us provide accurate and timely service to claimants for Social Security disability benefits and SSI payments based on disability or blindness. With this modification, we are permitting attorney advisors, under managerial oversight, to conduct certain prehearing proceedings to help develop claims, and issue fully favorable decisions in appropriate claims before a hearing is conducted. We expect that this change will help us reduce the very high number of pending cases at the hearing level by enhancing claims development before the hearing and by permitting attorney advisors to issue fully favorable decisions in appropriate claims. This temporary modification applies only to claims processed under parts 404 and 416 of our regulations; it does not apply to claims processed under part 405 of our regulations, which concerns only disability claims filed in the Boston region after July 31, 2006. Parts 404 and 416 of our regulations concern disability cases in every area outside the Boston region and non-disability cases in every location.

Generally, when a claim is filed for Social Security disability benefits or SSI payments based on disability or blindness, a State agency makes the initial and reconsideration disability determination for us. ALJs conduct hearings after we have made a reconsideration determination. Under this interim final rule, attorney advisors who serve as decision writers or managers within the hearing operation may conduct certain prehearing proceedings and, where appropriate, issue decisions that are wholly favorable to claimants and any other party to the hearing.

Attorney advisors have performed these duties in the past. In June 1995, we announced final rules establishing the attorney advisor program for a limited period of 2 years. 60 FR 34126 (June 30, 1995). The program's success prompted us to extend the program several times, until it finally ended in April 2001. 62 FR 35073 (June 30, 1997), 63 FR 35515 (June 30, 1998), 64 FR 13677, 64 FR 51892.

Requests for hearings have significantly increased in recent years, and we expect even more such requests in the future due to the projected increase in disability claims as the baby boomers move into their disability-prone years. Additionally, the very high number of pending cases at the hearing level has grown to an alarming level. We plainly must do everything that we can to address this workload. This interim final rule is an important part of our efforts designed to help us decide these cases more efficiently.

These regulations will allow us to expedite the processing of cases pending at the hearing level without infringing on the right of a claimant to a hearing before an ALJ. The attorney advisor's conduct of certain prehearing proceedings will not delay the scheduling of a hearing before an ALJ. If the prehearing proceedings are not concluded before the hearing date, the case will be sent to the ALJ unless a decision wholly favorable to the claimant and all other parties is in process, or the claimant and all other parties to the hearing agree in writing to delay the hearing until the prehearing proceedings are completed.

Prehearing proceedings may be conducted by the attorney advisor under this interim final rule if one of the following criteria is met: new and material evidence is submitted, there is an indication that additional evidence is available, there is a change in the law or regulations, or there is an error in the file or some other indication that a wholly favorable decision could be issued. A decision by an attorney advisor will be mailed to all parties. The notice of decision will state the basis for the decision and advise the parties that an ALJ will dismiss the hearing request unless a request to proceed with the hearing is made by a party within 30 days after the date the notice of the decision was mailed.

These procedures will remain in effect for a period of time not to exceed 2 years from the effective date of this interim final rule, unless we terminate or extend them by publication of a final rule in the Federal Register . If we publish such a final rule, we need not request further public comment.

Executive Order 12866, as amended, requires each agency to write all rules in plain language. In addition to your substantive comments on these interim final rules, we invite your comments on how to make them easier to understand.

For example:

Have we organized the material to suit your needs?

Are the requirements in the rules clearly stated?

Do the rules contain technical language or jargon that isn't clear?

Would a different format (grouping and order of sections, use of headings, paragraphing) make the rules easier to understand?

Would more (but shorter) sections be better?

Could we improve clarity by adding tables, lists, or diagrams?

What else could we do to make the rules easier to understand?

Pursuant to sections 205(a), 702(a)(5), and 1631(d)(1) of the Social Security Act, 42 U.S.C. 405(a), 902(a)(5), and 1383(d)(1), we follow the Administrative Procedure Act (APA) rulemaking procedures specified in 5 U.S.C. 553 in the development of our regulations. The APA provides exceptions to its prior notice and public comment procedures when an agency finds there is good cause for dispensing with such procedures on the basis that they are impracticable, unnecessary, or contrary to the public interest.

We have determined that, under 5 U.S.C. 553(b)(B), good cause exists for issuing this regulatory change as an interim final rule. However, we are inviting public comment on the interim final rule and will consider any responsive comments we receive within 60 days of the publication of the interim final rule.

We are not changing the substantive provisions of the attorney advisor program, which still appear in the regulations. We are merely re-enacting the provisions that we have used in the past. The substantive rules were promulgated with notice and public comment procedures, with a notice of proposed rulemaking published on April 14, 1995 (60 FR 19008) and final rules published on June 30, 1995 (60 FR 34126). Accordingly, we find that an additional opportunity for public comment prior to re-enactment of this program is unnecessary.

We also find that it would be contrary to the public interest not to effectuate these rules as quickly as we can. The attorney advisor program will help, along with a series of other initiatives that we are contemplating, reduce the pending hearing requests to a manageable level. We must address the hearing backlog as quickly as possible. If we do not address this issue now, the situation could easily worsen, possibly resulting in over one million cases awaiting a hearing within 3 years. Of course, such a state of affairs is acceptable neither to us nor to the public at large. For these reasons, we believe we must take swift action and implement this rule as quickly as possible.

We have consulted with the Office of Management and Budget (OMB) and determined that this rule meets the criteria for a significant regulatory action under Executive Order 12866, as amended. Thus, it was reviewed by OMB.

We certify that this interim final rule will not have a significant economic impact on a substantial number of small entities as it affects only States and individuals. Therefore, a regulatory flexibility analysis as provided in the Regulatory Flexibility Act, as amended, is not required.

This rule will impose no additional reporting or recordkeeping requirements requiring OMB clearance.

We have reviewed this rule under the threshold criteria of Executive Order 13132 and the Unfunded Mandates Reform Act and have determined that it does not have substantial direct effects on the States, on the relationship between the national government and the States, on the distribution of power and responsibilities among the various levels of government, or on imposing any costs on State, local, or tribal governments. This rule does not affect the roles of the State, local, or tribal governments. However, the rule takes administrative notice of existing statutes governing the roles and relationships of the State agencies and SSA with respect to disability determinations under the Act.

Electronic Version

The electronic file of this document is available on the date of publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html .

Sections 206(a) and 1631(d) of the Social Security Act (Act) direct the Commissioner of Social Security (Commissioner) to determine the maximum fees representatives may charge claimants for services that they perform in claims before the Social Security Administration (SSA) under title II or title XVI of the Act. For claims under title II in which the claimant is found entitled to past-due benefits, section 206 of the Act further authorizes the Commissioner to pay attorneys' fees, approved by the Commissioner or by a Federal court, out of a portion of the past-due benefits in the case. Prior to enactment of the SSPA (Pub. L. 108-203), we were not authorized to withhold and pay fees approved for attorneys in title XVI cases or for non-attorney representatives in cases under either title of the Act.

Section 302 of the SSPA amended section 1631(d)(2) of the Act to extend the attorney fee withholding and direct payment procedures to claims under title XVI of the Act. The amendments made by section 302 apply with respect to attorney fees that were first required to be paid from title XVI past-due benefits on or after February 28, 2005, and we began paying fees directly to attorneys in cases effectuated on or after that date. Section 302 includes a sunset provision. Under that provision, the amendments made by section 302 will not apply to claims for benefits with respect to which the claimant and the representative enter into the agreement for representation after February 28, 2010.

Section 303 of the SSPA directs the Commissioner to carry out a 5-year nationwide demonstration project to determine the potential results of extending the fee withholding and direct payment procedures that apply to attorneys under titles II and XVI of the Act, to non-attorney representatives who meet certain minimum prerequisites specified in section 303 and any additional prerequisites that the Commissioner may prescribe. Under the prerequisites specified in section 303, individuals applying to participate in the demonstration project must have a bachelor's degree or equivalent education, possess liability insurance or equivalent insurance adequate to protect claimants in the event of malpractice by the representative, pass a criminal background check ensuring fitness to practice before SSA, pass an examination testing knowledge of the relevant provisions of the Act and the most recent developments in Agency and court decisions, and demonstrate ongoing completion of qualified continuing education courses. In addition, the Commissioner has required that individuals applying to participate in the demonstration project show that they have sufficient prior experience representing claimants before SSA. More detailed information about these prerequisites may be found in the Federal Register notices published at the start of the demonstration project in 2005 (70 FR 2447, January 13, 2005; 70 FR 14490, March 22, 2005; and 70 FR 41250, July 18, 2005).

The 5-year demonstration project on direct payment of fees to eligible non-attorneys under section 303 of the SSPA commenced on February 28, 2005. We began making direct payment to non-attorneys under the demonstration project on July 28, 2005, the date on which we determined that the initial group of applicants had satisfied the prerequisites for participation in the project. The demonstration project established by SSPA section 303 applies to claims for benefits with respect to which the agreement for representation is entered into after February 27, 2005, and before March 1, 2010. In these final rules, we are amending our regulations to reflect the fact that non-attorney representatives participating in the demonstration project may have their approved fees withheld from their clients' past-due benefits and paid directly to them.

The amount of “past-due benefits” is important in calculating the fees of representatives and in determining the maximum amount we can pay directly for representation. Since we last defined the term “past-due benefits” in our regulations, there have been several legislative enactments that affect the definition of past-due benefits. In section 5106 of the OBRA (Pub. L. 101-508), section 321(f) of the SSIPIA (Pub. L. 103-296), and section 302 of the SSPA, the Act was amended to exclude from past-due benefits any continued benefits paid pursuant to § 404.1597a of part 404, any interim benefits paid pursuant to section 223(h) of the Act, any continued benefits paid pursuant to § 416.996 of part 416, any continued benefits paid pursuant to § 416.1336(b) of part 416, and any interim benefits paid pursuant to section 1631(a)(8) of the Act; to specify how a reduction under section 1127 of the Act (for receipt of benefits for the same period under both title II and title XVI) affects the past-due benefit computation; and to address the effect of interim assistance reimbursement payments. We are amending our regulations to reflect these statutory changes.

Section 406 of the TWWIIA (Pub. L. 106-170) amended section 206 of the Act by adding section 206(d), which imposed an assessment on attorneys for the services we provide in determining and paying fees directly to attorneys from the benefits due claimants under title II of the Act. When that provision took effect on February 1, 2000, the amount of the assessment was 6.3 percent of the direct payment amount, with a provision allowing the Commissioner to determine for future years the percentage (not to exceed 6.3 percent) necessary to achieve full recovery of the costs of determining and paying fees to attorneys. Effective September 1, 2004, section 301 of the SSPA revised section 206(d) to cap the assessment at the lesser of the amount calculated using the percentage rate determined by the Commissioner or $75, and to provide for annual adjustment of the $75 cap based on the cost-of-living computation in section 215(i)(2)(A)(ii) of the Act. Sections 302 and 303 of the SSPA extended this assessment to the direct payment of fees to attorneys under title XVI and to the direct payment of fees to non-attorney representatives participating in the demonstration project authorized by section 303.

We are amending our regulations on representation in 20 CFR parts 404 and 416 to reflect the legislative changes to sections 206, 1127 and 1631(d) of the Act that were enacted under section 5106 of OBRA, section 321(f) of the SSIPIA, section 406 of the TWWIIA, and sections 301 and 302 of the SSPA. In addition, we are revising the regulations to reflect the provisions of section 303 of the SSPA. We are making only those substantive changes necessary to conform our regulations to these currently applicable statutory provisions. In these changes we are:

• Amending § 404.1703 to revise the definition of “past-due benefits” to explain that we determine past-due benefits before any applicable reduction for receipt of benefits for the same period under title XVI and that past-due benefits do not include continued payment of disability benefits during appeal or interim benefits in cases of delayed final decision.

• Adding to § 416.1503 the definition of “past-due benefits” for title XVI benefits to explain that when we determine the amount of past-due benefits, we subtract the amount of any reduction under section 1127 for the concurrent receipt of benefits for the same period under both title II and title XVI, regardless of whether the actual reduction was applied to the title II benefits or to the title XVI benefits, and that past-due benefits do not include continued benefits or interim benefits.

• Adding new §§ 404.1717 and 416.1517 to reflect the demonstration project extending benefit withholding and direct fee payment to non-attorneys under title II and title XVI. These sections also define “eligible to participate in the direct payment demonstration project” and describe the claims to which the demonstration project applies.

• Amending § 404.1720 to revise paragraph (b)(4) to provide that we make direct fee payments from title II past-due benefits both to attorneys and to non-attorney representatives eligible to participate in the direct payment demonstration project, and that we assume no responsibility for the payment of any fee that we have authorized to a non-attorney if the representative is not eligible to participate in the demonstration project. We are also revising paragraph (c)(3) to provide that our notice of a fee determination will state whether we are responsible for paying the representative's fee from past-due benefits.

• Amending § 416.1520 to add a new paragraph (b)(4) stating that we make direct payment of fees from past-due benefits under title XVI to attorneys and to non-attorneys eligible to participate in the direct payment demonstration project, and that we assume no responsibility for the payment of any fee that we have authorized to a non-attorney if the representative is not eligible to participate in the demonstration project. We are revising paragraph (c)(3) to state that our notice of fee determination will state whether we are responsible for paying the fee, rather than that we are not responsible for paying the fee. We are also revising paragraph (d)(3) to state that we assume no responsibility for fee payment based on a revised determination if the representative does not file the request for administrative review timely.

• Revising § 416.1528 to place the existing text in a newly designated paragraph (a) having the heading, “Representation of a party in court proceedings” and to add a new paragraph (b) that has the heading “Attorney fee allowed by a Federal court.” Paragraph (b) states that the court may allow a reasonable fee to an attorney as part of its favorable judgment in a proceeding under title XVI of the Act and that we may pay the attorney the amount of the fee out of, but not in addition to, the amount of the past-due benefits payable to the claimant by reason of the court judgment.

• Amending § 404.1730 to insert a previously omitted “the” in paragraph (a), to add a cross-reference to the definition of “past-due benefits” in § 404.1703, and to reflect in paragraphs (b) and (c) the extension of the direct payment of fees from past-due benefits under title II to non-attorneys eligible to participate in the direct payment demonstration project. We are also adding a new paragraph (d) to reflect that we impose an assessment on the representative when we pay a fee directly to the representative; to explain how we calculate the assessment; and to state that the representative may not, directly or indirectly, request or otherwise obtain reimbursement of the amount of the assessment from the claimant.

• Adding new § 416.1530 to state that direct payment of fees under title XVI extends to attorneys for fees we authorize and for fees a Federal court allows, and extends to non-attorneys eligible to participate in the direct payment demonstration project for fees we authorize. This section also describes the maximum amount we will pay to the representative; shows that we impose an assessment on the representative when we pay a fee directly to the representative; explains how we calculate the assessment; and states that the representative may not, directly or indirectly, request or otherwise obtain reimbursement of the amount of the assessment from the claimant.

In addition to these substantive changes, we are revising §§ 404.1720(b)(4) and 404.1730(a), (b) and (c) to refer to the person claiming a right under the old-age, disability, dependents', or survivors' benefits program in the second person, and thus make the language in these sections consistent with the use of the second person throughout the regulations.

On April 5, 2007 (72 FR 16720), we published interim final rules with request for comments. The interim final rules were effective on that date. We received no public comments on the interim final rules. Thus, we are adopting them without change.

The Office of Management and Budget (OMB) earlier determined that the interim final rules we published on April 5, 2007, met the criteria for a significant regulatory action under Executive Order 12866, as amended. Accordingly, those interim final rules were subject to OMB review. Because these final rules merely adopt the provisions of the earlier interim final rules without change, however, OMB determined that it did not need to review these rules again. We also have determined that these rules meet the plain language requirement of Executive Order 12866, as amended.

We certify that these final rules will not have a significant economic impact on a substantial number of small entities. Also, these final rules simply reflect legislation already in effect. Therefore, a regulatory flexibility analysis as provided in the Regulatory Flexibility Act, as amended, is not required.

The Paperwork Reduction Act (PRA) of 1995 says that no persons are required to respond to a collection of information unless it displays a valid OMB control number. In accordance with the PRA, SSA is providing notice that OMB has approved the information collection requirements contained in §§ 404.1717, 404.1730(c)(1), 404.1730(c)(2)(i), 404.1730(c)(2)(ii), 416.1517, 416.1528(a), 416.1530(c)(1), 416.1530(c)(2)(i), and 416.1530(c)(2)(ii) of these final rules. The OMB Control Number for this (these) collection(s) is 0960-0745, expiring 06/30/2010.

Section 312 of the USA PATRIOT Act amended the Bank Secrecy Act  1 to add new subsection (i) to 31 U.S.C. 5318. This provision requires each U.S. financial institution that establishes, maintains, administers, or manages a correspondent account or a private banking account in the United States for a non-U.S. person to subject such accounts to certain anti-money laundering measures. In particular, a covered financial institution  2 must establish appropriate, specific and, where necessary, enhanced due diligence policies, procedures, and controls that are reasonably designed to enable the financial institution to detect and report instances of money laundering through these accounts.

On May 30, 2002, we published a notice of proposed rulemaking in the Federal Register , proposing to implement the requirements of section 312 in their entirety. 3 In that proposal, we set forth a series of specific measures that covered financial institutions could, and in some instances would be required to, apply to correspondent accounts and private banking accounts established or maintained for non-U.S. persons. We received comments on that proposal raising concerns about the definitions in the proposal, the scope of the requirements contained in the proposed rule text, and the types of financial institutions that would be subject to the proposal's requirements.

To have adequate time to review the comments we received in response to the proposal, to determine the appropriate resolution of the issues raised, and to give direction to financial institutions that would be subject to section 312, 4 we issued an interim final rule on July 23, 2002. 5 In the interim final rule, we exercised our authority under 31 U.S.C. 5318(a)(6) to defer temporarily the application of section 312 to certain financial institutions. 6 For those financial institutions that were not subject to the deferral, 7 we provided interim guidance for compliance with the statute by generally describing the scope of coverage, duties, and obligations under that provision, pending issuance of a final rule.

Thereafter, on January 4, 2006, we issued final rules implementing section 312, excepting the enhanced due diligence provisions for correspondent accounts established or maintained for certain foreign banks. 8 Also on January 4, we published a second notice of proposed rulemaking (Second Proposed Rule or proposed rule), 9 seeking comment on a new approach to implementing the enhanced due diligence provisions of section 312 with respect to correspondent accounts established or maintained for certain statutorily designated foreign banks (“respondent banks”). 10

As required by section 312, the enhanced due diligence measures proposed would apply to correspondent accounts maintained for a foreign bank operating under an offshore banking license, 11 under a license issued by a country that has been designated as being non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization of which the United States is a member and with which designation the United States representative to the group or organization concurs, 12 or under a license issued by a country designated by the Secretary of the Treasury (Secretary) as warranting special measures due to money laundering concerns. 13 With respect to these accounts, we proposed that a covered financial institution would be required to conduct risk-based enhanced due diligence with regard to a correspondent account maintained for or on behalf of such a foreign bank to guard against money laundering and to report suspicious activity; to ascertain whether such a foreign bank maintains correspondent accounts for other foreign banks  14 and, if so, to conduct appropriate due diligence; and to identify the owners of such a foreign bank if its shares are not publicly traded. This final rule adopts the risk-based enhanced due diligence rule that we proposed on January 4, 2006.

Finally, section 312(b)(1) of the USA PATRIOT Act provides that the Secretary shall issue implementing regulations under this section “in consultation with the appropriate federal functional regulators (as defined in section 509 of the Gramm-Leach-Bliley Act) of the affected financial institutions.” This final rule was developed in consultation with the staffs of the federal functional regulators. 15

We received seven comment letters on the Second Proposed Rule. Commenters included U.S. banks, an association of state banking supervisors, and trade associations representing U.S. banks, foreign banks, the futures industry, investment companies, the securities industry, and the bond markets. 16 Eleven trade associations representing covered financial institutions jointly signed one of the comment letters. In general, commenters expressed support for the risk-based approach elaborated in the Second Proposed Rule. We respond to the submitted comments in the Section-by-Section Analysis , below.

This final rule is substantially similar to the Second Proposed Rule. The following revisions to the rule, which we will explain more fully in the Section-by-Section Analysis below, have been made in response to comments received on the Second Proposed Rule.

First, the provisions requiring covered financial institutions, in appropriate circumstances, to obtain and review “documentation” relating to a respondent bank's anti-money laundering program and to “consider[ ] whether such program appears to be reasonably designed to detect and prevent money laundering” have been revised to require covered financial institutions, in appropriate circumstances, to obtain and consider “information” relating to a respondent bank's anti-money laundering program in order to assess the risk of money laundering presented by the respondent bank's account.

Second, the provision requiring a covered financial institution, in certain circumstances, to take reasonable steps to assess and “minimize” money laundering risks related to the customers of their respondent banks has been revised to require a covered financial institution, in certain circumstances, to take reasonable steps to assess and “mitigate” such money laundering risks.

Section 103.176(b) of this final rule requires a covered financial institution to establish enhanced due diligence procedures that, at a minimum, include taking reasonable steps to (1) Conduct risk-based enhanced scrutiny of correspondent accounts established or maintained for respondent banks to guard against money laundering and to identify and report suspicious transactions, (2) determine whether the subject respondent bank in turn maintains correspondent accounts for other foreign banks that enable those other foreign banks to gain access to the respondent bank's correspondent account with the covered financial institution and, if so, to take reasonable steps to obtain information to assess and mitigate the money laundering risks associated with such accounts, and (3) determine the identity of each owner of a respondent bank whose shares are not publicly traded, and the nature and extent of each owner's ownership interest.

The commenters generally expressed support for the risk-based approach of the Second Proposed Rule. One commenter suggested that the five risk factors enumerated in our rules implementing the due diligence requirements for correspondent accounts contained in section 312 should also be applied to determine the appropriate extent of enhanced due diligence. 17

As these five risk factors are meant to apply to all respondent banks, including those subject to the enhanced due diligence provisions of section 312, it would be appropriate to consider the five factors listed in subsection (a)(2) when assessing the risk posed by a respondent bank subject to the provisions of this final rule to help determine the level of enhanced due diligence required. The fourth risk factor in particular—the anti-money laundering regime of the jurisdiction that issued a charter or license to the foreign bank and, to the extent reasonably available, of the home jurisdiction of the foreign bank or its parent  18 —may be especially relevant in a covered financial institution's determination of the nature and extent of the risks posed by the correspondent accounts for the foreign banks covered by this rule and the extent of the enhanced due diligence that is necessary and appropriate to mitigate these risks. 19

1. 103.176(b)(1)— Enhanced scrutiny to guard against money laundering. Section 103.176(b)(1) of the Second Proposed Rule would have required a covered financial institution to conduct risk-based enhanced scrutiny of correspondent accounts established or maintained for respondent banks to guard against money laundering and to identify and report suspicious transactions. This provision is adopted in the final rule without substantial change.

Section 103.176(b)(1)(i) and (ii) of the Second Proposed Rule would have required covered financial institutions, as part of their enhanced due diligence programs when appropriate, to obtain and review documentation related to a respondent bank's anti-money laundering program and consider whether the program appears to be reasonably designed to detect and prevent money laundering. Several commenters questioned the utility of the requirement and expressed concern about the cost of complying with it.

One commenter read the Second Proposed Rule as effectively requiring a covered financial institution to perform an audit of a respondent bank's anti-money laundering program, despite guidance in the preamble stating that an audit was not required. Another commenter similarly expressed concern that this and other provisions of the Second Proposed Rule would cause covered financial institutions to become policemen and regulators. A third commenter was concerned that this provision ultimately would be enforced as a default or mandatory requirement.

Other commenters additionally suggested that obtaining and reviewing documentation frequently would be a difficult and expensive proposition, as such documents may be written only in the native language of a respondent bank. One commenter questioned the utility of reviewing the documentation of a respondent bank's anti-money laundering program and suggested that other due diligence measures, such as reviewing and monitoring transactions conducted by the foreign bank, would be more productive. Other commenters offered that administering a questionnaire to a respondent bank about its anti-money laundering practices, when appropriate, would be more effective than a review of its anti-money laundering program documents.

In response to these comments, section 103.176(b)(1)(i) of the final rule now requires a covered financial institution, in appropriate circumstances, to obtain and consider information related to the anti-money laundering program of the respondent bank to assess the risk of money laundering presented by the respondent bank's correspondent account. This provision of the final rule is not meant to be a mandatory requirement. Rather, it is intended to be risk-based. We emphasize that whether enhanced due diligence should include a reasonable inquiry into the anti-money laundering program of a respondent bank will depend on the extent to which reviewing the anti-money laundering program of the respondent bank would be appropriate based upon the nature of the correspondent account. 20 While covered financial institutions have discretion with respect to implementing this provision, as with other risk-based provisions of the BSA and its implementing regulations, a covered financial institution is responsible for reasonably demonstrating that it is effectively exercising that discretion on a risk-assessed basis.

We revised this due diligence provision of the Second Proposed Rule to clarify that covered financial institutions are expected neither to conduct an audit of the anti-money laundering programs of their respondent bank customers, nor to determine the extent to which the respondent bank's anti-money laundering program is “reasonably designed to detect and prevent money laundering,” which may be difficult to determine without conducting an audit. 21 Rather, under the final rule, a covered financial institution is required to consider and assess more generally the extent to which it may be exposed to money laundering risk by the respondent bank's correspondent account. The revision also was made to reduce the burdens associated with reviewing documents, such as language barriers, as well as to provide covered financial institutions with flexibility to determine how to conduct due diligence with respect to a respondent bank's anti-money laundering efforts.

For example, a covered financial institution may, in appropriate circumstances, use a questionnaire, as several commenters suggested, to gather information related to the anti-money laundering program of a respondent bank, provided that the questionnaire and the responses thereto enable a covered financial institution to assess effectively the risk of money laundering presented by the respondent bank. In appropriate situations, such as where a covered financial institution has a sufficient transaction history with a respondent bank, a covered financial institution may also conduct a review of that transaction history to assess the money laundering risk presented by the respondent bank.

As one commenter suggested, a covered financial institution may also, in appropriate circumstances, incorporate its enhanced due diligence efforts into the certification process available under the rules implementing sections 313 and 319(b) of the USA PATRIOT Act. 22 Incorporating a questionnaire into the certification form would not alone affect the safe harbor provided under the rules implementing sections 313 and 319(b), 23 provided that the covered financial institution also obtains and maintains all of the information required under those rules.

We caution, however, that the certifications are subject to renewal only every three years. Waiting until the next certification is required before obtaining information about the respondent bank's anti-money laundering program may not be reasonable for purposes of complying with the enhanced due diligence provisions of section 312. We also remind covered financial institutions incorporating a questionnaire into their certifications that doing so will not extend the section 313 and 319(b) safe harbor to this final rule.

Finally, one commenter asked whether a covered financial institution would be required to formulate additional due diligence measures for its accounts for foreign banks that are subject of this final rule if the covered financial institution applies the equivalent of enhanced due diligence required in this final rule to all of its correspondent accounts for foreign financial institutions. 24 If a covered financial institution applies both the due diligence program for foreign correspondent accounts  25 and the enhanced due diligence requirements of this final rule to all of its correspondent accounts for foreign financial institutions, then the covered financial institution would not be required to formulate additional due diligence measures for the correspondent accounts it establishes and maintains for foreign banks that are the subjects of this final rule.

Section 103.176(b)(1)(iii) of the Second Proposed Rule would have required covered financial institutions to monitor transactions to, from, or through a respondent bank in a manner that is reasonably designed to detect money laundering and suspicious activity. In the preamble to the Second Proposed Rule, we emphasized that monitoring is an important aspect of enhanced due diligence. 26 This monitoring may be conducted manually or electronically, may be done on an individual account basis or by product activity, and should reflect the risk assessment conducted by the covered financial institution on each respondent bank subject of the enhanced due diligence provisions. Section 103.176(b)(1)(iii) has been incorporated into the final rule without change, and has been re-designated as Section 103.176(b)(1)(ii).

Section 103.176(b)(1)(iv) of the Second Proposed Rule would have required covered financial institutions to obtain information from the foreign bank about the identity of any person with authority to direct transactions through any correspondent account that is a payable-through account, and the sources and beneficial owners of funds or other assets in the payable-through account. This provision has been incorporated into the final rule without change, and has been re-designated as Section 103.176(b)(1)(iii).

2. 103.176(b)(2)—Foreign bank customers. Section 103.176(b)(2) of the Second Proposed Rule would have required a covered financial institution to determine whether a respondent bank in turn maintains correspondent accounts for other foreign banks that enable those other foreign banks to gain access to the respondent bank's account with the covered financial institution. If such a situation exists, the Second Proposed Rule would have required the covered financial institution to take reasonable steps to assess and minimize the potential money laundering risk posed by the respondent bank's accounts for those other foreign banks.

Commenters were concerned about the extent to which they would be expected to obtain lists of foreign bank customers from their respondent banks, for the purposes of complying with section 103.176(b)(2). 27 One commenter, for example, stated that it may not be possible to obtain a list of the foreign bank customers of respondent banks due to strict privacy laws in some countries. 28 Two commenters suggested that there are situations where it is unlikely, due to the nature of the correspondent account, that funds transfers will be conducted through the account, and therefore the covered financial institution should not be required to obtain lists of, or other information about, foreign bank customers of their respondent banks.

As a general rule, we do not expect that a covered financial institution will request and obtain lists of foreign bank customers from their respondent banks. We do expect, however, that covered financial institutions, based upon their risk assessment of a respondent bank and as part of their enhanced due diligence efforts, will make appropriate inquiries about such factors as the nature of the foreign bank customers the respondent bank serves (if any) and the extent to which transactions for any such foreign bank customer may be conducted through the respondent bank's correspondent account. The covered financial institution also could consult bank reference guides, and monitor or otherwise assess transaction activity to the extent it may contain foreign bank customer information. 29

There may be circumstances, such as in the highest risk situations, where it may be necessary and appropriate to request and obtain the identity of a respondent bank's foreign bank customers directly from the respondent bank. If obtaining such information in appropriate circumstances is not possible—including by monitoring account activity—the covered financial institution should determine, pursuant to section 103.176(d) of this final rule, how to proceed in light of the particular circumstances.

One commenter expressed concern that covered financial institutions may be held responsible, according to the provisions of section 103.176(b)(2), for monitoring and reporting suspicious activity of the foreign bank customers of their respondent banks. The obligation to monitor for and report suspicious activity arises from the rules implementing 31 U.S.C. 5318(g). Under those rules, covered financial institutions must report suspicious activity involving any of their accounts to the extent they know, suspect, or have reason to suspect a violation of law or regulation, including suspicious activity attempted or conducted by, at, or through correspondent accounts they establish or maintain for respondent banks. 30 Such activity may involve the respondent bank's foreign bank customers.

One commenter was concerned by the level of due diligence that may be required by the use of the word “minimize” in section 103.176(b)(2) of the Second Proposed Rule and suggested replacing with the word mitigate. Accordingly, in this final rule, we have revised the relevant clause to require a covered financial institution to “take reasonable steps to obtain information relevant to assess and mitigate money laundering risks associated with the foreign bank's correspondent accounts for other foreign banks”  31 as the commenter suggested.

Finally, commenters sought clarification as to whether section 103.176(b)(2) is risk-based. The first part of this sub-paragraph requires a covered financial institution to take reasonable steps to “[d]etermine whether the foreign bank for which the correspondent account is established or maintained in turn maintains correspondent accounts for other foreign banks that use the foreign correspondent account established or maintained by the covered financial institution.” Making that initial determination is not dependent on the risks associated with a particular respondent bank.

However, once a covered financial institution has taken reasonable steps to make such a determination, it may “take reasonable steps to obtain information relevant to assess and mitigate money laundering risks associated with the foreign bank's correspondent accounts for other foreign banks, including, as appropriate, the identity of those foreign banks,” as section 103.176(b)(2) provides and the authorizing statute contemplates. A covered financial institution may take a risk-based approach when determining what steps to gather due diligence information are appropriate.

3. 103.176(b)(3)— Identification of the owners of foreign banks. Section 103.176(b)(3) of the Second Proposed Rule would require a covered financial institution to take reasonable steps to identify the owners of a respondent bank if the respondent bank's shares are not publicly traded. The section defined an owner as “any person who directly or indirectly owns, controls, or has the power to vote 10 percent or more of any class of securities” of the respondent bank.

One commenter suggested that we increase the proposed 10% threshold for identifying the interest of the owners of respondent banks to 25% for banks that are considered to represent a relatively low level of money laundering risk. Other commenters requested clarification that the provisions of subsection (b)(3) are risk-based.

After consideration, we adopted the proposed threshold into the final rule without change. The final rule covers three specific and relatively small categories of foreign banks that have been designated by statute. We believe that tiered ownership thresholds would undermine the benefit of identifying the owners of high-risk respondent banks while not appreciably reducing the burden of identifying such owners. Accordingly, we have not adopted a risk-based approach to section 103.176(b)(3).

Section 103.176(c) of the Second Proposed Rule set forth the types of foreign banks for which enhanced due diligence would be required, as provided by section 312 of the USA PATRIOT Act. The enhanced due diligence provisions would apply to foreign banks operating under (1) An offshore banking license;  32 (2) a license issued by a country designated as being non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization of which the United States is a member and with which designation the United States representative to the group or organization concurs;  33 or (3) a license issued by a country designated by the Secretary as warranting special measures due to money laundering concerns. 34 The final rule adopts this provision without change.

One commenter suggested that we reinstate the proposed exception from the enhanced due diligence requirements of section 312 for an offshore bank that “has been found, or is chartered in a jurisdiction where one or more foreign banks have been found, by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act or the International Banking Act, to be subject to comprehensive supervision or regulation on a consolidated basis by the relevant supervisors in that jurisdiction.”  35 After consideration, we did not include such an exception in this final rule.

We believe that the risk-based provisions of the final rule are better suited to addressing the various risk profiles of respondent banks subject to enhanced due diligence than the proposed exception. Thus, when dealing with an offshore booking location of a bank located in a country with a strong anti-money laundering regime, for example, a covered financial institution ordinarily will not be required to conduct enhanced due diligence to the same degree as it would with a stand-alone offshore bank. 36

One commenter was concerned that a covered financial institution may be cited for a violation of this final rule if it failed to subject an account established or maintained for a high-risk foreign bank to the enhanced due diligence requirements of the rule even when the foreign bank was not in one of the three designated categories of banks subject to enhanced due diligence. However, section 103.176(b) is expressly limited to the foreign banks enumerated at section 103.176(c). With respect to high-risk foreign banks not enumerated in section 103.176(c), a failure to apply appropriate due diligence to a correspondent account maintained for such a foreign bank would constitute a violation of the general due diligence provisions of the correspondent account rule, 37 but not the enhanced due diligence provisions of this final rule.

According to the provisions of proposed section 103.176(d), a covered financial institution would be required to establish special procedures for circumstances in which appropriate due diligence or enhanced due diligence cannot be performed with respect to a correspondent account. We received no comments on this provision of the Second Proposed Rule. It has been adopted in this final rule without change.

This final rule revises section 103.176(e) and adds new section (f) to reflect the applicability dates of the obligations under this section. The Second Proposed Rule did not address the issue of applicability dates. We are mindful, however, of the obligations that will result from the statutory requirement that enhanced due diligence apply to all correspondent accounts maintained for certain foreign banks, regardless of when the accounts were opened. Effective 180 days after the date of publication of this final rule, the requirements of this final rule will apply to correspondent accounts opened on or after that date. Effective 270 days after the date of publication of this final rule, the rule's requirements will apply to all correspondent accounts opened prior to the date that is 180 days after the date of publication of this final rule.

Section 103.176(f)(2) contains a special implementation rule for banks. This special implementation rule requires banks that have been subject to the provisions of our interim final rule  38 to continue to comply with the existing enhanced due diligence requirements for correspondent accounts of section 312 until the effective dates described in section 103.176(f)(1) are triggered.

Section 103.176(f)(3) contains a special implementation rule for all other covered financial institutions. This section provides that securities broker-dealers, futures commission merchants, introducing brokers, mutual funds, and trust banks or trust companies that have a federal regulator are not required to comply with the enhanced due diligence provisions until the effective dates described in section 103.176(f)(1) are triggered.

New section 103.176(g) restates and conforms the exemption for certain financial institutions from the due diligence and enhanced due diligence requirements of section 103.176.

We certified that the January 4, 2006 proposed rule would not have a significant economic impact on a substantial number of small entities. We made this certification because the proposed rule would provide guidance concerning certain mandated enhanced due diligence requirements in section 312 of the Act, and because the financial institutions that would be covered by the rule tend to be larger institutions.

One commenter expressed concern that the final rule will make it prohibitive for smaller institutions to engage in the foreign correspondent banking business. However, this final rule does not impose significant new burdens on covered financial institutions of any size. Since at least 2002, the depository institutions covered by this rule have been subject to an interim final rule containing substantially similar enhanced due diligence requirements. 39 Other covered financial institutions have been required to establish and maintain anti-money laundering programs reasonably designed, among other things, to prevent money laundering through correspondent accounts generally. 40

Because the terms of the interim rule and the final rule are substantially similar, and because the single comment does not provide evidence of any significant economic impact created by the interim or final rule, we believe that the final rule will not have a significant economic impact on a substantial number of small businesses. We also note that even if, as the comment asserts, the rule made foreign correspondent banking prohibitive for small entities, this would establish neither that a substantial number of small entities engage in foreign correspondent banking, nor that any that do derive significant revenue from such business.

Moreover, we have incorporated flexibility into this final rule, particularly by shifting from the prescriptive approach to compliance proposed in the First Proposed Rule to the risk-based approach adopted in this final rule. This flexibility will permit each covered financial institution to tailor its enhanced due diligence program for statutorily designated foreign banks  41 to fit its size and the risks of its customer base.

For these reasons, it is hereby certified, pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), that this final rule will not have a significant economic impact on a substantial number of small businesses.

This final rule is not a “significant regulatory action” as defined in Executive Order 12866. Accordingly, a regulatory assessment is not required.

The collection of information contained in this final rule has been approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), and was assigned Office of Management and Budget Control Number 1506-0046. 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.

The only requirements in the final rule that are subject to the Paperwork Reduction Act are set forth in 31 CFR 103.176(b)(1)(i), 103.176(b)(1)(iii)(A), and 103.176(b)(3), requiring covered financial institutions to obtain information relating to certain foreign banks' anti-money laundering programs, when appropriate, to obtain information from such foreign banks about the identity of any person with authority to direct transactions through a correspondent account that is a payable-through account and the sources and beneficial owner of funds or other assets in the payable-through account, when appropriate, and to obtain the identity of certain owners of any such foreign bank that is privately owned and the nature and extent of the ownership interest. The estimated annual average burden associated with this collection of information was one hour per recordkeeper. We estimated that there would be 28,163 recordkeepers, for a total of 28,163 annual burden hours. 42 We received two comments on this burden estimate.

One commenter argued that the burden would “number into the hundreds of hours, at a minimum.” The number of burden hours set forth under the Paperwork Reduction Act is designed to be an average, however, and includes recordkeepers subject to the provisions of this final rule that may not maintain correspondent accounts for statutorily designated foreign banks. Moreover, the number of burden hours pertains only to the collection of information when appropriate, and not to the review of the information.

Another commenter suggested that the number of burden hours may be two hours per year instead of one hour. We accept that estimate and, accordingly, have adjusted our final estimate of burden hours to two hours per recordkeeper.

Comments concerning the accuracy of this recordkeeping burden estimate and suggestions for reducing this burden should be sent (preferably by fax (202-395-6974)) to Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Office of Management and Budget, Paperwork Reduction Project (1506), Washington, DC 20503 (or by the internet to ahunt@omb.eop.gov ), with a copy by regular mail to Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183, “ATTN: Regulation Identifier Number 1506-AA29” or by electronic mail to regcomments@fincen.treas.gov with the caption “ATTN: Regulatory Information Number 1506-AA29” in the body of the text.

Regulatory Information

On June 19, 2007, we published a notice of proposed rulemaking (NPRM) entitled Security Zones; Oahu, Maui, Hawaii, and Kauai, HI in the Federal Register (72 FR 33711). We received no letters commenting on the proposed rule. No public meeting was requested, and none was held.

The terrorist attacks against the United States that occurred on September 11, 2001, have emphasized the need for the United States to establish heightened security measures in order to protect the public, ports and waterways, and the maritime transportation system from future acts of terrorism or other subversive acts. The terrorist organization al-Qaeda and other similar groups remain committed to conducting armed attacks against U.S. interests, including civilian targets within the United States. National security and intelligence officials warn that future terrorist attacks are likely.

In response to this threat, on December 19, 2005, the Coast Guard published a final rule establishing the current permanent security zones in designated waters surrounding the Hawaiian Islands (70 FR 75036, December 19, 2005). The current zones replaced zones established by a final rule issued in 2003 (68 FR 20344, April 25, 2003) which in turn replaced temporary zones that had been established, and then extended, in the waters surrounding the Hawaiian Islands soon after the attacks (66 FR 52693, October 17, 2001). The existing permanent security zones have been in operation for more than 18 months.

We have recently completed a periodic review of port and harbor security procedures and considered the oral feedback that local vessel operators gave to Coast Guard units enforcing the zones. In response, the Coast Guard is reducing the scope of the Honolulu International Airport, North Section security zone. The Coast Guard is also establishing new zones at Kawaihae Harbor, Hawaii and Kahe Point, Oahu to address a new vessel operation and recent identification of a critical facility. Additionally, we are clarifying the application of large cruise ship (LCS) security zones to the new Hawaii SuperFerry.

Our action with respect to the Honolulu International Airport, North Section zone (33 CFR 165.1407(a)(4)(i)) is to change it from one that is perpetually activated and enforced to one that is used only in response to a threat. This change, permitting a reduced security posture in the waters adjacent to Honolulu International Airport, is based on a 2006 reevaluation of airport protection requirements. The new arrangement offers us the opportunity to decrease disruption to maritime commerce and inconvenience to small entities by making the zone subject to activation and enforcement only under certain conditions rather than all the time.

All of the security zones described in this final rule are permanently established. We use the word “activated” to describe when these permanently established zones are subject to enforcement.

Our addition of a Kawaihae Harbor security zone is due to the arrival of the Hawaii SuperFerry. In June 2004, Hornblower Marine Services, Inc. signed a Marine Management Operating Agreement and Construction Oversight contract for the new Hawaii SuperFerry operation, an inter-island ferry service. The service will transport passengers and vehicles to Hawaiian island ports, including Kawaihae Harbor on the island of Hawaii. Each day, these ferries will carry many passengers as well as cargo and vehicles, presenting the same security vulnerabilities as the large cruise ships that operate in those areas. Kawaihae Harbor, however, lacked a security zone to protect such vessels, so we are creating one there.

Additionally, the definition of large cruise ship (LCS) in 33 CFR 165.1408(b), 165.1409(b), and 165.1410(b) did not adequately describe the Hawaii SuperFerry or any other vessel of similar size and carriage capacity. Therefore, the Coast Guard is revising the term large cruise ship to clarify that the presence of Superferry-type vessels triggers the activation and enforcement of the Maui, Hawaii, and Kauai security zones described in those three sections.

Our creation of a Kahe Point security zone is meant to protect the Hawaiian Electric Company power plant at Kahe Point, which produces a significant portion of the electricity for the island of Oahu. This beach-front power plant uses sea water piped in directly from the ocean to cool its turbines. Loss or damage to this cooling water system due to sabotage would reduce the power-generating capacity of the plant and overburden the other island facilities. The Kahe Point, Oahu zone is intended to enhance the plant's security.

We did not receive any comments in response to our NPRM. Our review of the regulation text, however, revealed a typo in the proposed amendment of 33 CFR 165.1410(b). In that paragraph, the word “ferries” should have been singular, so we made that change for this final rule. No other changes were made to the regulation text proposed in the NPRM.

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

The Coast Guard expects the economic impact of this rule to be so minimal that a full Regulatory Evaluation is unnecessary. This expectation is based on the short activation and enforcement duration of the zones created or impacted by this rule, as well as the limited geographic area affected by them.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. While we are aware that affected areas have small commercial entities, including canoe and boating clubs and small commercial businesses that provide recreational services, we anticipate that there will be little or no impact to these small entities due to the narrowly tailored scope of these changes.

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

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

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

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

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

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

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

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

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

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

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

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

We have analyzed this rule under Commandant Instruction M16475.lD and Department of Homeland Security Management Directive 5100.1, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g) of the Instruction, from further environmental documentation. That provision excludes regulations establishing or changing security zones.

A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” are available in the docket where indicated under ADDRESSES .

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This section provides additional information by addressing the following questions:

Section 110(a)(1) of the Clean Air Act (CAA or Act) requires, in part, that states submit to EPA plans to maintain any NAAQS promulgated by EPA. EPA interprets this provision to require that areas that were maintenance areas for the 1-hour ozone NAAQS but attainment for the 8-hour ozone NAAQS submit a plan to demonstrate the continued maintenance of the 8-hour ozone NAAQS. EPA established June 15, 2007, three years after the effective date of the initial 8-hour ozone designations, as the deadline for submission of plans for these areas. Missouri's Section 110(a)(1) maintenance plan was received by EPA on May 23, 2007.

On May 20, 2005, EPA issued guidance that applies, in part, to areas that are designated attainment/unclassifiable for the 8-hour ozone standard and that had an approved 1-hour ozone maintenance plan. The purpose of the guidance, referred to as Section 110(a)(1) guidance, is to assist the states in the development of a SIP which addresses the maintenance requirements found in Section 110(a)(1) of the CAA. There are five components of the Section 110(a)(1) maintenance plan which are: (1) An attainment inventory, which is based on actual typical summer day emissions of volatile organic compounds (VOCs) and oxides of nitrogen (NO X ) for a ten-year period from a base year as chosen by the state; (2) a maintenance demonstration which shows how the area will remain in compliance with the 8-hour ozone standard for 10 years after the effective date of designations (June 15, 2004); (3) a commitment to continue to operate air quality monitors; (4) a contingency plan that will ensure that a violation of the 8-hour ozone NAAQS is promptly addressed; and (5) an explanation of how the state will track the progress of the maintenance plan.

Missouri Department of Natural Resources' (MDNR) 8-hour ozone maintenance plan addresses the components of the Section 110(a)(1) 8-hour ozone maintenance as outlined in EPA's May 20, 2005, guidance. Missouri has requested that the Section 110(a)(1) 8-hour ozone maintenance plan replace the existing Section 175A 1-hour ozone maintenance plan.

Emissions Inventory: An emissions inventory is an itemized list of emission estimates for sources of air pollution in a given area for a specified time period. MDNR has provided a comprehensive and current emissions inventory for ozone precursors (NO X and VOCs) in the area. MDNR has chosen to use 2002 as the base year from which it projects emissions. The maintenance plan also includes an explanation of the methodology used for determining the anthropogenic (point, area, and mobile sources) emissions in the maintenance area. The inventory is based on emissions for a typical ozone season day. The term “typical” refers to emissions expected on a typical weekday during the months where ozone concentrations are typically the highest. For Kansas City, these months are June through August.

Maintenance Demonstration and Tracking Progress: With regard to demonstrating continued maintenance of the 8-hour ozone standard, Missouri projects that the total emissions from the entire Kansas City Maintenance Area (KCMA) will decrease during the ten-year maintenance period. MDNR has projected emissions for 10 years from the effective date of initial designations, or 2014. In 2002, the total anthropogenic emissions in the entire KCMA were 226.42 tons/ozone season day for VOCs and 316.09 tons/ozone season day for NO X . The projected 2014 anthropogenic emissions from the entire KCMA are 181.07 tons/ozone season day for VOCs and 180.08 tons/ozone season day for NO X . As such, the plan demonstrates that, from an emissions projections standpoint, emissions are projected to decrease.

It is important to note that the formation of ozone is dependent on a number of variables which cannot be estimated through emissions growth and reduction calculations. A few of these variables include weather and the transport of ozone precursors from outside the maintenance area. In the Section 110(a)(1) maintenance plan, MDNR has indicated that the state will track the progress of the maintenance plan by updating the emissions inventory for the KCMA approximately every three years. The years of 2005, 2008, and 2011 were chosen as the years in which emissions will be reviewed. A review of the 2005 emissions inventory is underway. The emissions inventory update will include point, area, and onroad and offroad emissions. Information from these future updates will be compared with the projected growth estimates for the 2002 base inventory data to track maintenance of the standard.

Ambient Monitoring: With regard to the ambient air monitoring component of the maintenance plan, Missouri's plan describes the ozone monitoring network in Kansas City and explains that states and local air agencies are responsible for the operation, maintenance and data collection at these monitoring sites. MDNR commits to continue operating air quality monitors in accordance with 40 CFR Part 58 to verify maintenance of the 8-hour ozone standard. If any changes to the monitoring locations become necessary, MDNR commits to working with EPA to ensure that the adequacy of the monitoring network is maintained.

Contingency Measures: EPA interprets Section 110(a)(1) of the CAA to require that the state develop a contingency plan that will ensure that any violation of a NAAQS is promptly corrected. The purposes of the contingency measures, outlined in MDNR's maintenance plan, are to achieve sufficient VOC and/or NO X emissions to reduce further ozone monitored concentrations. Missouri and Kansas worked together to design a two-phased approach for the contingency measure portion of the maintenance plan. The approach includes specific triggers for each phase. The triggers are the same for both states although the measures vary slightly. For Phase 1, the Missouri plan provides that a violation of the 8-hour ozone standard, once quality assured, would trigger two control measures, which are (1) early implementation of control devices on Clean Air Interstate Rule-(CAIR) affected coal-fired electric generating units; and (2) an idle reduction regulation.

Phase 2 contingency measures would be triggered by the occurrences of either of the following two events: (1) A three-year design value for the area equaling or exceeding 0.089 parts per million (ppm) which would become active one year following the end of the ozone season that triggered the Phase 1 contingency measures or (2) three consecutive years following the Phase 1 trigger year with a design value greater than 0.084 ppm. Either of these events would implement the selection of control measures of Phase 2. Following the implementation of Phase 1, if any one year has a three-year design value equaling or exceeding 0.085 ppm, an evaluation to determine appropriate action will be undertaken by MDNR. The purpose of delaying the potential implementation of Phase 2 control measures for a period of time following the implementation of Phase 1 is to allow for Phase 1 controls to be initiated and have an effect on air quality in the region before Phase 2 is implemented. It also allows for further evaluation of the various control measures that could be implemented under Phase 2. Below are a few of the controls options being considered for Phase 2: NO X reductions to coal-fired electric generating units (EGUs) not covered under CAIR that exceed 100 tons of NO X emissions per year; NO X reductions from industrial boilers and process heaters that exceed 100 tons of NO X emissions per year; NO X reductions from cement kilns that exceed 100 tons of NO X emissions per year; lowering the threshold for major sources of VOCs to 75 tons per year; enacting regulations to reduce VOC emissions from 46 architectural and industrial maintenance coatings, including traffic coatings; enacting emissions offsets of 1.1:1.0 for new sources; diesel Engine Chip Re-Flashing regulations; or enacting the gas-cap testing program. If triggered, the Phase 2 measures will be selected based on emission reduction benefits, cost effectiveness and timeframe for implementation. MDNR also would consider additional potential measures if other beneficial emission reduction methods are determined to be useful to the air quality in the KCMA.

Missouri has addressed the components of a maintenance plan pursuant to EPA's May 20, 2005, guidance. The Section 110(a)(1) 8-hour ozone Kansas City maintenance plan approved in this action will replace the existing Section 175A 1-hour ozone maintenance plan. Existing VOC control rules included in the 1-hour maintenance plan will remain in place. Missouri has committed to implementing the contingency measures within 24 months of the trigger date and will take action to maintain the standard in the event the contingency measures are triggered.

We are processing this action as a direct final action because we do not anticipate any adverse comments. Please note that if EPA receives adverse comment on part of this rule and if that part can be severed from the remainder of the rule, EPA may adopt as final those parts of the rule that are not the subject of an adverse comment.

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

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

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

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

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by October 9, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This section provides additional information by addressing the following questions:

Section 110(a)(1) of the Clean Air Act (CAA or Act) requires, in part, that states submit to EPA plans to maintain any NAAQS promulgated by EPA. EPA interprets this provision to require that areas that were maintenance areas for the 1-hour ozone NAAQS but attainment for the 8-hour ozone NAAQS submit a plan to demonstrate the continued maintenance of the 8-hour ozone NAAQS. EPA established June 15, 2007, three years after the effective date of the initial 8-hour ozone designations, as the deadline for submission of plans for these areas. Kansas's Section 110(a)(1) maintenance plan was received by EPA on May 23, 2007.

On May 20, 2005, EPA issued guidance that applies, in part, to areas that are designated attainment/unclassifiable for the 8-hour ozone standard and that had an approved 1-hour ozone maintenance plan. The purpose of the guidance, referred to as Section 110(a)(1) guidance, is to assist the states in the development of a SIP which addresses the maintenance requirements found in Section 110(a)(1) of the CAA. There are five components of the Section 110(a)(1) maintenance plan which are: (1) An attainment inventory, which is based on actual typical summer day emissions of volatile organic compounds (VOCs) and oxides of nitrogen (NO X ) for a ten-year period from a base year as chosen by the state; (2) a maintenance demonstration which shows how the area will remain in compliance with the 8-hour ozone standard for 10 years after the effective date of designations (June 15, 2004); (3) a commitment to continue to operate air quality monitors; (4) a contingency plan that will ensure that a violation of the 8-hour ozone NAAQS is promptly addressed; and (5) an explanation of how the state will track the progress of the maintenance plan.

The Kansas Department of Health and Environment's (KDHE) 8-hour ozone maintenance plan addresses the components of the Section 110(a)(1) 8-hour ozone maintenance plan as outlined in EPA's May 20, 2005, guidance. Kansas has requested that the Section 110(a)(1) 8-hour ozone maintenance plan replace the existing Section 175A 1-hour ozone maintenance plan.

Emissions Inventory: An emissions inventory is an itemized list of emission estimates for sources of air pollution in a given area for a specified time period. KDHE has provided a comprehensive and current emissions inventory for ozone precursors (NO X , and VOCs) in the area. KDHE has chosen to use 2002 as the base year from which they project emissions. The maintenance plan also includes an explanation of the methodology used for determining the anthropogenic (point, area, and mobile sources) emissions in the maintenance area. The inventory is based on emissions for a typical ozone season day. The term “typical” refers to emissions expected on a typical weekday during the months where ozone concentrations are typically the highest. For Kansas City, these months are June through August.

Maintenance Demonstration and Tracking Progress: With regard to demonstrating continued maintenance of the 8-hour ozone standard, Kansas projects that the total emissions from the entire Kansas City Maintenance Area (KCMA) will decrease during the ten-year maintenance period. KDHE has projected emissions for 10 years from the effective date of initial designations, or 2014. In 2002, the total anthropogenic emissions in the entire KCMA were 226.42 tons/ozone season day for VOCs and 316.09 tons/ozone season day for NO X . The projected 2014 anthropogenic emissions from the entire KCMA are 181.07 tons/ozone season day for VOCs and 180.08 tons/ozone season day for NO X . As such, the plan demonstrates that, from an emissions projections standpoint, emissions are projected to decrease.

It is important to note that the formation of ozone is dependent on a number of variables which cannot be estimated through emissions growth and reduction calculations. A few of these variables include weather and the transport of ozone precursors from outside the maintenance area. In the Section 110(a)(1) maintenance plan, KDHE has indicated that the state will track the progress of the maintenance plan by updating the emissions inventory for the KCMA approximately every three years. The years of 2005, 2008, and 2011 were chosen as the years in which emissions will be reviewed. A review of the 2005 emissions inventory is underway. The emissions inventory update will include point, area, and onroad and offroad emissions. Information from these future updates will be compared with the projected growth estimates for the 2002 base inventory data to track maintenance of the standard.

Ambient Monitoring: With regard to the ambient air monitoring component of the maintenance plan, Kansas's plan describes the ozone monitoring network in Kansas City and explains that states and local air agencies are responsible for the operation, maintenance and data collection at these monitoring sites. KDHE commits to continue operating air quality monitors in accordance with 40 CFR Part 58 to verify maintenance of the 8-hour ozone standard. If any changes to the monitoring locations become necessary, KDHE commits to working with EPA to ensure that the adequacy of the monitoring network is maintained.

Contingency Measures: EPA interprets Section 110(a)(1) of the CAA to require that the state develop a contingency plan which will ensure that any violation of an NAAQS is promptly corrected. The purposes of the contingency measures, outlined in KDHE's maintenance plan, are to achieve sufficient VOC and/or NO X emissions to reduce ozone monitored concentrations. Kansas and Missouri worked to design a two-phased approach for the contingency measure portion of the maintenance plan. The approach includes specific triggers for each phase. The triggers are the same for both states, although the measures vary slightly. For Phase 1, the Kansas plan provides that a violation of the 8-hour ozone standard, once quality assured, would trigger two control measures, which are, (1) reduction in NO X emission from point sources greater than 1000 tons of actual annual emissions from the entire facility averaged over the last three years of complete, quality-assured inventory data in Wyandotte and Johnson Counties. This would be accomplished through either NO X Reasonable Available Control Technology (RACT) rules or signed agreements with affected sources, and (2) diesel idle reduction in Wyandotte and Johnson Counties through administrative regulations or local ordinances. If this measure is implemented, KDHE would develop the enforcement mechanism through contracts with local agencies.

Phase 2 contingency measures would be triggered by the occurrences of either of the following two events: (1) A three-year design value for the area equaling or exceeding 0.089 parts per million (ppm) which would become active one year following the end of the ozone season that triggered the Phase 1 contingency measures or (2) three consecutive years following the Phase 1 trigger year with a design value greater than 0.084 ppm. Either of these events would implement the selection of control measures of Phase 2. Following the implementation of Phase 1, if any one year has a three-year design value equaling or exceeding 0.085 ppm, an evaluation to determine appropriate action will be undertaken by KDHE. The purpose of delaying the potential implementation of Phase 2 control measures for a period of time following the implementation of Phase 1 is to allow for Phase 1 controls to be initiated and have an effect on air quality in the region before Phase 2 is implemented. It also allows for further evaluation of the various control measures that could be implemented under Phase 2. Below are a few of the control options being considered for Phase 2:

• Reductions in NO X emissions from point sources that exceed 100 tons of actual annual emissions from the entire facility averaged over the last three years of complete, quality-assured inventory data in Wyandotte and Johnson Counties. This would be accomplished through either NO X RACT rules or signed agreements with affected sources.

• Reductions in NO X emissions from point sources greater than 1000 tons of actual annual emissions from the entire facility averaged over the last three years of complete, quality-assured inventory data in areas located south of and outside the KCMA (Miami and Linn Counties). Based on current emissions inventory, this would affect two sources. Reductions would be accomplished through either a regional NO X administrative regulation or signed agreements with affected sources.

• Open burning restrictions in Wyandotte and Johnson Counties.

• Lower threshold for major sources of VOC to 75 tons per year (tpy) in Wyandotte and Johnson Counties. The KDHE would evaluate remaining large VOC emitters subject to existing VOC RACT rules to determine if further reductions could be achieved (VOC RACT rules).

• VOC control for 46 Architectural and Industrial Maintenance Coatings, including traffic coatings in Wyandotte and Johnson Counties.

• Diesel Engine Chip Re-Flashing regulations in Wyandotte and Johnson Counties.

If triggered, the Phase 2 measures will be selected based on emission reduction benefits, cost effectiveness and timeframe for implementation. KDHE also would consider additional potential measures if other beneficial emission reduction methods are determined to be useful to the air quality in the KCMA.

Kansas has addressed the components of a maintenance plan pursuant to EPA's May 20, 2005, guidance. The section 110(a)(1) 8-hour ozone Kansas City maintenance plan approved in this action will replace the existing section 175A 1-hour ozone maintenance plan. Kansas has committed to continue implementation of the VOC control measures in the 1-hour maintenance plan. Kansas has also committed to implementing the contingency measures no later than 24 months after the trigger date and will take action to maintain the standard in the event the contingency measures are triggered.

We are processing this action as a direct final action because we do not anticipate any adverse comments. Please note that if EPA receives adverse comment on part of this rule and if that part can be severed from the remainder of the rule, EPA may adopt as final those parts of the rule that are not the subject of an adverse comment.

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

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

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

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by October 9, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

In the following, whenever “we,” “us,” or “our” are used, we mean the United States Environmental Protection Agency.

The background for today's action is discussed in detail in EPA's June 12, 2007, proposal (72 FR 32246). In that rulemaking, we noted that, under EPA regulations at 40 CFR part 50, the 8-hour ozone standard is attained when the 3-year average of the annual fourth-highest daily maximum 8-hour average ozone concentrations is less than or equal to 0.08 ppm. (See 69 FR 23857 (April 30, 2004) for further information). The data completeness requirement is met when the average percent of days with valid ambient monitoring data is greater than 90%, and no single year has less than 75% data completeness, as determined in accordance with Appendix I of part 50.

Under the CAA, EPA may redesignate nonattainment areas to attainment if sufficient complete, quality-assured data are available to determine that the area has attained the standard and that it meets the other CAA redesignation requirements in section 107(d)(3)(E).

The Ohio EPA submitted a request on December 22, 2006, and supplemented it on March 9, 2007, for redesignation of the Toledo, Ohio area, which includes Lucas and Wood Counties, to attainment for the 8-hour ozone standard. The request included three years of complete, quality-assured data for the period of 2004 through 2006, indicating that the 8-hour NAAQS for ozone had been achieved. Preliminary 2007 air quality data show that the area continues to attain the 8-hour ozone standard. The data satisfy the applicable CAA requirements discussed above. The June 12, 2007, proposed rule provides a detailed discussion of how Ohio met these requirements.

On December 22, 2006, the U.S. Court of Appeals for the District of Columbia Circuit vacated EPA's Phase 1 Implementation Rule for the 8-hour Ozone Standard. (69 FR 23951, April 30, 2004). South Coast Air Quality Management Dist. v. EPA, 472 F.3d 882 (D.C. Cir. 2006). On June 8, 2007, in South Coast Air Quality Management Dist. v. EPA, Docket No. 04-1201, in response to several petitions for rehearing, the D.C. Circuit clarified that the Phase 1 Rule was vacated only with regard to those parts of the rule that had been successfully challenged. Therefore, the Phase 1 Rule provisions related to classifications for areas currently classified under subpart 2 of Title I, part D of the CAA as 8-hour nonattainment areas, the 8-hour attainment dates, and the timing for emissions reductions needed for attainment of the 8-hour ozone NAAQS, remain effective. The June 8 decision left intact the Court's rejection of EPA's reasons for implementing the 8-hour standard in certain nonattainment areas under subpart 1 in lieu of subpart 2. By limiting the vacatur, the Court let stand EPA's revocation of the 1-hour standard and those anti-backsliding provisions of the Phase 1 Rule that had not been successfully challenged. The June 8 decision reaffirmed the December 22, 2006, decision that EPA had improperly failed to retain four measures required for 1-hour nonattainment areas under the anti-backsliding provisions of the regulations: (1) Nonattainment area New Source Review (NSR) requirements based on an area's 1-hour nonattainment classification; (2) Section 185 penalty fees for 1-hour severe or extreme nonattainment areas; (3) measures to be implemented pursuant to section 172(c)(9) or 182(c)(9) of the CAA, contingent on an area not making reasonable further progress toward attainment of the 1-hour NAAQS, or for failure to attain that NAAQS; and (4) certain transportation conformity requirements for certain types of Federal actions. The June 8 decision clarified that the Court's reference to conformity requirements was limited to requiring the continued use of 1-hour motor vehicle emissions budgets until 8-hour budgets were available for 8-hour conformity determinations.

For the reasons set forth in the proposal, EPA does not believe that the Court's rulings alter any requirements relevant to this redesignation action so as to preclude redesignation, and do not prevent EPA from finalizing this redesignation. EPA believes that the Court's December 22, 2006, and June 8, 2007, decisions impose no impediment to moving forward with redesignation of this area to attainment, because even in light of the Court's decisions, redesignation is appropriate under the relevant redesignation provisions of the Act and longstanding policies regarding redesignation requests.

With respect to the requirement for transportation conformity under the 1-hour standard, the Court in its June 8 decision clarified that for those areas with 1-hour motor vehicle emissions budgets in their maintenance plans, anti-backsliding requires only that those 1-hour budgets must be used for 8-hour conformity determinations until replaced by 8-hour budgets. To meet this requirement, conformity determinations in such areas must comply with the applicable requirements of EPA's conformity regulations at 40 CFR part 93.

EPA provided a 30-day review and comment period. One comment, from BP Products, North America Inc., was received supporting EPA's proposal.

EPA is taking several related actions for the Toledo, Ohio area. First, EPA is making a determination that the Toledo, Ohio area has attained the 8-hour ozone standard. EPA is approving Ohio's maintenance plan SIP revision for the Toledo, Ohio area (such approval being one of the CAA criteria for redesignation to attainment status). The maintenance plan is designed to keep the Toledo, Ohio area in attainment of the 8-hour ozone NAAQS through 2018 by ensuring that the 2018 Volatile Organic Compounds (VOC) and Oxides of Nitrogen (NO X ) emissions are less than 2004 emissions, the attainment year. EPA is also approving the State's request to change the legal designation of the Toledo, Ohio area from nonattainment to attainment of the 8-hour ozone NAAQS. Finally, as supported by and consistent with the ozone maintenance plan, EPA is approving the 2009 and the 2018 VOC and NO X MVEBs for the Toledo, Ohio area. The 2009 MVEBs are 18.99 tons/day of VOC and 33.75 tons/day for NO X . The 2018 MVEBs are 11.20 tons/day of VOCs and 14.11 tons/day for NO X .

In accordance with 5 U.S.C. 553(d), EPA finds that there is good cause for these actions to become effective immediately upon publication. This is because a delayed effective date is unnecessary due to the nature of a redesignation to attainment, which relieves the area from certain CAA requirements that would otherwise apply to it. The immediate effective date for this action is authorized under both 5 U.S.C. 553(d)(1), which provides that rulemaking actions may become effective less than 30 days after publication if the rule “grants or recognizes an exemption or relieves a restriction,” and section 553(d)(3) which allows an effective date less than 30 days after publication “as otherwise provided by the agency for good cause found and published with the rule.” The purpose of the 30-day waiting period prescribed in 553(d) is to give affected parties a reasonable time to adjust their behavior and prepare before the final rule takes effect. Today's rule, however, does not create any new regulatory requirements such that affected parties would need time to prepare before the rule takes effect. Rather, today's rule relieves the State of planning requirements for these 8-hour ozone nonattainment areas. For these reasons, EPA finds good cause under 5 U.S.C. 553(d)(3) for these actions to become effective on the date of publication of these actions.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and, therefore, is not subject to review by the Office of Management and Budget.

Because it is not a “significant regulatory action” under Executive Order 12866 or a “significant energy action,” this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001).

This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Redesignation of an area to attainment under section 107(d)(3)(E) of the Clean Air Act does not impose any new requirements on small entities. Redesignation is an action that affects the status of a geographical area and does not impose any new regulatory requirements on sources. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ).

Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

This action also does not have Federalism implications because it does not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). Redesignation is an action that merely affects the status of a geographical area, and does not impose any new requirements on sources, or allows a state to avoid adopting or implementing additional requirements, and does not alter the relationship or distribution of power and responsibilities established in the Clean Air Act.

This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the state to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Redesignation is an action that affects the status of a geographical area but does not impose any new requirements on sources. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply.

This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

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

Under Section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by October 9, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review, nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to force its requirements. (See Section 307(b)(2).)

EPA Region 4 is publishing this direct final notice of deletion of the Rochester Property Superfund Site from the NPL.

The EPA identifies Sites that appear to present a significant risk to public health or the environment and maintains the NPL as the list of those Sites. As described in the Section 300.425(e)(3) of the NCP, Sites deleted from the NPL remain eligible for remedial actions if conditions at a deleted Site warrant such action.

Section II of this document explains the criteria for deleting Sites from the NPL. Section III discusses procedures that EPA is using for this action. Section IV discusses the Rochester Property Superfund Site and demonstrates how it meets the deletion criteria. Section V discusses EPA's action to delete the Site from the NPL unless adverse comments are received during the public comment period.

Section 300.425(e) of the NCP provides that releases may be deleted from the NPL where no further response is appropriate. In making a determination to delete a Site from the NPL, EPA shall consider, in consultation with the State, whether any of the following criteria have been met:

i. Responsible parties or other persons have implemented all appropriate response actions required;

ii. All appropriate Fund-financed (Hazardous Substance Superfund) response under CERCLA has been implemented, and no further response action by responsible parties is appropriate; or

iii. The remedial investigation has shown that the release poses no significant threat to public health or the environment and, therefore, the taking of remedial measures is not appropriate.

Even if a Site is deleted from the NPL, where hazardous substances, pollutants, or contaminants remain at the deleted Site above levels that allow for unlimited use and unrestricted exposure, CERCLA section 121(c), 42 U.S.C. 9621(c) requires that a subsequent review of the Site be conducted at least every five years after the initiation of the remedial action at the deleted Site to ensure that the action remains protective of public health and the environment. In the case of this site, the selected remedy is protective of human health and the environment. EPA has determined that all remedial action objectives and cleanup goals have been attained, that all cleanup actions are completed at this site, and there are no hazardous substances, pollutants, or contaminants remaining at the site above levels that allow for unlimited use and unrestricted exposure. If new information becomes available which indicates a need for further action, EPA may initiate remedial actions. Whenever there is a significant release from a Site deleted from the NPL, the deleted Site may be restored to the NPL without application of the hazard ranking system.

The following procedures apply to deletion of the Site:

(1) The EPA consulted with the State of South Carolina on the deletion of the Site from the NPL prior to developing this direct final notice of deletion.

(2) South Carolina concurred with deletion of the Site from the NPL.

(3) Concurrently with the publication of this direct final notice of deletion, a notice of the availability of the parallel notice of intent to delete published today in the “Proposed Rules” section of the Federal Register is being published in a major local newspaper of general circulation at or near the Site and is being distributed to appropriate federal, state, and local government officials and other interested parties; the newspaper notice announces the 30-day public comment period concerning the notice of intent to delete the Site from the NPL.

(4) The EPA placed copies of documents supporting the deletion in the Site information repositories identified above.

(5) If adverse comments are received within the 30-day public comment period on this document, EPA will publish a timely notice of withdrawal of this direct final notice of deletion before its effective date and will prepare a response to comments and continue with the deletion process on the basis of the notice of intent to delete and the comments already received.

Deletion of a Site from the NPL does not itself create, alter, or revoke any individual's rights or obligations. Deletion of a Site from the NPL does not in any way alter EPA's right to take enforcement actions, as appropriate. The NPL is designed primarily for informational purposes and to assist EPA management. Section 300.425(e)(3) of the NCP states that the deletion of a Site from the NPL does not preclude eligibility for future response actions, should future conditions warrant such actions.

The following information provides EPA's rationale for deleting the Site from the NPL:

The Rochester Property Site (Site) is located west of the town of Travelers Rest, in Greenville County, South Carolina, in a rural, sparsely populated area. The 4.5 acre site lies approximately 300 feet north of County Road 268, also known as Ledbetter Road, and approximately one-quarter mile east of County Road 102. The area where waste was disposed, and later removed, is located within a 0.6 acre fenced area. The northern portion of the property is a pine and deciduous forest, while the southern portion is grassed. A small house is located at the east end of the site.

In late 1971 and early 1972, waste materials were placed in four trenches on the site. Each of the trenches was approximately 40 feet long, 3 feet wide and 10 feet deep. The wastes were thought to include wood glue, print binders, powder materials, natural guar gums, adhesive for food packages, and adhesive restick for envelopes.

The site was included on the NPL on October 4, 1989.

On June 5, 1989, EPA and the Potentially Responsible Party (PRP) signed an Administrative Order on Consent (AOC), Docket No. 89-09-C, requiring that the PRP characterize the vertical and horizontal extent of affected media and remove the buried waste. In January 1990, 1400 cubic yards of waste and surrounding soil were excavated and disposed of off-site at a secure hazardous waste landfill.

EPA and the PRP signed another AOC, Docket Number 92-04-C, dated February 19, 1992, to conduct the Remedial Investigation and Feasibility Study (RI/FS). RMT, Inc. (RMT) submitted to EPA, on behalf of the PRP, the Final RI Report in April 1993, and the Final FS Report in May 1993. A ROD was signed August 31, 1993.

The ROD specified that the preferred remedy for groundwater at the site would be the installation and operation of a dual trench, in-situ air sparging system, in order to meet the remedial goals (RGs). The RGs were set at the Maximum Contaminant Level (MCL) of .005 ppm for trichlorethylene (TCE) and 0.006 ppm for bis (2-ethylhexyl) phthalate, and a risk-based level of 0.180 ppm for manganese (Mn).

Construction of the system was completed by June 1995. After approximately three years of air sparging, the monitoring wells that had the highest concentration of organic contaminants of concern during the RI did not show any concentrations exceeding the RGs. However, in 1996, one monitoring well, located downgradient of the air sparging trenches, began to show TCE concentrations above the RG.

On July 8, 2002, an ESD to the ROD was issued to address the downgradient contamination. The significant change to the ROD was that a mixture of air and ozone would be sparged, rather than air only. The supplemental remedy for the site, ozone sparging and recirculation, was installed at the site in 2002 and began operation in October 2002.

Since the ROD was signed, the toxicity criterion for Mn in USEPA's Integrated Risk Information System (IRIS) database was changed; Mn is now believed to be less toxic than previously thought and the hazard quotient for Mn in groundwater is an order of magnitude lower. As a result, on January 31, 2006, a second ESD was issued removing the RG for Mn from the site remedy.

Confirmatory sampling verifies that all remedial action objectives and cleanup goals have been attained, and all cleanup actions are complete as specified in the ROD, as changed by the ESDs issued July 2002 and January 2006. Three annual confirmatory groundwater sampling events were conducted to provide further assurance that the site is currently protective, no longer poses any threats to human health or the environment, all areas of concern described in the NPL listing have been adequately addressed, and no further Superfund response is needed to protect human health and the environment. The final groundwater sampling event was conducted in November 2006. No further operations and maintenance (O&M) activities are required.

The cleanup of the site complies with the “clean closure” requirements, consistent with the Resource Conservation and Recovery Act of 1976, as amended, CERCLA, as amended, and to the extent practicable, the NCP. No further site O&M activities are required.

CERCLA requires a five-year review of all sites with hazardous substances remaining above the health-based levels for unrestricted use of the site. EPA conducted two five-year reviews at the site while the remedial action was being implemented. Since there are no hazardous substances, pollutants, or contaminants remaining at the site above levels that allow for unlimited use and restricted exposure, no further five-year reviews are required.

An information repository was established at the Travelers Rest Library and all of the documents used to make the decision were placed there before the final ROD was signed. All other reports and fact sheets were sent to the repository as they were completed. Since the remedy was initiated at this site, public interest or concern about the site has not been expressed.

One of the three criteria for site deletion specifies that EPA may delete a site from the NPL if all appropriate Fund-financed response under CERCLA has been implemented, and no further response action by responsible parties is appropriate. 40 CFR 300.425(e)(1)(ii). EPA, with the concurrence of the State of South Carolina through the SCDHEC in a letter dated July 5, 2007, believes that this criterion for deletion has been met. All the completion requirements for this Site have been met as described in the Final Close-Out Report (COR) dated June 8, 2007. The Final COR documents the completion of all remedial and operation and maintenance activities. Consequently, EPA is proposing deletion of this Site from the NPL. Documents supporting this action are available in the docket.

The EPA, with concurrence of the State of South Carolina, has determined that all appropriate responses under CERCLA have been completed, and that no further response actions under CERCLA are necessary. Therefore, EPA is deleting the Site from the NPL.

Because EPA considers this action to be noncontroversial and routine, EPA is taking it without prior publication. This action will be effective October 9, 2007 unless EPA receives adverse comments by September 10, 2007. If adverse comments are received within the 30-day public comment period, EPA will publish a timely withdrawal of this direct final notice of deletion before the effective date of the deletion and it will not take effect and, EPA will prepare a response to comments and continue with the deletion process on the basis of the notice of intent to delete and the comments already received. There will be no additional opportunity to comment.

Appendix D of part 222 of title 49 of the Code of Federal Regulations was included in the interim final rule (68 FR 70586) in order to provide additional information about the calculations underlying various risk calculations discussed within the part. Even though a minor modification was made to appendix D when the final rule was issued (70 FR 21844, April 27, 2005), the appendix was not revised to reflect necessary variations in the data that would be used in future risk index calculations.

FRA has determined that appendix D needs to be revised in order to eliminate confusion about the data that will be used in certain risk index calculations. As currently written, portions of appendix D contain specific numbers and dates that are required to be revised on an annual basis, in order to properly calculate the NSRT. For example, in paragraph (e) under the section titled “Risk Index”, a specific value is listed for the total number of collisions identified over a five-year period. However, each year that the NSRT is recalculated, this number and the date range will need to change. Otherwise, the NSRT value will not accurately reflect current risk levels at gated crossings nationwide where train horns are routinely sounded. Therefore, FRA is revising appendix D by removing references to specific numbers and dates that will change from year to year and simply leaving the relevant formulas. (Actual numbers will be provided in annual Federal Register notices announcing FRA's recalculation of the NSRT value.) FRA believes these technical amendments will avoid any misunderstanding or confusion over how the NSRT is calculated.

FRA has determined that these technical amendments to appendix D are nonsubstantive clarifications that will make the appendix more accurate, without changing the actual risk index calculations that were contained in the final rule. While FRA does not anticipate any adverse comment, interested parties may submit written adverse comments or request an oral hearing on these amendments during the thirty (30) day period immediately following publication of this direct final rule.

This rule has been evaluated in accordance with existing policies and procedures, and determined to be non-significant under both Executive Order 12866 and DOT policies and procedures (44 FR 11034 (Feb. 26, 1979)).

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612) requires a review of proposed and final rules to assess their impact on small entities, unless the Secretary certifies that the rule will not have a significant economic impact on a substantial number of small entities. Pursuant to Section 312 of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), FRA has issued a final policy that formally establishes “small entities” as including railroads that meet the line-haulage revenue requirements of a Class III railroad. 49 CFR part 209, app. C. For other entities, the same dollar limit in revenues governs whether a railroad, contractor, or other respondent is a small entity. Id.

FRA certifies that this direct final rule will have no significant economic impact on a substantial number of small entities. To the extent that this rule has any impact on small entities, the impact will not be significant.

There are no new information collection requirements associated with this direct final rule. Therefore, no estimate of a public reporting burden is required.

Executive Order 13132, entitled, “Federalism,” issued on August 4, 1999, requires that each agency “in a separately identified portion of the preamble to the regulation as it is to be issued in the Federal Register , provide[ ] to the Director of the Office of Management and Budget a federalism summary impact statement, which consists of a description of the extent of the agency's prior consultation with State and local officials, a summary of the nature of their concerns and the agency's position supporting the need to issue the regulation, and a statement of the extent to which the concerns of the State and local officials have been met * * *.” This rulemaking action has been analyzed in accordance with the principles and criteria contained in Executive Order 13132. This rule will not have a substantial direct effect on States, on the relationship between the National Government and the States, or on the distribution of power and the responsibilities among the various levels of government, as specified in the Executive Order 13132. Accordingly, FRA has determined that this rule will not have sufficient federalism implications to warrant consultation with State and local officials or the preparation of a federalism assessment. Accordingly, a federalism assessment has not been prepared.

FRA has evaluated this regulation in accordance with its “Procedures for Considering Environmental Impacts” (FRA's Procedures) (64 FR 28545, May 26, 1999) as required by the National Environmental Policy Act (42 U.S.C. 4321 et seq. ), other environmental statutes, Executive Orders, and related regulatory requirements. FRA has determined that this regulation is not a major FRA action (requiring the preparation of an environmental impact statement or environmental assessment) because it is categorically excluded from detailed environmental review pursuant to section 4(c)(20) of FRA's Procedures. 64 FR 28545, 28547, May 26, 1999. In accordance with section 4(c) and (e) of FRA's Procedures, the agency has further concluded that no extraordinary circumstances exist with respect to this regulation that might trigger the need for a more detailed environmental review. As a result, FRA finds that this regulation is not a major Federal action significantly affecting the quality of the human environment.

Pursuant to Section 201 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 2 U.S.C. 1531), each Federal agency “shall, unless otherwise prohibited by law, assess the effects of Federal regulatory actions on State, local, and tribal governments, and the private sector (other than to the extent that such regulations incorporate requirements specifically set forth in law).” Section 202 of the Act (2 U.S.C. 1532) further requires that “before promulgating any general notice of proposed rulemaking that is likely to result in the promulgation of any rule that includes any Federal mandate that may result in expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of [$120,800,000 or more (as adjusted for inflation)] in any 1 year, and before promulgating any final rule for which a general notice of proposed rulemaking was published, the agency shall prepare a written statement” detailing the effect on State, local, and tribal governments and the private sector. The direct final rule will not result in the expenditure, in the aggregate, of $120,800,000 or more in any one year, and thus preparation of such a statement is not required.

Executive Order 13211 requires Federal agencies to prepare a Statement of Energy Effects for any “significant energy action.” 66 FR 28355 (May 22, 2001). Under the Executive Order, a “significant energy action” is defined as any action by an agency (normally published in the Federal Register ) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking: That (1)(i) is a significant regulatory action under Executive Order 12866 or any successor order, and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. FRA has evaluated this direct final rule in accordance with Executive Order 13211. FRA has determined that this direct final rule is not likely to have a significant adverse effect on the supply, distribution, or use of energy. Consequently, FRA has determined that this regulatory action is not a “significant energy action” within the meaning of Executive Order 13211.

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

The FMCSA published on July 24, 2007 (72 FR 40250), a document announcing regulatory guidance concerning its definition of “accident.” In that document, FMCSA provided an incorrect telephone number for the agency contact person under the heading FOR FURTHER INFORMATION CONTACT . The correct telephone number should read (202) 366-4325.

NMFS manages the groundfish fishery in the BSAI exclusive economic zone according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The 2007 TAC of Pacific cod specified for catcher processor vessels using trawl gear in the BSAI is 37,110 metric tons (mt) as established by the 2007 and 2008 final harvest specifications for groundfish in the BSAI (72 FR 9451, March 2, 2007). See § 679.20(c)(3)(iii), § 679.20(c)(5), and § 679.20(a)(7)(i)(B).

In accordance with § 679.20(d)(1)(i), the Administrator, Alaska Region, NMFS, has determined that the 2007 Pacific cod TAC specified for catcher processor vessels using trawl gear in the BSAI will soon be reached. Therefore, the Regional Administrator is establishing a directed fishing allowance of 32,310 mt, and is setting aside the remaining 4,800 mt as bycatch to support other anticipated groundfish fisheries. In accordance with § 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance has been reached. Consequently, NMFS is prohibiting directed fishing for Pacific cod by catcher processor vessels using trawl gear in the BSAI.

After the effective date of this closure the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA, (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of Pacific cod by catcher processor vessels using trawl gear in the BSAI. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of August 3, 2007.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

This action is required by § 679.20 and is exempt from review under Executive Order 12866.

NMFS manages the groundfish fishery in the BSAI according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The third seasonal allowance of the 2007 halibut bycatch allowance specified for the trawl rock sole, flathead sole, and “other flatfish” fishery category in the BSAI is 167 metric tons as established by the 2007 and 2008 final harvest specifications for groundfish in the BSAI (72 FR 9451, March 2, 2007).

In accordance with § 679.21(e)(7)(v), the Administrator, Alaska Region, NMFS, has determined that the third seasonal allowance of the 2007 halibut bycatch allowance specified for the trawl rock sole, flathead sole, and “other flatfish” fishery category in the BSAI has been reached. Consequently, NMFS is closing directed fishing for rock sole, flathead sole, and “other flatfish” by vessels using trawl gear in the BSAI.

“Other flatfish” includes Alaska plaice, as well as all other flatfish species except for Pacific halibut (a prohibited species), Greenland turbot, rock sole, yellowfin sole, flathead sole, and arrowtooth flounder.

After the effective date of this closure the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of directed fishing for rock sole, flathead sole, and “other flatfish” by vessels using trawl gear in the BSAI. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of August 3, 2007.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

This action is required by § 679.21 and is exempt from review under Executive Order 12866.

NMFS manages the groundfish fishery in the BSAI according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The 2007 halibut bycatch allowance specified for the trawl yellowfin sole fishery category in the BSAI is 936 metric tons as established by the 2007 and 2008 final harvest specifications for groundfish in the BSAI (72 FR 9451, March 2, 2007).

In accordance with § 679.21(e)(7)(v), the Administrator, Alaska Region, NMFS, has determined that the 2007 halibut bycatch allowance specified for the trawl yellowfin sole fishery category in the BSAI has been reached. Consequently, NMFS is closing directed fishing for yellowfin sole by vessels using trawl gear in the BSAI.

After the effective date of this closure the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of directed fishing for yellowfin sole by vessels using trawl gear in the BSAI. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of August 3, 2007.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

This action is required by § 679.21 and is exempt from review under Executive Order 12866.

NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The 2007 TAC of Pacific ocean perch in the Western Regulatory Area of the GOA is 4,244 metric tons (mt) as established by the 2007 and 2008 harvest specifications for groundfish of the GOA (72 FR 9676, March 5, 2007).

In accordance with § 679.20(d)(1)(i), the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that the 2007 TAC of Pacific ocean perch in the Western Regulatory Area of the GOA will soon be reached. Therefore, the Regional Administrator is establishing a directed fishing allowance of 4,234 mt, and is setting aside the remaining 10 mt as bycatch to support other anticipated groundfish fisheries. In accordance with § 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance has been reached. Consequently, NMFS is prohibiting directed fishing for Pacific ocean perch in the Western Regulatory Area of the GOA.

After the effective date of this closure the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of Pacific ocean perch in the Western Regulatory Area of the GOA. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of August 3, 2007.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

This action is required by § 679.20 and is exempt from review under Executive Order 12866.

The International Pacific Halibut Commission (IPHC) and NMFS manage fishing for Pacific halibut ( Hippoglossus stenolepis ) through regulations established under the authority of the Halibut Act (16 U.S.C. 773-773k). The IPHC promulgates regulations governing the halibut fishery under the Convention between the United States and Canada for the Preservation of the Halibut Fishery of the Northern Pacific Ocean and Bering Sea. The IPHC's regulations are subject to approval by the Secretary of State with concurrence of the Secretary of Commerce (Secretary). NMFS publishes the approved IPHC regulations as annual management measures pursuant to 50 CFR 300.62. Additional management regulations not in conflict with regulations adopted by the IPHC (such as the IFQ Program) may be recommended by the Council and implemented by the Secretary through NMFS to allocate harvesting privileges among U.S. fishermen under the authority of the Halibut Act (16 U.S.C. 773-773k).

The U.S. groundfish fisheries of the exclusive economic zone in the Gulf of Alaska (GOA) and the Bering Sea and Aleutian Islands (BSAI) are managed by NMFS under fishery management plans (FMPs). The FMPs were prepared by the Council under the Magnuson-Stevens Act (16 U.S.C. 1801 et seq. ) and are implemented by regulations at 50 CFR part 679. Fishing for sablefish ( Anoplopoma fimbria ) with hook-and-line gear is governed by regulations implementing the BSAI and GOA groundfish FMPs as part of the IFQ Program.

Relevant background on the IFQ Program and each part of this action is presented in the proposed rule published November l, 2006 (71 FR 64218). That publication proposed changes to the IFQ Program regulations in seven areas. This final rule adopts the following five changes in their entirety:

• Allow transfers of QS for medical reasons;

• Require a vessel monitoring system for vessels harvesting sablefish in the BSAI;

• Amend the block program for halibut by (a) allowing a QS holder to hold 3 blocks rather than 2, (b) dividing halibut blocks in Areas 3B and 4A that yield more than 20,000 lb (9.1 mt), based on the 2004 harvest figures, into a block of 20,000 lb (9.1 mt) and the remainder unblocked, and (c) increasing the halibut sweep-up level in Areas 2C and 3A to 5,000 lb (2.3 mt);

• Allow category D QS to be fished on vessels less than or equal to 60 ft (18.3 m) length overall (LOA) in areas 3B and 4C; and

• Allow category B catcher vessel QS for Area 2C halibut and Southeast Outside District sablefish, which currently must be fished on vessels greater than 60 ft (18.3 m) LOA, to be fished on catcher vessels of any length.

The sixth proposed change would have tightened the requirements for QS holders who use hired skippers by requiring specific documentation of vessel ownership and requiring ownership of the vessel used by the hired skipper for the prior 12 months. The final rule adopts the documentation requirement but not the 12-month ownership requirement. Specifically, the final rule lists the documentation a QS holder must submit to prove ownership of a documented vessel that a hired master will use. This final rule does not adopt the 12-month ownership requirement in the proposed rule, namely that QS holders must prove at least the minimum vessel ownership (20 percent ownership interest) for 12 consecutive months prior to using a hired master. NMFS is seeking clarification from the Council on whether the Council wishes to exclude from the 12-month requirement those QS holders whose vessels need temporary repairs and, for that reason, have their QS fished from vessels that the QS holders have owned less than 12 months.

This final rule does not adopt the seventh proposed change. The final rule does not change the Product Recovery Rate (PRR) for bled sablefish from 0.98 to 1.00. The Secretary disapproves this proposed rule because it would violate National Standard 2 of the Magnuson-Stevens Act: “Conservation and management measures shall be based upon the best scientific information available.”

The parts of the final rule affecting the halibut fishery are adopted under the authority of the Halibut Act. The parts of the final rule affecting the sablefish fishery are adopted under the authority of the Magnuson-Stevens Act. This final rule also implements Amendment 67 to the FMP for Groundfish for the Gulf of Alaska (Notice of Availability published October 3, 2006; 71 FR 58372), which allows category B QS to be fished on a vessel of any length in all areas (November l, 2006; 72 FR 64218). Amendment 67 was approved by the Secretary on January 3, 2007.

The final rule also adopts two administrative changes that were in the proposed rule (November l, 2006; 72 FR 64218). The first administrative change clarifies the existing regulation that once an IFQ permit holder has caught his or her total sablefish IFQ, the IFQ permit holder can not catch additional IFQ sablefish in State of Alaska (State) or Federal waters. The second administrative change eliminates the term “IFQ card” and replaces it with “IFQ hired master permit.” The final rule extends this change to the Western Alaska Community Development Quota (CDQ) Program, changing the term “CDQ card” to “CDQ hired master permit.”

The background and rationale for each part of this final rule were explained in the proposed rule, published November l, 2006 (71 FR 64218). Changes made in the final rule from the proposed rule are explained below.

This section explains the changes from the proposed rule in the final rule, except editorial changes, which are not discussed.

1. The final rule revises §§ 679.4, 679.5, and 679.7 and extends the administrative change in the proposed rule regarding IFQ cards to the CDQ Program. The CDQ halibut fishery and the IFQ halibut fishery are largely subject to the same fisheries management regulations. The two fisheries have comparable permitting and reporting requirements. The final rule eliminates the term “IFQ cards.” To maintain consistency between the IFQ Program and the CDQ Program, the final rule also eliminates the term “CDQ cards.” Under the final rule, NMFS instead will issue “CDQ permits” and “CDQ hired master permits.”

As described in the proposed rule, CDQ cards, like IFQ cards, originally served as a catch accounting tool for identification and catch reporting through a swipe card computer system. NMFS has replaced that system with an Internet-based reporting system. Hence, CDQ cards are obsolete and unnecessary. CDQ hired masters will be required to carry an original CDQ hired master permit for identification purposes while fishing for or making landings of CDQ halibut and a copy of the CDQ permit under which they are fishing. The final rule also revises associated terms, such as changing “CDQ cardholder” to “CDQ hired master permit holder.”

2. The final rule clarifies who may seek a medical transfer provision of catcher vessel QS under § 679.42(d). The final rule uses the term “QS holder” as the most accurate and precise term. The proposed rule used the term “IFQ holder” and “QS holder.” An “IFQ holder” could be confused with an “IFQ permit holder.” Usually, an IFQ permit holder will also hold QS, but a few IFQ catcher vessel permit holders do not hold QS because they are leasing QS from the heir of a deceased QS holder under § 679.41(k) or from a Community Quota Entity under § 679.41(l). The IFQ Program generally does not allow catcher vessel QS to be leased; however, the Council and the Secretary have approved leasing in these restricted situations. The person who leases catcher vessel QS receives an IFQ permit and is therefore an IFQ permit holder, but not necessarily a QS holder.

NMFS concludes that the Council intended to allow medical transfers by QS holders, not the slightly larger class of IFQ permit holders. The IRFA, prepared by Council staff, described those eligible for the benefit of medical transfers as “individual halibut or sablefish QS holders.” If IFQ permit holders who are lessees could obtain a medical transfer of the right to fish the pounds remaining on their IFQ permit, those IFQ permit holders would, in essence, be subleasing QS. Because the basic rule in the IFQ Program is that catcher vessel QS cannot be leased, and because the Council has approved leasing only in strictly limited situations, NMFS concludes that the Council did not intend to allow subleasing of QS and did not intend to grant the benefit of medical transfers to IFQ permit holders who are fishing leased QS.

A corollary of this conclusion is that a QS holder may obtain a medical transfer only of the IFQ derived from the QS certificate issued in the name of the QS holder. Sometimes a QS holder has IFQ derived from his or her QS and IFQ leased from another QS holder on the same IFQ permit. The QS holder may obtain a medical transfer only for the IFQ derived from his or her own QS. The final rule makes explicit that NMFS may not approve a medical transfer of leased QS.

By specifying that a “QS holder” may obtain a medical transfer, the final rule also clarifies that an IFQ or CDQ hired master permit holder cannot obtain a medical transfer other than for his or her IFQ. If a hired master becomes sick and unable to participate in the fishery, the QS holder who hired the master can hire another master. Again, NMFS concludes that the Council did not intend to allow subleasing of QS, in this instance by the hired master who becomes sick.

3. The final rule clarifies who may receive an emergency waiver under § 679.42(d)(1). This provision allows NMFS to waive the requirements that the person authorized to fish IFQ sablefish or halibut be present on the vessel and sign the landing report, if that person experiences an extreme personal emergency during a fishing trip. The prior regulation stated that NMFS could waive those requirements for an IFQ card holder. Because the rule eliminates IFQ cards, the final rule states that NMFS may waive those requirements for “a person authorized to fish IFQ halibut or IFQ sablefish,” which may be an IFQ permit holder or an IFQ hired master permit holder.

4. The final rule eliminates the requirement proposed at § 679.42(d)(2)(iv)(B) that NMFS disapprove an application for a second medical transfer unless a health professional attested to a reasonable likelihood of recovery of the applicant. This requirement is eliminated from the final rule because the Council motion adopting this action did not have that requirement. Further, this requirement would put an applicant's doctor or other health professional and the applicant in a difficult situation if the doctor could not attest that the applicant had a reasonable likelihood of recovery. Additionally it might be hard for a health professional to assess whether the applicant/patient has a reasonable likelihood of recovery if the patient is in the early stages of diagnosis and treatment of a disease or condition. NMFS notes that the Council's motion had other elements which prevented potential abuse of medical transfers such as a prohibition against a QS holder receiving a medical transfer more than twice in five years and the requirement for proof of a qualifying medical condition from a health professional. These requirements were in the proposed rule and are retained in the final rule.

5. The final rule clarifies the documentation that a QS holder must submit to prove the QS holder's minimum 20 percent ownership in the vessel from which a hired master will fish the QS. The QS holder who is an owner of a documented vessel must submit an Abstract of Title issued by the U.S. Coast Guard to show that the QS holder is an owner of the vessel and, if the Abstract of Title does not prove the required percentage interest, the QS holder must submit additional written documentation. The QS holder who is the owner of an undocumented vessel must submit a State of Alaska boat registration or a commercial vessel license that shows that the QS holder is an owner of the vessel. The State of Alaska issues an “Alaska Boat Registration” through its Department of Motor Vehicles and a “Commercial Vessel License” through its Commercial Fisheries Entry Commission. If either State document does not prove the required percentage ownership, the final rule clarifies that the QS holder must submit further written documentation to prove the required percentage ownership.

This clarification was necessary because the proposed rule at § 679.42(i) and (j) required proof of ownership of a documented vessel “as supported by the U.S. Abstract of Title issued by the U.S. Coast Guard and any other documentation indicating percentage ownership” and proof of ownership of an undocumented vessel “as supported by a State of Alaska vessel registration and any other documentation indicating percentage ownership.” The problem with this language is that it did not clearly state the role and purpose of “other documentation.” On one hand, read literally, it required the QS holder to submit the Abstract of Title and other documentation, even if the abstract or the State document sufficiently proved percent ownership. On the other hand, it could have been read to allow a QS holder to prove the required ownership interest through other documentation only, without submitting an Abstract of Title. The latter interpretation would have been the same as the prior regulation which merely required a QS holder to submit written documentation of his or her ownership interest.

The Council concluded that the prior regulation the requirement simply for written documentation was inadequate. It was concerned that some QS holders were abusing the hired skipper provision through vessel ownership arrangements that were informal and unverifiable. The Council also was responding to NMFS staff reports that NMFS had difficulty verifying the required ownership under the prior regulation which simply required written documentation. The final rule addresses the Council's concerns by requiring that the QS holders submit specified formal documents that are issued by the government to prove that they are an owner of the vessel that will be used to harvest their IFQ. If these formal documents do not show percentage ownership, the final rule requires QS holders to supplement those formal documents with other written documentation.

6. The final rule does not adopt the proposed requirement that a QS holder prove the minimum 20 percent vessel ownership for 12 months prior to the QS holder's use of a hired master. NMFS is seeking clarification from the Council on whether the Council wants also to exempt QS holders whose vessels need repairs from the 20 percent/12-month requirement and, if so, the criteria for the exemption. For a full explanation, see Response to Comment 4.

7. The final rule adds § 679.42(g)(2) which directs the Regional Administrator to identify all halibut blocks in Areas 3B and 4A that result in an allocation of more than 20,000 lb (9.1 mt) of halibut IFQ, based on the 2004 total allowable catch (TAC) for fixed gear halibut in those areas, and divide those halibut blocks into one block of 20,000 lb (9.1 mt) and the remainder unblocked, based on the 2004 TAC. This action was analyzed in the RIR/IRFA and specifically adopted by the Council. The proposed rule inadvertently omitted the regulatory text for this action although its description and rationale were presented in the proposed rule, and NMFS gave notice that it was considering approving it (71 FR 64222 - 64223). The final rule adopts this action as recommended by the Council and described in the proposed rule.

Because of this change, existing paragraph (g)(2) with the heading “Holding or to hold blocks of QS” is renumbered as paragraph (g)(4).

Proposed paragraph (g)(3) in this section, headed “Transfer of QS blocks,” remains paragraph (g)(3) in the final rule. However, the final rule clarifies paragraph (g)(3) to provide an exception to the requirement in paragraph (g)(1)(i) for those persons who have more than one block of QS and unblocked QS as a result of the Regional Administrator's action under paragraph (g)(2). The final rule also eliminates a specific effective date for this provision and relies instead on the overall effective date of the final rule (see DATES).

8. The final rule does not approve the proposed change in the PRR for bled sablefish from 0.98 to 1.00. NMFS finds that this proposed change is not based on the best scientific information available, and would violate National Standard 2 in the Magnuson-Stevens Act, that requires conservation and management measures to be based upon the best scientific information available (16 U.S.C. 1851 (a)(2)). Therefore, the PRR for bled sablefish remains at 0.98. See responses to comments 20, 21 and 22 below.

NMFS received 12 letters that contained 22 comments on the proposed rule.

Comment 1: One individual, who identified himself as a current IFQ holder, stated that he supported all the proposed changes as beneficial to the IFQ Program.

Response: This support is noted.

Comment 2: NMFS allows too many fish to be harvested. Fish species are going extinct.NMFS should cut all quotas by 50 percent this year and 10 percent each succeeding year.

Response: This rule changes certain features of the IFQ Program and does not affect how many halibut or sablefish may be harvested in Federal waters off Alaska. NMFS disagrees with the commenter's perception that fish species off Alaska are going extinct. Halibut and groundfish are managed conservatively and sustainably with annual quotas based on the best scientific information available. The IPHC recommends annual catch limits for Pacific halibut, which are adopted in regulations that the United States Secretary of State approves under section 4 of the Halibut Act. NMFS annually publishes catch limits and other management measures that are recommended by the IPHC to sustain halibut stocks. For 2007, the annual management measures for halibut were published March 14, 2007 (72 FR 11792). NMFS sets the annual TAC for groundfish, including sablefish, in regulations which are adopted by the Secretary under the Magnuson-Stevens Act. NMFS annually publishes TAC specifications for groundfish, including sablefish, and the rationale for the TAC, in the Federal Register . The TACs for groundfish for 2007 and 2008 in the BSAI were published on March 2, 2007 (72 FR 9451). The TACs for groundfish for 2007 and 2008 in the Gulf of Alaska were published on March 5, 2007 (72 FR 9676).

Comment 3: Two comments specifically supported the new provision at § 679.42(d)(1) to allow medical transfers by QS holders.

Response: The support is noted.

Comment 4: Under proposed § 649.42(i)(1), QS holders who want to use a hired master to harvest their IFQ must have owned at least a 20 percent interest in the vessel from which the QS will be fished for at least 12 months prior to their using a hired master permit. The proposed regulation at § 679.42(i)(6) exempted a QS holder from this requirement if the QS holder suffered “the actual total loss or constructive total loss” of a vessel owned by the QS holder. The final rule should define “constructive total loss” to include a vessel that is out of the fishery for 30 days or longer. Another comment said that a vessel owner should be exempt if his or her vessel would be out of the fishery for repairs for two to six months.

Response: NMFS acknowledges that the term “constructive total loss” was not defined in the proposed rule and agrees that it should be defined in a final rule. The terms “total loss” and “constructive total loss” are most commonly used in insurance. “Total loss” means the complete destruction of an item of property. “Constructive total loss” means a loss to insured property that is not total, but is so great that repair would cost more than the value of the property. Some definitions of “constructive total loss” include that the item has lost its total usefulness to the insured person. If NMFS were going to adopt the 12-month vessel ownership requirement in the final rule, the only QS holders that it could exempt from the 20 percent/12-month requirement would be those IFQ permit holders who had suffered a total loss or constructive total loss of their vessels, in accordance with a standard definition of those terms.

NMFS cannot adopt in this final rule a definition of “constructive total loss” that includes a vessel that is out of the IFQ fishery temporarily for repair. This definition of “constructive total loss” was not in the proposed rule. This definition is antithetical to the standard definition of “constructive total loss,” which is that the item is unable to be repaired for less than the value of the item. Thus, NMFS could not, consistent with the requirements in the Administrative Procedure Act, adopt in this final rule an exemption from the 12-month requirement for QS holders whose vessels are undergoing repair because the proposed rule did not give notice that NMFS might adopt that provision. A vessel repair exemption is not a logical outgrowth of the proposed rule, which exempted only QS holders who suffered a total loss or constructive total loss of their vessels.

Comments on this subject, however, bring to light a consequence of the proposed rule, which NMFS concludes was unanalyzed, and probably unintended, by the Council. Currently, if a QS holder's vessel needs repairs, the QS holder can acquire a 20 percent ownership interest in another vessel and use a hired master on that vessel to harvest his or her IFQ. Under the proposed rule, if a QS holder's vessel suffers damages and is out of the fishery for repairs, the QS holder would not be able to hire a master to fish his or her QS until his vessel is repaired, or until 12 months have elapsed, unless the QS holder had a minimum 20 percent ownership interest in a second vessel for the 12 months prior to wanting to use a hired master and the second vessel was available to fish in the IFQ fishery. NMFS is not willing to presume that many or most QS holders could maintain at least a 20 percent ownership interest in two or more vessels.

For QS holders who may use hired masters (other than in Area 2C for halibut or Southeast Outside for sablefish), the proposed rule left them the option of personally fishing their IFQ. If an individual QS holder is personally fishing his or her IFQ, this can be done from any boat, even if the QS holder has no ownership interest in it. For QS holders that must use hired masters such as corporations or partnerships that were initial QS recipients, the proposed rule did not leave them that option because they must use a hired master.

It is not clear whether the Council wanted to exempt QS holders whose vessels need repairs from the 12-month vessel ownership requirement, from the 20 percent ownership requirement or from the combined 20 percent/12-month vessel ownership requirement. In December 2006 the Council passed a resolution asking NMFS to define “constructive loss.” The Council then submitted a comment on the proposed rule. The Council's comment suggests that the Council wanted NMFS to define “constructive loss” to include a vessel that was out of the fishery for repairs. In that case, however, NMFS has insufficient guidance on what vessel repair situations to exempt. This uncertainty leads to the following questions: Would any repair of a vessel, or only certain types of repairs, trigger an exemption from the 12-month ownership requirement? Would a QS holder who is scheduling a vessel upgrade or routine maintenance be exempt or only a QS holder whose vessel needs unanticipated repairs? Would the exemption be triggered by repairs over a certain dollar amount or by repairs that kept the vessel out of the fishery for a certain period of time? Would it matter whether the need for repairs occurred early or late in the IFQ season? For how long would the QS holder be exempt from the 12-month requirement? And would the QS holder whose vessel needs repairs be exempt from the 12-month ownership requirement and the 20 percent ownership requirement? After receiving Council guidance on this issue, the Administrative Procedure Act would require that NMFS publish the criteria or conditions of the “vessel repair” exemption in a new proposed rule, before NMFS could adopt it in a final rule.

Therefore, NMFS is not adopting the 12-month requirement in the final rule and is seeking clarification from the Council on whether it wants to exempt QS holders whose vessels need repair from the 20 percent ownership requirement, the 12-month ownership requirement, or the combined 20 percent/12-month requirement and, if it does, the terms of the exemption.

Comment 5: The only QS holders who have the right to use a hired skipper are QS holders who were initial recipients of QS for catcher vessels and who meet other requirements. Some of these “old timers” will not be able to afford to buy or build a new boat and then leave it tied to the dock for 12 months before it goes fishing.

Response : The proposed regulation would not have required a QS holder to leave a boat tied to the dock before the vessel goes fishing, as it could have been used in non-IFQ fisheries. If NMFS had adopted this part of the proposed rule, NMFS would have had to determine whether to make this requirement effective immediately or whether to delay the effective date for 12 months. See Comment 9.

As noted in response to Comment 4, NMFS has concluded that the proposed regulation affected whether these “old timers” could use hired masters to fish their IFQ when their vessels were out of the fishery temporarily for repairs. NMFS is seeking clarification from the Council on whether it wants to exempt from the 20 percent/12-month vessel ownership requirement only those QS holders who suffer a total loss or total constructive loss of their vessels or whether it also wants to exempt QS holders whose vessels are temporarily out of the fishery for repairs and, if so, the terms of the exemption.

Comment 6: The proposed requirement for a QS holder to own a 20 percent interest in a vessel for 12 months prior to using a hired master will make entry into the halibut and longline fishery more difficult. Under the current system, it is easier for a person who owns a vessel, and does not own IFQ, to find IFQ permit holders to be partners.

Response: The imposition of a 12-month vessel ownership requirement would still allow those seeking entry into the IFQ fishery to prove themselves by forming ownership agreements with IFQ permit holders, but they would have to be longer-term agreements, i.e., a year or longer. If the imposition of the 12-month ownership requirement causes QS holders who have been entering into short-term ownership agreements to sell their QS, more QS will be available for purchase by those seeking entry into an IFQ fishery.

As noted in response to Comment 4, however, NMFS needs the Council to clarify whether it wishes to exempt QS holders whose vessels are temporarily out of the IFQ fishery for repairs from the 20 percent/12-month ownership requirement and if so, the terms of the exemption.

Comment 7: The problem of QS holders forming short-term vessel ownership agreements has never been quantified and is a personal issue only.

Response : NMFS disagrees that the proposed 12-month vessel ownership rule was merely responding to “personal issues.” The Council was responding to genuine policy concerns. From the inception of the IFQ Program, the Council's goal has been to have an owner-operated fleet in the IFQ fisheries. Based on the Council's recommendation, NMFS adopted the minimum 20 percent vessel ownership requirement in 1999 (May 10, 1999; 89 FR 24960). Before that, an IFQ permit holder wishing to use a hired master had to prove only “an ownership interest” and IFQ permit holders could acquire as little as 0.1 percent ownership interest in a vessel expressly for the purpose of hiring a skipper (December 16, 1998; 63 FR 69256). The Council required a minimum 20 percent ownership interest to prevent that practice, which had circumvented the Council's goal of an owner-operated fleet in the IFQ fisheries. But the minimum 20-percent-ownership requirement still allowed an IFQ permit holder to “own” a 20 percent interest in a vessel for a short period of time, e.g., the duration of a two- or three-week fishing trip. Such short-term ownership agreements undermined the development of an owner-operated fishery. Therefore, in addition to a substantial percentage ownership, defined as 20 percent or more, the Council recommended an additional requirement of owning the vessel for a substantial period of time, defined as twelve months or longer.

The proposed 12-month ownership requirement resulted from recommendations of Council committees established to assist the Council in its conservation and management duties under the Magnuson-Stevens Act. In October 2003 the IFQ Implementation and Cost Recovery Committee (Committee) recommended a number of changes in the IFQ Program. The Committee recommended that NMFS implement criteria to tighten compliance with the minimum 20 percent vessel ownership requirement that the Council adopted in 1999, including a one-year limitation on ownership changes. In December 2003, the Advisory Panel for the Council reviewed the Committee's recommendations and recommended that the Council analyze them. In December 2003, the Council approved the Committee's recommendations for analysis. In October 2004, the Council approved publication of the analysis for public review and comment. In December 2004, the Council approved tightening the 20 percent vessel ownership requirement by requiring specified documentation of ownership and by requiring that the QS holder have the requisite minimum ownership interest for twelve months prior to using the hired skipper exception. All meetings of the Council and its committees are open to the public.

As noted in response to Comment 4, however, the proposed rule would have prevented all QS holders from entering into short-term ownership agreements, including those who do so because their vessels need repairs. NMFS is seeking clarification from the Council on whether the Council wishes to exempt from the 20 percent/12-month ownership requirement those QS holders whose vessels are temporarily out of the IFQ fishery due to repairs and, if so, the terms of the exemption.

Comment 8: The proposed requirement that a QS holder own a 20 percent interest in a vessel for twelve months prior to applying to use a hired master is unnecessary because the only QS holders who can hire masters are original recipients. Eventually, no original recipients will exist and all QS holders will have to be onboard the vessel when their IFQ is fished.

Response : NMFS agrees that in the long run this problem will be resolved as original recipients pass from the fishery. However, a considerable amount of catcher vessel QS is still held by QS holders who may use hired masters and QS holders who must use hired masters. As of 2002, QS holders who may use hired masters held 42 percent of the halibut catcher vessel QS and 33 percent of sablefish catcher vessel QS. As of 2002, QS holders who must use hired masters held 25 percent of halibut catcher vessel QS and 30 percent of sablefish catcher vessel QS (see Table 3.1 of the FRFA). Because many QS holders are still using hired masters, the Council and NMFS can impose restrictions to prevent these QS holders from, in effect, leasing their QS. Hence, the Council's recommendation and the proposed rule that these original QS holders must have a substantial, long term interest in the vessel from which their QS is fished.

As noted in response to Comment 4, however, the proposed rule would have prevented all QS holders from entering into short-term ownership agreements, including those who do so because their vessels need repairs. NMFS is seeking clarification from the Council on whether the Council wishes to exempt from the 20 percent/12 month ownership requirement those QS holders whose vessels are temporarily out of IFQ fishery due to repairs and, if so, the terms of the exemption.

Comment 9: If NMFS adopts the proposed 12-month ownership provision in § 679.42(i) and (j), the effective date of this provision should be 12 months after the regulation is adopted. This would provide lead time for compliance by QS holders before the regulation becomes law.

Response : NMFS is not adopting the 12-month ownership requirement in this final rule. If NMFS adopts this requirement in a future rule, NMFS will consider this comment when it sets an effective date for the rule.

Comment 10: The proposed 12-month ownership requirement in § 649.42(i) and § 679.42 (j)(1) imposes an unfair burden on QS holders that are required to hire a master to harvest their QS. Maintaining and insuring a vessel for 12 months prior to using the vessel is an inequitable requirement. QS holders who may, or who must, use a hired master could be required to maintain their ownership for a period of 12 months without such an economic burden. An alternative suggested in the comment is to accept only one change annually in a vessel's documentation.

Response: NMFS does not see this comment as a reason not to adopt the 12-month ownership requirement. If by “economic burden,” the commenter means that the rule may result in QS holders making a more substantial investment in the vessels from which their QS is fished, NMFS sees that as consistent with the Council's reasons for adopting the 12-month ownership requirement. See Response to Comment 7. The alternative suggested by the commenter only one change in vessel ownership a year does not require that the QS holder maintain an ownership interest for 12 months. This alternative still allows a QS holder to use a hired master on a vessel in which the QS holder had an ownership interest only for the duration of a fishing trip.

However, the minimum 12-month requirement would affect all QS holders, including those QS holders who resort to short-term vessel ownership agreements because their regular vessels need repairs. NMFS is seeking clarification from the Council on whether it wishes to exempt QS holders whose vessels are temporarily out of the IFQ fishery for repairs from the 20 percent/12-month ownership requirement and, if it does, the terms of the exemption.

Comment 11: The proposed regulation is good because it tightens up the requirement for a QS holder to use a hired skipper. The current regulation is too vague.

Response: NMFS agrees that the previous regulation for documentation of a QS holders's 20 percent ownership interest in the vessel was vague in that it required an individual to submit only non-specified “written documentation.” The final rule requires specific documentation an Abstract of Title for documented vessels and a State of Alaska boat registration or commercial vessel license for undocumented vessels. See the discussion of change number 5 under “Changes in the Final Rule.”

The proposed rule also sought to restrict the use of hired masters by requiring a QS holder to own the required interest in a vessel for at least 12 months before receiving a hired master permit. As noted, NMFS is seeking clarification from the Council on whether it wants to exempt QS holders whose vessels need repairs from the minimum 12-month vessel ownership requirement and, if so, the terms of the exemption.

Comment 12 : The final rule should define what documentation is necessary to prove a “constructive total loss” for the exemption from the 12-month ownership vessel requirement in § 679.42(i)(6).

Response: This final rule does not specify what documentation is necessary to prove a “constructive total loss” because it does not adopt any provision that contains the term “constructive total loss.” As previously noted, NMFS is seeking clarification from the Council on whether it wants to exempt from the 12-month ownership requirement only those QS holders who have suffered a total loss or total constructive loss of their vessel or whether it also wants to exempt those QS holders whose vessels are out of the IFQ fishery temporarily for repair. If in the future the Council proposes a rule that requires a QS holder to prove a “constructive total loss” of a vessel, the Council will evaluate whether to specify the documentation required to prove the loss.

Comment 13: The proposed regulation specifying the documentation that a QS holder must submit to prove 20 percent ownership interest in a vessel is unnecessary because an owner already has to produce documentation to prove 20 percent ownership of a vessel.

Response : NMFS disagrees. The prior regulation required only that NMFS determine 20 percent ownership of a vessel “on the basis of written documentation” (50 CFR 679.42(i)(1)). The Council was concerned that, under the prior regulation, some vessel owners were abusing the hired skipper provision through the use of informal, unverifiable transactions. The Council also was responding to NMFS staff reports that, under the prior regulation, it had been difficult to verify the minimum 20 percent vessel ownership. The final rule meets the Council's concerns by requiring the QS holder to submit a formal document of ownership issued by a government agency. An owner of a documented vessel must submit an Abstract of Title issued by the U.S. Coast Guard that shows the QS holder is an owner of the vessel. An owner of an undocumented vessel must submit a State of Alaska boat registration or commercial vessel license that shows the QS holder is an owner of the vessel. If these documents prove the required percentage ownership, the QS holder need not submit any other documentation. If these formal documents do not prove percentage ownership, the QS holder must prove the required percentage ownership through additional written documentation.

Comment 14: Vessel operators who harvest sablefish in the BSAI should not be exempt from the Vessel Monitoring System (VMS) based on vessel size. If an exemption is desired, it should be based on the value of the sablefish that the vessel harvests in a year.

Response: This rule does not exempt any vessel operator who harvests sablefish in the BSAI from the requirement to have a VMS. The requirement applies to all vessels. The preamble to the proposed rule invited comment on whether small vessels should be exempt from the VMS requirement. No comments were received in favor of exempting vessels based on size. This comment merely stated that an exemption based on the amount of a vessel's harvest would be better than an exemption based on an overall length of a vessel. For reasons described in the preamble to the proposed rule, NMFS concludes that no exemption is warranted.

Comment 15: Our vessel is already required to have a VMS, because we fish in critical habitat in the Aleutian Islands and in area 4B. Using the VMS for clearance in the BSAI has turned out to have some actual time and fuel saving benefits.

Response: NMFS notes this information.

Comment 16: The number of QS blocks that a person can hold should not be increased from two blocks to three blocks. The proposed regulation allows further fleet consolidation, will result in less blocks available for purchase, will likely increase the cost of QS and will make entry into the halibut fishery more difficult.

Response: When the IFQ Program was started, all initially issued QS that resulted in less than 20,000 lb of IFQ was “blocked,” that is, issued as an inseparable unit. Also, no person was allowed to own more than two QS blocks per species in any regulatory area, or one QS block, if unblocked QS also was held by that individual for that area. The block approach was meant to prevent excessive consolidation in the IFQ fisheries, and maintain the diversity of the IFQ longline fleet, without compromising the flexibility and economic efficiency of the program as a whole. As noted in the FRFA for this action, the proportion of QS that is unblocked QS ranges from 29 percent in Area 2C to 65 percent in Area 3A. NMFS is aware of the concerns raised in the comment; they were discussed by the Council and discussed in the FRFA for this action. The FRFA notes that an increase from two to three blocks would lead to consolidation of QS, and would be likely to increase the value of blocked QS, but may consequently decrease the value of unblocked QS. The FRFA notes that the action might reduce the availability of entry-level opportunities in the fishery. The Council weighed these considerations against the potential benefits of easing restrictions on the transfer of large blocks, and on helping small vessel owners constrained by ownership of two small blocks to make more economically viable trips.

Comment 17: The sweep up limit for QS blocks in regulatory Areas 2C and 3A should not be increased to 5,000 pounds, particularly in light of the proposal to increase the QS blocks a person can hold from two to three blocks. The proposed sweep up regulation will make entry into the halibut fishery more difficult. If the halibut sweep up limit is increased to 5,000 pounds, at current quota prices, an “entry level” block of halibut would cost approximately $100,000.

Response: The block provisions of the IFQ Program created many blocks that were quite small. The halibut IFQ regulations allow a “sweep-up” of small blocks that would be economically unfishable (i.e., the value of the harvest would not exceed the costs of the fishing trip). This allowed small QS blocks to be permanently consolidated as long as the resulting block did not exceed a specified limit. This limit has been 3,000 lb for halibut, based on 1996 TACs. This final rule implements the Council's recommendation that, for Areas 2C and 3A, the sweep-up limit be increased to 5,000 lb, based on 1996 QS units.

The FRFA for this rule recognizes that the block program was implemented in part to provide entry level opportunity in the IFQ fisheries, and that the increase in the “sweep-up” limit would reduce the numbers of small blocks available in the fishery. In this event, blocks containing more QS units than were previously allowed likely will cost more to purchase. Note that not all blocks would be consolidated to the maximum size, and the amount of unblocked QS would not be affected. The FRFA also indicates that the 3,000-lb sweep-up limit imposed costs on some fishing operations by constraining their growth and efficiency. The FRFA indicates large declines in the numbers of operations in areas 2C and 3A with QS holdings less than 3,000 lb, suggesting that holdings in this size range are not economically viable. Moreover, the block system creates significant transaction costs for operations with two blocks. An operation with two blocks must sell one of its existing blocks before buying a new block. The FRFA notes that the complexity involved in this dual transaction may provide a substantial obstacle to growth for active fishery participants. This final rule allows some QS holders who currently are at the threshold limit and the block limit to incrementally increase their QS holding without first selling one of their blocks. The Council balanced these considerations before choosing the 5,000 lb limit as its preferred alternative.

Comment 18: The “fish down” exception for category B QS in Area 2C and Southeast Outside should not be repealed. The current regulation prevents category B QS in Area 2C and Southeast Outside from being fished on vessels less than 60 feet length overall (LOA). The proposed regulation will have a severe adverse financial effect on IFQ permit holders who purchased vessels larger than 60 feet (18.3 m) LOA because the proposed rule will make QS less available for vessels that size.

Response: This final rule makes the category B restrictions for Area 2C halibut QS and Southeast Outside sablefish QS consistent with restrictions in all other halibut and sablefish management areas off of Alaska. The FRFA noted that this action would increase the marketability and potentially the value of unblocked and large blocks of category B QS. In this event, existing holders of category B QS in these areas would see an increase in the value of their holdings. The FRFA further noted that this might reduce the value of category C halibut and sablefish QS, relatively, as the supply of QS was expanded for operators of vessels less than or equal to 60 ft (18.3 m) LOA. While the FRFA points to potential increased costs for large vessels, the costs are not expected to be prohibitive. Large vessel operations may still enter the market to purchase category B shares, and may be in a better financial position to do so. Small vessel owners would be unlikely to drive category B prices above category C and D QS prices because that would increase their cost of usable QS.

Comment 19: The exception to the “fish down” regulation for category B QS in Area 2C and Southeast Outside should not be repealed. The proposed rule allows category B QS that currently must be fished on vessels greater than 60 feet (18.3 m) LOA to be fished on smaller vessels. The proposed regulation will decrease scientific data available on the halibut and sablefish fisheries since vessels greater than 60 feet must have observers onboard but vessels smaller than 60 feet do not have to have observers onboard.

Response: This rule likely will result in some QS that currently is fished from vessels greater than 60 ft (18.3 m) LOA being fished from vessels less than or equal to 60 ft (18.3 m) LOA and, therefore, likely will result in somewhat less observer data. NMFS concludes, however, that this is not a reason to disapprove this action for several reasons. First, this rule makes the category B QS restrictions for Area 2C halibut QS and Southeast Outside sablefish QS consistent with the category B QS restrictions in the rest of the State. Second, vessels over 60 ft (18.3 m) LOA that harvest IFQ sablefish and halibut generally must have observer coverage for 30 percent of their fishing days. Therefore, these vessels do not currently generate observer data every time they are fishing. These vessels still will harvest some IFQ halibut and sablefish and will supply observer data from 30 percent of their fishing days. The extent of the decrease in observer data is uncertain but is expected to be marginal. Finally, if the Council and NMFS perceive a harmful decline in observer data, they can propose rules to change the requirements of observer coverage.

Comment 20: The Product Recovery Rate (PRR) for bled sablefish should be changed from 0.98 to 1.00, based on the study, “Product Recovery Rates for Bled Sablefish,” by NOAA Fisheries and Alaska Longline Fishermen's Association (ALFA) members in Sitka. The study supports the conclusion that the PRR for bled sablefish of 0.98 does not reflect the difference between the weight of bled sablefish and unbled sablefish.

Response: NMFS disagrees based on its determination that the study does not support the proposed change in the PRR for bled sablefish from 0.98 to 1.00. NMFS concludes that the proposed change is not based upon the best scientific information available and that adoption of the proposed change would violate National Standard 2 of the Magnuson-Stevens Act. Therefore, NMFS disapproves the proposed change of the PRR for bled sablefish from 0.98 to 1.00. This means that the PRR for bled sablefish remains at 0.98, which is the current PRR in Table 3 to Part 679.

In the preamble to the proposed rule, NMFS noted “serious concerns that the proposal may not be based on sufficient scientific evidence” (71 FR 64222). NMFS specifically requested public comment on the appropriate PRR for this product type. Public comment did not demonstrate to NMFS that the proposed rule was based on the best scientific information available. Therefore, NMFS cannot approve the proposed change in the sablefish PRR.

A brief description of the study cited in the comment follows (the full study is in Appendix 2 of the FRFA). In 2002 and 2003, NMFS staff and ALFA members conducted field experiments to determine the change in individual sablefish weight due to blood loss from different types of harvest methods. Fish weights were compared before and after bleeding. Sablefish lost 2 percent of their weight when bled on deck without flowing seawater. Sablefish lost 1.6 percent of their weight when bled and immersed in flowing seawater. Sablefish lost 2 percent of their weight when carefully brought aboard and bled. Sablefish lost 1.7 percent of their weight when they were gaffed aboard and bled without flowing seawater. Sablefish lost 1 percent of their weight when gaffed aboard, and not intentionally bled, because of blood loss at the gaff wound. The study concluded the following statement:

The question is whether this study supports the proposed change in the PRR for bled sablefish from 0.98 to 1.00. The study does not support that change. The study concludes that the 2.0 percent PRR for bled sablefish “slightly overestimates” blood loss for bled sablefish. The blood loss for bled sablefish was 1.7 percent. The slight overestimation is 0.03 percent. All the percentages in the PRR table are whole percentages (Table 3 to Part 679). Therefore, under conventional rounding rules, 2 percent is the closest whole percentage to the actual blood loss of 1.7 percent and is the proper PRR for bled sablefish.

A change in the PRR for bled sablefish to 1.00 would imply that NMFS concluded that sablefish, when bled, lose no weight. The PRR for all other groundfish species, when bled, is 0.98 (Table 3 to Part 679). The conclusion that a species, when bled, loses no weight is counterintuitive and the study does not support that conclusion.

The commenters are correct that the study results do question the accuracy of the PRR of 1.00 for unbled sablefish. The PRR for unbled sablefish is 1.00, which means NMFS adds nothing to the weight of unbled sablefish when debiting the IFQ account of the IFQ permit holder that harvests sablefish that are categorized as unbled. The study stated that gaffing was the normal method for bringing sablefish aboard during longline fishing. Gaffed sablefish are treated as unbled. The study found a blood loss of 1 percent for gaffed sablefish because gaffing itself even with no intentional bleeding causes blood loss. Hence, the study suggests that the PRR for bled sablefish is inaccurate, relative to the PRR for unbled sablefish, because fishermen who catch and bleed their sablefish are charged 2 percent more than fishermen who catch and gaff their sablefish. The study does not suggest, however, that even this “relative inaccuracy” is 2 percent, because it concludes that bled sablefish weigh 1 percent less, not 2 percent less, than gaffed sablefish. Thus, even if “relative inaccuracy” were a valid basis to change the PRR for bled sablefish, it would support a change in the PRR for bled sablefish only from 0.98 to 0.99, an alternative that was rejected by the Council and not proposed.

If the current PRRs do not accurately reflect the difference between bled and unbled sablefish, it may be because the PRR for unbled sablefish is inaccurate, not because the PRR for bled sablefish is inaccurate. The problem may be that gaffed sablefish are treated as unbled but they are, in fact, bled, albeit unintentionally. To solve this problem, the Council could consider recommending a PRR for unbled sablefish of 0.99 or recommending a new category for gaffed sablefish with a PRR of 0.99. This problem cannot be solved by changing the PRR for bled sablefish from 0.98 to 1.00, because the conclusion that a sablefish loses no weight when bled is not based on the best available scientific data.

Comment 21: The PRR for bled sablefish should be changed from 0.98 to 1.00 because the study, “Product Recovery Rates for Bled Sablefish,” concluded that different storage methods and handling practices could affect blood loss.

Response: NMFS agrees that the study concluded that different storage methods and handling practices could affect blood loss. The study concluded, “Measuring an accurate PRR requires further studies of the effects of storage methods (ice or refrigerated seawater) and handling practices (gaffing, hook removal devices, and soak time), which would be time-consuming to complete.” The only practice that the study analyzed and stated was normal was gaffing. The study concluded that gaffing led to a 1 percent weight loss. Gaffed fish are treated as unbled. As noted in response to Comment 20, this conclusion about gaffed fish does not support changing the PRR for bled sablefish from 0.98 to 1.00. The study did not state that any other storage or handling method was standard. The study did not analyze the effect of any other storage or handling methods. Therefore, the caveat in the study about different storage and handling practices does not support changing the PRR for bled sablefish from 0.98 to 1.00.

Comment 22: A PRR of 0.98 for bled sablefish discourages bleeding sablefish, which is bad because bleeding improves the quality of product.

Response: The FRFA noted that in the fall of 2005, Council staff interviewed representatives of the major sablefish processors and the unanimous response was that they paid fishermen no price premium for bled versus unbled sablefish. If quality is measured by the market by what processors are willing to pay bleeding does not increase quality.

A more basic problem exists with this argument. Any PRR less than 1.00 for any fish product “discourages” that product because a fisherman's IFQ account is debited more for that product than for a whole fish product. For example, the PRR for sablefish headed and gutted without tail is 0.50 (Table 3 to Part 679). This means that if an IFQ permit holder reports a sablefish headed and gutted without a tail that weighs 10 pounds, the permit holder will be counted as having caught a sablefish that weighed 20 pounds. Although this arguably discourages heading and gutting and removing the tail of the sablefish, the discouragement is compensated to the extent that buyers want that sablefish product enough to pay fishermen for the time, labor, and expense to produce it.

The purpose of the PRR is not to encourage or discourage particular processing activities. The purpose of the PRR is to accurately measure the biomass of fish that is removed from the ocean. NMFS concludes that the current PRR for bled sablefish accurately measures the biomass of sablefish that is removed from the ocean and is based on the best scientific information available. Because NMFS concludes that the proposed 1.00 PRR for bled sablefish is not based on the best scientific information available, the proposed change is not approved.

The Administrator, Alaska Region, NMFS, determined that Amendment 67 is necessary for the conservation and management of the sablefish fishery and that it is consistent with the Magnuson-Stevens Fishery Conservation and Management Act and other applicable laws.

The FRFA prepared for each action assesses potential impacts on small entities for purposes of the Regulatory Flexibility Act (RFA). NMFS reviewed multiple alternatives for each individual action, including a “no action” alternative and a preferred alternative, in separate FRFAs. Each FRFA describes the potential adverse impacts on small entities, attributable to the proposed alternatives for each action.

The objective of each action in this final rule and its legal basis is explained in the preamble of the proposed rule (71 FR 64218) and in this final rule. Changes in the final rule from the proposed rule are described under “Changes in Final Rule” above.

NMFS defines all halibut and sablefish vessels as small businesses, for the purpose of this analysis. In 2003, 1,338 unique vessels made IFQ halibut landings, and 409 unique vessels made sablefish landings.

The number of small entities operating as fishing vessels in the IFQ fisheries may be deduced from certain restrictions placed on those vessels. The IFQ Program restricts the amount of annual IFQ that may be landed from any individual vessel. A vessel may be used to land up to 0.5 percent of all halibut IFQ TAC, or up to 1 percent of all sablefish TAC. In 2003, 295,050 lb (133.8 mt) of halibut constituted 0.5 percent of all the halibut IFQ TAC and 348,635 lb (158.1 mt) of sablefish constituted 1 percent of all the sablefish IFQ TAC. NMFS annually publishes standard prices for halibut and sablefish that are estimates of the ex-vessel prices received by fishermen for their harvests. NMFS uses these prices for calculating IFQ holder cost recovery fee liabilities. In 2003 price data suggested that the prevailing prices were approximately $2.92 per pound for halibut and $2.36 per pound for sablefish (68 FR 71036; December 22, 2003). In combination, the harvest limits and prices imply maximum ex-vessel revenues of about $1.68 million for halibut and sablefish together. Although some halibut and sablefish IFQ operations participate in other revenue generating activities, the halibut and sablefish IFQ fisheries probably represent the largest single source of annual gross receipts.

Based on available data, and more general vessel economic activity information of vessels in these IFQ fisheries, no vessel subject to these restrictions is believed to have been used to land more than $4.0 million in combined gross receipts in 2003. Therefore, all halibut and sablefish vessels have been assumed to be “small entities,” for purposes of the FRFA. However, this simplifying assumption likely overestimates the true number of small entities, since it does not take account of vessel affiliations. No reliable data exist on vessel affiliation. The conclusions of the FRFA for each action are summarized separately below.

Since the initial implementation of the halibut and sablefish IFQ Program in 1995, individuals have submitted numerous petitions to NMFS and the Council requesting the temporary transfer of IFQs for medical reasons. These individuals sought medical transfers due to the inability of IFQ holders to physically be onboard the vessel as IFQs were fished. NMFS was previously unable to implement a medical transfer program recommended by the Council due to legal and administrative constraints. The approach proposed in this action would resolve the issues arising from previous approaches.

This action could directly affect 3,349 halibut QS holders and 874 sablefish QS holders. NMFS currently does not have sufficient ownership and affiliation information to determine the precise number of small entities in the IFQ Program or the number that would be impacted by the proposed action. Approximately 12 QS holders contact NMFS or the Council each year for information about medical transfers in the IFQ Program. However, it is not possible to estimate how many QS holders did not contact NMFS or the Council, but would have requested a medical transfer if it were available. This analysis assumes that all halibut and sablefish QS operations are small for RFA purposes.

Alternative 1 was the no action or status quo alternative and would not have any associated adverse economic impacts on directly regulated small entities. However, the status quo would not have advanced the objectives of this action to relieve a burden on certain types of fishing operations. Alternative 2 would allow medical transfers, but would require an applicant to document his/her medical emergency with NMFS. The transfer would also require an affidavit from a licensed medical doctor, an advanced nurse practitioner, or a primary community health aide, that describes the medical condition affecting the applicant and attests to the inability of the applicant to participate in the IFQ fishery(ies) for which she or he holds IFQ permit(s), during the IFQ season. In the case of a family member's medical emergency, the affidavit would describe the necessity for the IFQ permit holder to tend to an immediate family member who suffers from the medical condition. An emergency transfer would not be granted if the individual had been granted an emergency medical transfer in any two of the previous five years.

Options were considered which would have been less specific about the types of medical professionals from whom affidavits would have been accepted, and which would have allowed transfers for persons who had received medical transfers in three of the last six years. These options might have provided more flexibility to small entities, however the Council and NMFS are also concerned about the potential for abuse of this program, and adopted more conservative measures to better control use of the exemption. These more conservative measures advance the Council's objective of limiting IFQ leasing and encouraging an owner-operator fishery.

An individual must submit an Application for Emergency Medical Transfer of IFQ to receive a medical transfer. Public reporting time per response is estimated to average 2 hours per application. To support the application, the QS holder must submit a written declaration from a medical professional.

The proposed rule, and the Council's preferred alternative for Action 2, had two elements for tightening the requirements for a QS holder to use a hired skipper rather than being onboard the vessel. First, the proposed rule specified the documentation a QS holder had to submit to prove the minimum 20 percent ownership interest in the vessel that the hired skipper would use. Second, the proposed rule required the QS holder to have the minimum ownership interest for 12 months prior to using a hired master. As explained below, the final rule adopts the documentation requirement but does not adopt the 12-month provision.

The requirement for catcher vessel QS holders to be onboard the vessel during harvest and offloading of IFQ species constitutes a key element of the halibut and sablefish IFQ Program. The Council remains concerned about alleged abuses of the regulatory provision allowing vessel owners who received QS as initial allocation to hire masters to harvest their IFQs without being onboard the vessel. Specifically, the final rule specifies the documentation that a QS holder must submit to prove the required ownership of the vessel that the hired master will use. For documented vessels, the QS holder must submit an Abstract of Title. For undocumented vessels, the QS holder must submit a State of Alaska registration or license. In both cases, other written documentation may be required if necessary to prove the required percentage ownership interest. The Council adopted the documentation requirement out of concern that some vessel owners were abusing the hired skipper provision through the use of informal, unverifiable transactions. The Council was also responding to NMFS staff reports that, under the prior regulation, it had been difficult to verify the minimum 20 percent vessel ownership.

Two comments on the proposed rule addressed the documentation issue. Comment 11 favored the provision. Comment 13 said the requirement was unnecessary because the current regulation required written documentation. NMFS responded to those comments under “Comments and Responses” and made no change in this provision as a result of public comment.

The final rule could directly regulate a maximum of 4,200 halibut and sablefish QS holders who hold category B, C, or D QS. NMFS currently does not have sufficient ownership and affiliation information to determine precisely the number of small entities in the IFQ Program or the number that would be adversely impacted by the present action. The FRFA assumes that all entities affected by the hired master provision are small for RFA purposes.

The FRFA for the documentation provision reviews the status quo (Alternative 1) and the Council's preferred alternative (Alternative 2) which was contained in the proposed rule and is adopted in the final rule. Alternative 1 would maintain the current 20 percent vessel ownership requirement for catcher vessel QS holders eligible to hire a master to harvest IFQs. Current regulations do not specify the documents needed to demonstrate percentage of vessel ownership and, therefore, the requirement is difficult to monitor, verify, or enforce. Alternative 2 amends the regulations to require specific, formal documentation of ownership of the catcher vessel before use of the hired master exception: (1) an Abstract of Title for a documented vessel showing the required 20 percent minimum ownership interest (or other percentage, if applicable), and (2) a State of Alaska vessel registration or license for undocumented vessels. In both cases, other written documentation may be required if necessary to prove the required percentage ownership interest. While the status quo would place a smaller burden on directly regulated small entities, it would not accomplish the objective of tightening the documentation procedures so as to successfully enforce the regulations. This regulation supports the Council's objective of encouraging an owner-operator fishery.

The projected reporting, recordkeeping, and other compliance requirements of this provision are expected to take one hour per document to prove vessel ownership.

The final rule did not adopt the 12-month requirement in the Council's preferred alternative for reasons explained in Comments and Responses. NMFS received comments from the public and from the Council on the proposed rule. These comments raised the question of the effect of the proposed rule on QS holders whose vessels need repair and who, for that reason, use a hired master to fish their IFQ from a vessel which they have not owned for 12 months. NMFS concluded that it could not exempt those QS holders whose vessels need repairs from the 12-month requirement because the proposed rule only excluded QS holders whose vessels suffered “constructive total loss.” That term is commonly used in insurance and a key element of a standard definition of “constructive total loss” is that the insured item cannot be economically repaired, i.e., the cost of repairing the item is worth more than the item itself. Further, if the Council wishes to adopt a vessel repair exemption, the Council must specify the elements of the exemption. NMFS therefore is not adopting the 12-month requirement in the final rule but is seeking clarification from the Council on a possible exemption to the 12-month vessel ownership for QS holders who resort to short-term ownership vessel agreements because their vessels need repairs.

This rule adds a VMS-based vessel clearance requirement to the BSAI sablefish fisheries. The BS and AI sablefish fixed gear sectors have not fully harvested their TACs since the beginning of the IFQ Program. Reasons for harvest shortfalls include predation by killer whales, increased costs of traveling to the BSAI, and relatively low catch rates in the BSAI that may result in harvesters fishing in the western GOA and possible misreporting that the harvest was from the BS or AI. The industry has expressed concern that a lack of enforcement may have resulted in misreporting of harvests taken in the GOA as having come from the BSAI.

There are 163 unique persons holding QS in the AI or BS and GOA. Of these unique persons, 42 hold QS in all three areas, 34 hold QS in the AI and GOA, and 43 hold QS in both the BS and GOA for a total of 119 directly affected small entities under Alternative 2. This analysis assumes that all operations are small.

The analysis of vessel clearance alternatives reviews the status quo and the preferred alternative to add either visual clearance or VMS requirements. Alternative 1 would result in no change to the regulations. Alternative 2 imposes a check-in/check-out requirement and/or a VMS requirement. The preferred alternative would implement the VMS requirement option of Alternative 2, without the check-in/check-out option, as a disincentive to misreporting of catch areas.

The status quo alternative would not have created a clearance requirement. An option for Alternative 2 that would have created a visual clearance requirement for vessels that did not carry VMS was not adopted. The status quo alternative would have created smaller costs for operating vessels, but would not have met the monitoring and enforcement objectives of this action, and the objective of increasing public confidence in sablefish management. The visual clearance alternative was not adopted because the lack of personnel, and legal constraints on delegation of enforcement authority to private entities, made it impracticable for enforcement purposes.

This action will create new recordkeeping requirements for fishing operations. The operator of any vessel who fishes for sablefish in the BSAI management area must carry a transmitting VMS while fishing until all sablefish caught in any of these areas is landed. The operator of the vessel also must notify NOAA Fisheries Office of Law Enforcement of the presence of a functioning VMS unit on the vessel at least 72 hours before fishing, and receive a VMS confirmation number.

Under current regulations, NMFS applies a PRR of 0.98 to all sablefish intentionally bled upon landing. NMFS uses this rate to calculate the equivalent round weight to be attributed to a harvest allocation.

This action could directly affect a maximum of 874 sablefish QS holders (this estimate is probably high because of some double-counting of QS holders), although not all of these IFQ holders land their catch as bled fish. At present, NMFS does not have sufficient ownership and affiliation information to determine precisely the number of small entities in the IFQ Program or the number that would be adversely impacted by this action. This analysis assumes that all operations are small.

The FRFA reviewed the status quo and two alternatives to change the PRR for bled sablefish. Alternative 1 would not revise the PRR for bled sablefish, and it would remain at 0.98. Alternative 2 would change the PRR to 1.0 for bled sablefish, which would effectively eliminate the PRR. Alternative 3 would change the PRR to 0.99. Alternatives 2 and 3 might have allowed some small fishing entities to increase the revenues from their QS. The Council's preferred alternative was Alternative 2, which was contained in the proposed rule. However, NMFS concluded that the proposed rule, which would have changed the PRR for bled sablefish from 0.98 to 1.00, was not based on the best scientific information available and therefore violated National Standard 2 of the Magnuson-Stevens Act. NMFS explains this conclusion in responses to comments 20, 21, and 22 on the proposed rule. The FRFA incorporates NMFS' responses to these public comments and also concludes that Alternative 2 violates National Standard 2.

No additional recordkeeping or reporting requirements are associated with this action.

Since implementation of the IFQ Program, the halibut fleet has experienced large quota increases, consolidation, and changing use patterns. Halibut QS holders have indicated that the existing block and sweep-up restrictions are cumbersome, and changing the restrictions could improve flexibility and efficiency in fishing operations.

This action would directly regulate holders of halibut QS blocks in all IFQ areas. There are 3,205 persons, both individual and collective entities, who hold at least one block of halibut QS. Eighty to ninety percent of QS holders hold at least one block in each regulatory area except for Area 4A. At present, NMFS does not have sufficient ownership and affiliation information to determine precisely the number of small entities in the IFQ Program, nor the number of directly regulated small entities that would be adversely impacted by the present actions. This analysis assumes that all operations are small for RFA purposes.

The FRFA reviews the status quo and four alternatives to the existing halibut IFQ Program requirements. One alternative would increase block holding limits, two alternatives would allow the break-up of blocks yielding more than 20,000 lb of halibut, based on the 2004 TACs, and a fourth would increase sweep-up limits for halibut in Areas 2C and 3A.

Alternative 1 is the no action alternative and would not have any associated adverse economic impacts on directly regulated small entities, but would not accomplish the objectives of the action.

Alternative 2 would increase the block limits for persons holding only blocks, and/or persons holding blocks and unblocked QS. Four options were available. The Council chose the option that relaxed the limits the least; under its preferred option a QS holder without unblocked QS would be able to hold three blocks (as opposed to two under the status quo), while a QS holder with unblocked QS would continue to be restricted to holding one block (as under the status quo). Other alternatives would have allowed persons without unblocked QS to hold up to four blocks, or allowed persons with unblocked QS to hold up to 2 or 3 blocks. QS block holders that are currently constrained would benefit from increased operational flexibility under an increased block size limit. This may decrease the market value of unblocked QS in relation to blocked QS, because by relaxing the ownership constraint on blocked QS, it would become relatively more marketable. This would hurt small entities that currently hold it, but benefit small entities that would like to acquire it. There are no data available to determine whether and by how much the alternative would change QS market value.

Alternative 3 would unblock all QS blocks yielding more than 20,000 lb of halibut based on 2004 TACs, in all regulatory areas. The Council modified Alternative 3 by (a) limiting the preferred alternative to only Areas 3B and 4A, because these areas contain the most large QS blocks, and by (b) permitting the division of large blocks into new blocks yielding 20,000 lb, plus unblocked QS. Additional flexibility in managing QS holdings would yield greater asset liquidity to owners of large QS blocks, allowing them to be more responsive to operational needs and economic opportunities. The preferred alternative also may impact the value of unblocked shares in Areas 3B and 4A by increasing the proportion of unblocked QS available in those IFQ areas. Benefits could accrue to holders of large QS blocks, and fishermen wishing to make adjustments to their QS asset holdings to reflect changes in their personal circumstances, or the broader economic environment (e.g., market demand, input costs). At present, the capital demands associated with transferring very large restricted blocks is reportedly prohibitive. The preferred alternative would contribute to alleviating this potential barrier to the transfer of the large, restricted blocks. The action may increase the amount of unblocked QS and decrease its value. This would hurt small entities currently holding unblocked QS, but may help small entities that had an interest in acquiring more. Differential impacts on the basis of size of the regulated entity attributable to this preferred alternative are difficult to identify, because all are “small” based on criteria in the RFA.

Alternative 4 would allow large QS block holders to divide their holding into smaller blocks, potentially increasing efficient use of the QS holding. Data are unavailable to determine the extent to which QS holders would be likely to take advantage of this option. Should all large holdings be divided, the alternative may impact the market price of block holdings.

Alternative 5 was selected as a part of the preferred alternative. Alternative 5 would increase the halibut sweep-up levels in Areas 2C and 3A from 3,000 lb equivalents to 5,000 lb equivalents in QS units, based on the 1996 halibut TAC. This preferred alternative would allow small QS block holders to incrementally increase their holdings. There are no apparent adverse impacts on small entities.

The Council sought to provide more flexibility for fishing operations to change and grow, and to structure themselves into viable operations, while maintaining a balance with constraints that prevented undue consolidation. The Council relaxed consolidation restrictions somewhat in order to permit operations to restructure more easily, but it did not adopt other alternatives that would have relaxed restrictions by a greater amount because it sought to limit the extent to which consolidation would occur. Alternative 1 was rejected because it would not address the problem. The less restrictive options for Alternatives 2 and 3 were rejected because of the increased scope for consolidation. Alternative 4 was somewhat more restrictive than the preferred version of Alternative 3 in the areas where increased flexibility was considered to be appropriate (3B and 4A), and was thus rejected. Alternative 5 was adopted.

No additional recordkeeping and reporting requirements are associated with this action.

Halibut fishermen in western Alaska have identified safety concerns in Areas 3B and 4C, and problems in fully harvesting Area 4C QS, associated with fishing in those areas on small vessels. These problems can be alleviated, in large part, by relaxing the current restrictions on vessel length associated with category D quota share.

The action could potentially directly regulate 243 category D halibut QS holders in Areas 3B, 4A, 4B, and 4C. Currently, NMFS does not have sufficient ownership and affiliation information to determine precisely the number of entities in the IFQ Program that are “small,” based on the Small Business Administration guidelines, nor the number that would be adversely impacted by the present action. This analysis assumes that all directly regulated operations are small for RFA purposes.

Four alternatives were considered: (1) the status quo, (2) an alternative permitting category D QS to be fished from category C vessels, (3) an alternative permitting D QS to be fished from category C and B vessels, and (4) an alternative to combine C and D QS. The preferred alternative is Alternative 2 in Areas 3B and 4C, and the status quo in other western Alaska areas.

Alternative 1 is a no action alternative and would not have associated adverse economic impacts on directly regulated small entities. Alternative 1 is the preferred alternative in Areas 4A, 4B, and 4D, because no safety or IFQ harvest concerns were raised by industry in those areas.

Alternatives 2, 3, and 4 would allow category D QS to be fished on larger vessels, which includes vessels less than or equal to 60 ft (18.3 m) LOA for Alternatives 2 and 4, and vessels of any size for Alternative 3. The proposed alternatives could address safety concerns for small vessel operators and concerns over the ability of category D QS holders in Area 4C to completely harvest their IFQs. Because the proposed alternatives are likely to increase the value of category D QS, there may be some corollary decrease in the value of category C QS, and also category B QS in the case of Alternative 3. However, category D QS constitutes such a small share of the aggregate halibut TAC in Area 3B, that such a change in relative value would not be expected to substantially influence the market for QS. There may be a somewhat greater impact in Area 4C.

The objective of this action is to address industry concerns about small vessel safety in the Western Alaska halibut fisheries in Areas 3B and 4C, and concerns over low harvests of category D QS in Area 4C. Since concerns are specific to Areas 3B and 4C, the status quo action is appropriate for Western Alaska Areas 4A, 4B, and 4D. The status quo alternative does not address the safety objectives in Areas 3B and 4C, and the low harvest concerns in Area 4C, so it was not chosen. Alternatives 2, 3, and 4 can meet these objectives. A qualitative analysis suggests that these alternatives appear to impose similar costs on directly regulated small entities. Alternative 2, which would allow category D QS to be fished off of category C vessels is the preferred alternative. Both Alternatives 2 and 3 may reduce entry level opportunities by increasing the cost of acquiring category D QS. Alternative 3 would allow category D QS to be fished off of vessels of any size, while Alternative 2 maintains the less than or equal to 60 ft (18.3 m) LOA restriction; thus Alternative 2 would preserve more of the existing fleet structure. Alternative 4 would eliminate category D QS, and may limit the Council's future ability to use this class of QS to meet its programmatic objections. NMFS is not aware of any alternatives, in addition to the alternatives considered therein, that would more effectively meet these RFA criteria.

No additional recordkeeping and reporting requirements are associated with this action.

In the original IFQ Program for halibut and sablefish, category B QS was permitted to be fished only on a vessel greater than 60 ft (18.3 m) LOA. In 1996 the Council adopted a regulatory change that allowed category B QS to be fished on vessels less than or equal to 60 ft (18.3 m) LOA. At the time, certain category B QS holdings in the Southeast Outside District sablefish and Area 2C halibut fisheries were identified as ineligible for “fish down,” and IFQ derived from these quota shares must be fished on a vessel greater than 60 ft (18.3 m) LOA. This was intended to ensure that category B quota share would be available to vessels 60 ft (18.3 m) LOA or greater. However, some fishermen have recently identified this prohibition as unnecessary, inefficient, and burdensome.

This proposed action could potentially affect 72 holders of category B halibut QS in Area 2C, and 87 persons who hold category B sablefish QS in the Southeast Outside District. Indirectly, the action may affect 22 owners of vessels greater than 60 ft (18.3 m) LOA who made landings in 2003 in the halibut fisheries in Area 2C, 40 large vessel owners who landed sablefish in the Southeast Outside District in 2003, 825 persons who are category B, C, or D halibut QS holders in Area 2C, and 436 persons who are category B or C sablefish QS holders in the Southeast Outside District. Currently, NMFS does not have sufficient ownership and affiliation information to determine precisely the number of RFA small entities in the IFQ Program nor the number that would be adversely impacted by the preferred alternative. For the purposes of this RFA, this analysis assumes that all operations are small.

The preferred alternative would allow all category B QS, in either Area 2C for halibut or the Southeast Outside District for sablefish to be fished on any size catcher vessel. It may have the potential to disadvantage large (greater than 60 ft (18.3 m) LOA) vessel operations that can only harvest category B QS, as competition for access to these QS could be substantially broadened. It may also lead to decreases in the prices of category C and D QS. While the status quo alternative may have smaller adverse impacts on owners of larger vessels and of category C and D QS, the status quo would not accomplish the objective of the action, which is to eliminate a discriminatory provision, align halibut and sablefish program rules in Southeast Alaska with rules elsewhere in the state, and relieve a burden on holders of halibut and sablefish B QS in Southeast Alaska.

No additional recordkeeping and reporting requirements are associated with this action.

This rule contains a collection-of-information requirement subject to the Paperwork Reduction Act (PRA) and which has been approved by OMB under control number 0648-0445. Public reporting burden per response is estimated to average 12 minutes for a VMS check-in report, 6 hours for VMS installation, and 4 hours for VMS maintenance.

This rule also contains a collection-of-information requirement subject to review and approval by OMB under the Paperwork Reduction Act (PRA). This requirement has been submitted to OMB for approval. Public reporting burden per response is estimated to average 2 hours for Application for Emergency Medical Transfer of IFQ and 4 hours for each letter of appeal. NMFS will publish a final rule upon notification of OMB approval and assignment of an OMB control number for this new collection.

Public comment is sought regarding: whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology. Estimated time includes the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed , and completing and reviewing the collection of information.

Send comments regarding this burden estimate, or any other aspect of this data collection, including suggestions for reducing the burden, to NMFS (see ADDRESSES ) and by e-mail to David_Rostker@omb.eop.gov , or fax to (202) 395-7285.

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

Alaska, Fisheries, Recordkeeping and reporting requirements.