The FAA has determined that notice and opportunity for prior public comment hereon are impracticable because these procedures would significantly delay issuance of the design approval and thus delivery of the affected aircraft. In addition, the substance of these special conditions has been subject to the public comment process in several prior instances with no substantive comments received. The FAA therefore finds that good cause exists for making these special conditions effective upon issuance.

We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data. We ask that you send us two copies of written comments.

We will file in the docket all comments we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning these special conditions. You can inspect the docket before and after the comment closing date. If you wish to review the docket in person, go to the address in the ADDRESSES section of this preamble between 7:30 a.m. and 4 p.m., Monday through Friday, except Federal holidays.

We will consider all comments we receive by the closing date for comments. We will consider comments filed late if it is possible to do so without incurring expense or delay. We may change these special conditions based on the comments we receive.

If you want us to let you know we received your comments on these special conditions, send us a pre-addressed, stamped postcard on which the docket number appears. We will stamp the date on the postcard and mail it back to you.

On August 21, 2006, AmSafe Inc., 1043 N. 47th Ave., Phoenix, AZ 85043, applied for a supplemental type certificate to install the AmSafe Aviation Inflatable Restraint (AAIR) for head injury protection on passenger seats on various transport category airplanes. The AAIR is designed to limit passenger forward excursion in the event of an accident, thus reducing the potential for head injury.

The AAIR will reduce the potential for head injury and head entrapment. The AAIR behaves like an automotive inflatable airbag except that the airbag is integrated into the lap belt and inflates away from the seated passenger. While inflatable airbags are standard in the automotive industry, the use of an inflatable lap belt is novel for commercial aviation.

Title 14, Code of Federal Regulations (CFR), section 25.785 requires that passengers be protected from head injury by either the elimination of any injurious object within the striking radius of the head or by padding. Traditionally, compliance has required either a setback of 35 inches from any bulkhead, front seat or other rigid interior feature or padding where a setback was not practical. The relative effectiveness of these two means of injury protection was not quantified. The adoption of Amendment 25-64 to 14 CFR part 25, specifically § 25.562, created a new standard for protection from head injury.

Section 25.562 requires that dynamic tests be conducted for each seat type installed in the airplane. In particular, the regulation requires that persons not suffer serious head injury under the conditions specified in the tests and that a Head Injury Criterion (HIC) measurement of not more than 1000 units be recorded, should the head contact the cabin interior. While the test conditions described in this section are specific, it is the intent of the requirement that an adequate level of head injury protection be provided for crash severity up to and including that specified.

Section 25.562, including HIC, is part of the certification basis of some of the airplanes covered by these special conditions. While § 25.562 is not part of the certification basis of other airplanes covered by these special conditions, some applicants elected to comply with portions of § 25.562—not including §§ 25.562(c)(5) and (c)(6) which specify protection from femur injury and the HIC (this is summarized in table 1). Therefore, on those airplanes, the seat installations with AAIR are not required to meet the requirement of § 25.562 that HIC of less than 1000 be demonstrated for occupants of seats incorporating the AAIR. Although HIC may not be part of the certification basis for some of the covered airplanes, references to HIC are included in these special conditions for consistency with other projects that do require compliance with HIC.

Because §§ 25.562 and 25.785 do not adequately address seats with AAIRs, the FAA recognizes that we need to develop appropriate pass/fail criteria that do address the safety of occupants of those seats.

The AAIR has two potential advantages over other means of head impact protection. The first is that it can provide significantly greater protection than would be expected with energy-absorbing pads; the second is that it can provide essentially equivalent protection for occupants of all stature. These are significant advantages from a safety standpoint, since such devices will likely provide a level of safety that exceeds the minimum 14 CFR part 25 standards.

On the other hand, AAIRs are active systems and must activate properly when needed, as opposed to an energy-absorbing pad or upper torso restraint that is passive and always available. Therefore, the potential advantages must be balanced against potential disadvantages in order to develop standards that will provide an equivalent level of safety to that intended by the regulations.

There are two primary safety concerns with the use of AAIRs: one is that they perform properly under foreseeable operating conditions, and two, that they do not perform in a way that would constitute a hazard to the airplane or occupants. This latter point has the potential to be the more rigorous of the requirements, owing to the active nature of the system.

The AAIR will rely on electronic sensors for signaling and pyrotechnic charges for activation, so that it is available when needed. These same devices could be susceptible to inadvertent activation, causing deployment in a potentially unsafe manner. The consequences of such deployment must be considered in establishing the reliability of the system. AmSafe must substantiate that the effects of an inadvertent deployment in flight are either not a hazard to the airplane or that such deployment is an extremely improbable occurrence (occurring less than 10 −9 per flight hour). The effect of an inadvertent deployment on a passenger sitting or standing close to the AAIR must also be considered. A minimum reliability level will have to be established for this case, depending upon the consequences, even if the effect on the airplane is negligible.

The potential for an inadvertent deployment could be increased as a result of conditions in service. The installation must take into account wear and tear, so that the likelihood of an inadvertent deployment is not increased to an unacceptable level. In this context, an appropriate inspection interval and self-test capability are necessary.

Other outside influences are lightning and high intensity radiated fields (HIRF). Since the sensors that trigger deployment are electronic, they must be protected from the effects of these threats. Existing regulations regarding lightning (§ 25.1316) and HIRF (§ 25.1317) are applicable in lieu of any other lightning and HIRF special conditions that have been adopted for the affected airplanes.

For the purposes of compliance, if inadvertent deployment could cause a hazard to the airplane, the AAIR is considered a critical system; if inadvertent deployment could cause injuries to persons, the AAIR is considered an essential system. Finally, the AAIR installation should be protected from the effects of fire, so that an additional hazard is not created by, for example, a rupture of the pyrotechnic squib.

In order to be an effective safety system, the AAIR must function properly and must not introduce any additional hazards to occupants as a result of its functioning. There are several areas where the AAIR differs from traditional occupant protection systems, and requires special conditions to ensure adequate performance.

Because the AAIR is essentially a single use device, there is the potential that it could deploy under crash conditions that are not sufficiently severe as to require head injury protection from the AAIR. Since an actual crash is frequently composed of a series of impacts before the airplane comes to rest, this could render the AAIR useless if a larger impact follows the initial impact. This situation does not exist with energy absorbing pads or upper torso restraints, which tend to provide protection according to the severity of the impact. Therefore, the AAIR installation should be such that the AAIR will provide protection when it is required and will not expend its protection when it is not needed. There is no requirement for the AAIR to provide protection for multiple impacts, where more than one impact would require protection.

Since each passenger's restraint system provides protection for that occupant only, the installation must address seats that are unoccupied. It will be necessary to show that the required protection is provided for each occupant regardless of the number of occupied seats and considering that unoccupied seats may have AAIR that are active.

Since there is a wide range in the size of passengers, the inflatable seatbelt restraint must be effective over the entire range. The FAA has historically considered the range from the fifth percentile female to the ninety-fifth percentile male as the range of passengers to take into account. In this case, the FAA is proposing consideration of an even broader range of passengers, due to the nature of the inflatable seatbelt restraint installation and its close proximity to the passenger. In a similar vein, passengers may assume the brace position for those accidents where an impact is anticipated. Test data indicate that passengers in the brace position do not require supplemental protection, so that it will not be necessary to show that the AAIR will enhance the brace position. However, the inflatable seatbelt restraint must not introduce a hazard in that case by deploying into the seated, braced passenger.

Another area of concern is the use of seats so equipped by children, whether lap-held, in approved child safety seats, or occupying the seat directly. Similarly, if the seat is occupied by a pregnant woman, the installation needs to address such usage, either by demonstrating that it will function properly, or by adding an appropriate limitation on usage.

Since the AAIR will be electrically powered, there is the possibility that the system could fail due to a separation in the fuselage. Since this system is intended as a means of protection in a crash or after a crash, failure due to fuselage separation is not acceptable. As with emergency lighting, the system should function properly, if such a separation occurs at any point in the fuselage.

Since the AAIR is likely to have a large volume displacement, the inflated bag could potentially impede egress of passengers. Since the bag deflates to absorb energy, it is likely that an AAIR would be deflated at the time that persons would be trying to leave their seats. Nonetheless, it is considered appropriate to specify a time interval after which the AAIR may not impede rapid egress. Ten seconds has been chosen as a reasonable time, since it corresponds to the maximum time allowed for an exit to be openable. In actuality, it is unlikely that an exit would be prepared this quickly in an accident severe enough to warrant deployment of the AAIR, and the AAIR will likely deflate much quicker than ten seconds.

Finally, it should be noted that the special conditions are applicable to the AAIR system, as installed. The special conditions are not an installation approval. Therefore, while the special conditions relate to each such system installed, the overall installation approval is a separate finding and must consider the combined effects of all such systems installed.

In automobile installations, the airbag is a supplemental system and works in conjunction with an upper torso restraint. In addition, the crash event is more definable and of typically shorter duration, which can simplify the activation logic. The airplane-operating environment is also quite different from automobiles and includes the potential for greater wear and tear and unanticipated abuse (due to galley loading, passenger baggage, etc.); airplanes also operate where exposure to high intensity electromagnetic fields could affect the activation system.

Under the provisions of § 21.101, AmSafe Inc. must show that the multiple airplane models as changed, continue to meet the applicable provisions of the regulations incorporated by reference in the Type Certificate (TC) numbers listed in Table 1 or the applicable regulations in effect on the date of application for the change. The regulations incorporated by reference in the type certificate are commonly referred to as the “original type certification basis.” The regulations incorporated for each individual airplane model listed in Table 1 are defined within each Type Certificate Data Sheet (TCDS).

In addition, the certification basis includes other regulations and special conditions that are not pertinent to these special conditions.

If the Administrator finds that the applicable airworthiness regulations (i.e., 14 CFR part 25) do not contain adequate or appropriate safety standards for each airplane model listed in Table 1 because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.

In addition to the applicable airworthiness regulations and special conditions, each airplane model listed in Table 1 must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36.

The FAA issues special conditions, as defined in § 11.19, under § 11.38 and they become part of the type certification basis under § 21.101.

Special conditions are initially applicable to the model for which they are issued. Should the applicant apply for a supplemental type certificate to modify any other model included on the same type certificate to incorporate the same or similar novel or unusual design feature, the special conditions would also apply to the other model under § 21.101.

The airplane model list in Table 1 will incorporate the following novel or unusual design features: These airplanes as modified by AmSafe, Inc. will have a lap belt or shoulder harness portion of the safety belt that contains an integrated inflatable airbag device or AAIR installed on passenger seats. The AAIR will be installed to reduce the potential for head injury in the event of an accident. The AAIR works like an automotive airbag, except that the airbag is integrated with the lap belt or harness of the restraint system. The AAIR is considered a novel design for transport category airplanes and were not considered as part of the original type certification basis.

Section 25.785 states the performance criteria for head injury protection in objective terms. However, none of these criteria are adequate to address the specific issues raised concerning seats with AAIR. The FAA has therefore determined that, in addition to the requirements of 14 CFR part 25, special conditions are needed to address requirements particular to installation of seats with AAIR.

Accordingly, in addition to the passenger injury criteria specified in § 25.785, these special conditions are adopted for the airplane model list in Table 1 equipped with AAIR. Other conditions may be developed, as needed, based on further FAA review and discussions with the manufacturer and civil aviation authorities.

From the standpoint of a passenger safety system, the airbag is unique in that it is both an active and entirely autonomous device. While the automotive industry has good experience with airbags, the conditions of use and reliance on the airbag as the sole means of injury protection are quite different. In automobile installations, the airbag is a supplemental system and works in conjunction with an upper torso restraint. In addition, the crash event is more definable and of typically shorter duration, which can simplify the activation logic. The airplane-operating environment is also quite different from automobiles and includes the potential for greater wear and tear, and unanticipated abuse conditions (due to galley loading, passenger baggage, etc.); airplanes also operate where exposure to high intensity electromagnetic fields could affect the activation system.

The following special conditions can be characterized as addressing either the safety performance of the system, or the system's integrity against inadvertent activation. Because a crash requiring use of the airbags is a relatively rare event, and because the consequences of an inadvertent activation are potentially quite severe, these latter requirements are probably the more rigorous from a design standpoint.

As discussed above, these special conditions are applicable to the airplane models listed in Table 1. Should AmSafe, Inc. apply at a later date for a supplemental type certificate to modify any other model included on the airplane model list in Table 1 to incorporate the same novel or unusual design feature, the special conditions would apply to that model as well.

This action affects only certain novel or unusual design features on the airplane models listed in Table 1. It is not a rule of general applicability and affects only the applicant which applied to the FAA for approval of these features on the airplane models listed in these special conditions.

The substance of these special conditions has been subjected to the notice and comment period in several prior instances and has been derived without substantive change from those previously issued. It is unlikely that prior public comment would result in a significant change from the substance contained herein. For this reason and because a delay would significantly affect the certification of the airplane, which is imminent, the FAA has determined that prior public notice and comment are unnecessary and impracticable and that good cause exists for adopting these special conditions upon issuance. The FAA is requesting comments to allow interested persons to submit views that may not have been submitted in response to the prior opportunities for comment described above.

We have received a report of cracking found at fourteen adjacent fastener holes where protruding head fasteners were installed in the upper row of the right stringer 6 (S-6) lap splice, between station (STA) 360 and STA 380. The airplane had accumulated 23,132 total flight cycles. The protruding head fasteners had been installed without external skin doublers 9,757 flight cycles earlier as one of several modification options provided in Boeing Service Bulletin 747-53-2253 (AD 90-06-06, amendment 39-6490 (55 FR 8374, March 7, 1990), requires that one of the modifications specified in the service bulletin be done). Analysis by Boeing indicates that the protruding head fastener modification and the post-modification inspections are not adequate to prevent and detect cracks at the upper row of fasteners in the S-6 lap splices before the cracks reach critical length. The post-modification inspections are given in Boeing Service Bulletin 747-53-2253 and are required by AD 90-23-14, amendment 39-6801 (55 FR 46652, November 6, 1990). Cracking in the fuselage skin, if not corrected, could result in rapid decompression and loss of structural integrity.

We reviewed Boeing Alert Service Bulletin 747-53A2748, dated May 9, 2008. The alert service bulletin describes procedures for an external inspection to determine if acceptable external skin doublers are installed at the left- and right-side S-6 lap splices, between STA 340 and STA 400. For airplanes without the acceptable external skin doublers, the alert service bulletin specifies doing repetitive related investigative actions and corrective actions if necessary. Related investigative actions include external high frequency eddy current (HFEC) and low frequency eddy current (LFEC) inspections of the skin for cracking, as applicable. Corrective actions include repairing cracking and repeating related investigative actions, or modifying the airplane by installing acceptable external skin doublers at both the left- and right-side S-6 lap splices (includes doing an open-hole HFEC inspection of the skin for cracking, and trimming out cracking if necessary). Doing the modification would end the repetitive related investigative actions.

Boeing Alert Service Bulletin 747-53A2748 refers to Boeing Service Bulletin 747-53-2253, Revision 3, dated March 24, 1994; and Boeing Service Bulletin 747-53-2272, Revision 18, dated May 16, 2002; as additional sources of service information for accomplishment of the modification (installation of acceptable external skin doublers).

We are issuing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design. This AD requires an external inspection to determine if acceptable external skin doublers are installed at the S-6 lap splices, between STA 340 and STA 400. For airplanes without the acceptable external skin doublers, this AD requires repetitive related investigative actions, as applicable, and corrective actions if necessary. This AD also provides an optional terminating modification for the repetitive related investigative actions.

We consider this AD interim action. We are currently considering requiring the modification (installation of acceptable external skin doublers), which would terminate the repetitive related investigative actions. However, the planned compliance time for the modification would allow enough time to provide notice and opportunity for prior public comment on the merits of the modification.

We have determined that cracking of multiple adjacent fastener holes at the S-6 lap splices adjacent to the flight deck windows could join together and result in large cracks. Considering the number of accumulated flight cycles on the affected Boeing Model 747 airplanes and the consequences of cracking, we have determined that immediate inspections are necessary. Because of our requirement to promote safe flight of civil aircraft and thus, the critical need to assure the structural integrity of the fuselage and the short compliance time involved with this action, this AD must be issued immediately.

Because an unsafe condition exists that requires the immediate adoption of this AD, we find that notice and opportunity for prior public comment hereon are impracticable and that good cause exists for making this amendment effective in less than 30 days.

This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments before it becomes effective. However, we invite you to send any written data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2008-0554; Directorate Identifier 2008-NM-100-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this AD. We will consider all comments received by the closing date and may amend this AD because of those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about 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.

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.

You can find our regulatory evaluation and the estimated costs of compliance in the AD Docket.

The Commission today is adopting amendments to Rule 2a-46 [17 CFR 270.2a-46] under the Investment Company Act of 1940 [15 U.S.C. 80a].  1

A BDC is a closed-end investment company that Congress established for the purpose of making capital more readily available to certain types of companies. Under the Investment Company Act (“Investment Company Act” or “Act”), a BDC must invest at least 70 percent of its assets in “eligible portfolio company” securities and certain other securities. Rule 2a-46 defines the term eligible portfolio company to include any company whose securities are not listed on a national securities exchange (“Exchange”).  2 When we adopted Rule 2a-46 in 2006, we also requested comment on whether to further expand the definition to include Exchange-listed companies that have (i) less than $75 million in public float or (ii) less than $150 million in market capitalization or less than $250 million in market capitalization.  3 Today we are amending Rule 2a-46 to expand the definition of eligible portfolio company to include Exchange-listed companies that have less than $250 million in market capitalization.

Congress established BDCs as a new category of closed-end investment companies when it enacted the Small Business Investment Incentive Act (“SBIIA”) in 1980.  4 Congress intended that BDCs would make capital more readily available to certain types of companies.  5 To accomplish this purpose, the Investment Company Act generally prohibits a BDC from making any investment unless, at the time of the investment, at least 70 percent of its total assets (“70% basket”) are invested in securities of certain specific types of companies, including “eligible portfolio companies.”  6

The Investment Company Act defines eligible portfolio company to include any domestic operating company   7 that does not have a class of securities with respect to which a member of an Exchange, broker, or dealer may extend margin credit pursuant to rules promulgated by the Federal Reserve Board under Section 7 of the Securities Exchange Act of 1934 (“Exchange Act”).  8 At the time that Section 2(a)(46) was adopted, Congress generally perceived the Federal Reserve Board's definition of “margin security” to be a “rational and objective test for determining whether an issuer has ready access to the securities markets.”   9 Nevertheless, Congress recognized that the definition of eligible portfolio company as adopted, and, in particular, the definition's reliance on the Federal Reserve Board's margin rules, might need to be adjusted in the future.  10 Accordingly, Congress specifically gave the Commission rulemaking authority under Section 2(a)(46)(C)(iv) of the Investment Company Act to expand the definition of eligible portfolio company.  11

Since 1980, the Federal Reserve Board has periodically amended its definition of margin security to increase the types of securities that would fall within that definition under its rules. In 1998, for reasons unrelated to small business capital formation, the Federal Reserve Board amended its definition of margin security to include all equity securities that trade on an Exchange or are listed on the NASDAQ Stock Market, and most debt securities. This amendment had the result of significantly reducing the companies that qualify as eligible portfolio companies under Section 2(a)(46) of the Investment Company Act.  12

In 2006, we adopted two rules, Rules 2a-46 and 55a-1 under the Act, to address the impact of the Federal Reserve Board's amendment to its definition of margin security on the definition of eligible portfolio company.  13 Rule 2a-46 defines eligible portfolio company to include all domestic operating companies   14 whose securities are not listed on an Exchange.  15 Rule 55a-1 conditionally permits a BDC to continue to invest in any company that qualified as an eligible portfolio company under Rule 2a-46 when the BDC made its initial investment(s) in it, but that subsequently does not meet the definition of eligible portfolio company because it no longer meets the requirements of that rule.  16

When we adopted Rules 2a-46 and 55a-1, we also proposed to amend Rule 2a-46 to expand the definition of eligible portfolio company to include certain public domestic operating companies that list their securities on an Exchange.  17 This proposal was designed to address concerns that part of the rule (proposed in 2004, but not adopted   18 ) would be unworkable and too narrow.  19

In the Reproposing Release, we requested comment on alternatives that would expand the definition of eligible portfolio company to include domestic operating companies with securities listed on an Exchange. We asked whether we should expand the definition to include any such company with (i) a public float of less than $75 million or (ii) market capitalization of less than $150 million or market capitalization of less than $250 million.  20 We explained that the $75 million public float standard incorporates the size-based standard used in Form S-3 and Rule 12b-2 which the Commission has used to delineate between small, unseasoned companies, and larger seasoned companies whose securities are listed on an Exchange.  21 We explained that the market capitalization alternatives are similar to definitions of “micro-cap” company used generally by market participants.  22 We also noted that some who had commented on Rule 2a-46 when it was initially proposed had stated that companies with market capitalizations in this range generally have limited (if any) analyst coverage, have lower trading volume and are owned by fewer institutional investors than companies with higher market capitalizations.  23 These commenters concluded that such companies have difficulty accessing the public capital markets.  24

We received letters from fifteen commenters (including eight BDCs and one legal counsel to BDCs).  25 Fourteen commenters favored the $250 million market capitalization standard.  26 Several commenters specifically noted that companies meeting such a standard “often have difficulty accessing traditional capital sources.”   27 Commenters also stated that the $250 million market capitalization standard is similar to what most market participants use to identify micro-cap companies, and that these companies have less analyst coverage, institutional ownership and lower trading volume.  28

In addition, in support of the $250 million market capitalization standard, one commenter provided information about public companies that have received financing over the past several years and the types of financing that they have received.  29 Specifically, the commenter submitted information regarding public companies that were able to access the public markets, either by engaging in initial public offerings or by issuing follow-on equity and debt financing.  30 The commenter also provided information regarding the public companies that had obtained capital through private investment transactions.  31 In addition, the commenter provided information regarding the average institutional leveraged loan size and average high yield issuance size.  32 Based on this information, the commenter concluded that companies with less than $250 million market capitalization are having difficulty accessing traditional capital sources.  33 Accordingly, the commenter urged the Commission to adopt the $250 million market capitalization standard.  34

After carefully considering the comments received in response to both the Reproposing Release and the 2004 Proposing Release, we are amending Rule 2a-46 to include new paragraph (b).  35 Rule 2a-46(b) expands the definition of eligible portfolio company to include any domestic operating company that has a class of securities listed on an Exchange and that has a market capitalization   36 of less than $250 million (calculated using the price at which the company's common equity is last sold, or the average of the bid and asked prices of the company's common equity, in the principal market for such common equity) on any day in the 60-day period immediately before the BDC's acquisition of its securities.  37 We believe that the new rule is consistent with the public interest, the protection of investors and the purposes fairly intended by the policy and provisions of the Investment Company Act.

As discussed above, one of the alternatives that we proposed used a public float standard, and the options proposed in the other alternative used a market capitalization standard.  38 We have decided to adopt a market capitalization standard for the reasons discussed below. For purposes of Rule 2a-46(b), market capitalization is the aggregate value of a company's outstanding voting and non-voting equity securities.  39 In contrast, a company's public float is a company's market capitalization minus the aggregate market value of common equity held by the company's affiliates.  40

We requested comment on whether it would be burdensome for a BDC to determine a company's eligible portfolio company status if the standard is based on public float rather than market capitalization.  41 Adopting a public float standard in Rule 2a-46(b) would have imposed burdens that are not present in other Commission rules that incorporate such a standard. These other Commission rules typically are rules in which a company is responsible for calculating its own public float to determine its eligibility in connection with certain registration or reporting requirements.  42 Section 55 of the Investment Company Act, however, effectively requires a BDC to determine whether a target company qualifies as an eligible portfolio company before investing in it as part of the BDC's 70% basket.  43 Consequently it is the BDC, rather than the target company, that must determine whether a target company meets the definition of eligible portfolio company under Rule 2a-46(b).

Accordingly, although several commenters stated that both public float and market capitalization are good indicators of whether a company is small and unseasoned, all commenters who addressed this issue preferred a market capitalization standard.  44 Commenters stated that information about a company's market capitalization is readily available through third-party sources, while information about a company's public float is not.  45 Commenters generally explained that, in order for a BDC to calculate a company's public float, as proposed, it would have to determine the number of shares owned by the company's affiliates, which is information not readily available on a current basis through third-party sources.  46 The BDC therefore would have to communicate with possible target companies to determine whether they would qualify under the definition of eligible portfolio company before making any investment decision.

Commenters argued that requiring BDCs to determine a company's public float within the requirements of the proposed rule would place an unnecessary burden on BDCs and thereby impede appropriate investment activity.  47 In contrast, under the adopted market capitalization standard, a BDC may use information obtained from third parties to assist it in determining whether a possible investment target is an eligible portfolio company. In this regard, we note that under the adopted market capitalization standard, a BDC may use information obtained from independent third parties to assist it in determining whether a possible target company is an eligible portfolio company without communicating with the target company directly. In light of these burdens and the general public availability of information regarding a company's market capitalization, we agree with commenters that a market capitalization standard is appropriate for purposes of Rule 2a-46.

We are adopting new Rule 2a-46(b) to define eligible portfolio company to include any company that is listed on an Exchange with market capitalization of less than $250 million. The new standard, consistent with legislative intent, broadens the definition of eligible portfolio company.  48 We estimate that, based on January 31, 2008 data, 6,062 companies, representing 61.3% (6,062/9,883) of all public domestic operating companies, qualify as eligible portfolio companies under Rule 2a-46(a). We further estimate that 1,649 Exchange-listed companies qualify as eligible portfolio companies under Rule 2a-46(b).  49 Accordingly, we estimate that 7,711 companies, representing 78% (7,711/9,883) of all public domestic operating companies qualify as eligible portfolio companies under Rule 2a-46 as amended.

In the Reproposing Release, we noted a general concern raised by commenters in response to the 2004 Proposing Release   50 that companies with market capitalization up to $300 million are followed by fewer analysts, have lower institutional ownership and have lower trading volume than companies at higher levels of market capitalization.  51 These commenters concluded that companies having market capitalization below that amount may have more difficulty accessing public capital. We generally agreed that there may be some correlation between the size of a company, based on these factors, and the ability of a company to access public capital.  52 We specifically requested comment on whether any of the alternative standards would better align the definition of eligible portfolio company with the purpose that Congress intended when it adopted the SBIIA.

Commenters universally favored the $250 million market capitalization standard. Commenters argued that companies with market capitalization of less than $250 million often have difficulty accessing traditional forms of capital and that adoption of the standard thus would be consistent with Congressional intent.  53 One commenter also provided information regarding the limited number of follow-on offerings of equity and debt securities by Exchange-listed companies and stated that this information “clearly demonstrates that the vast majority of companies with market capitalizations of $250 million or less * * * have significantly limited access” to the public equity and debt markets.  54 This commenter also argued that market participants that provide public capital are not servicing the needs of these companies.  55

Most commenters responding to the alternatives proposed in the Reproposing Release also argued that companies with less than $250 million market capitalization have difficulty accessing public capital because generally these companies are followed by fewer analysts, have lower institutional ownership and lower trading volume than larger companies.  56 One commenter specifically noted that companies with less than $250 million market capitalization “have spotty analyst coverage at best, * * * few or no institutional investors, and * * * thin trading volumes” and that “these are characteristics of companies that would not in today's market have ready access to public capital.”  57 This commenter referred to information developed by our Office of Economic Analysis (“OEA”) about those factors that were prepared for purposes other than this rulemaking.  58

As we stated in the Reproposing Release, we believe that there is some correlation between analyst coverage, institutional ownership and trading volume and the ability of a company to access public capital.  59 Based on the comments we received, and our review of those factors with respect to companies with less than $250 million market capitalization, we believe that a distinction can be made with respect to a company's ability to access public capital at $250 million market capitalization. OEA has considered this information and determined that fewer than 50% of companies with market capitalizations of less than $250 million are followed by more than two analysts and that these companies generally have lower institutional ownership and are more thinly traded than larger companies.

Moreover, in the Reproposing Release we requested comment on whether adoption of a $250 million market capitalization standard would result in BDCs focusing their investment activities in companies at the higher end of the standard to the detriment of smaller companies.  60 Commenters responded that adoption of a $250 million market capitalization standard would not have this result, with some arguing further that larger companies do not necessarily present a more attractive investment in comparison to smaller companies.  61 Commenters also argued that historically, BDCs have not invested in larger non-public companies at the expense of smaller non-public companies, and that there is no reason to suggest that this would occur in the context of public companies.  62 In light of these comments, we are persuaded that our adoption of the $250 million market capitalization standard is not likely to result in BDCs focusing their investment activity on larger companies to the detriment of smaller companies.

Accordingly, we conclude that adoption of the $250 million market capitalization standard is an appropriate standard for purposes of the amended rule and we believe that it is consistent with the public interest, the protection of investors and the purposes fairly intended by the policies and provisions of the Investment Company Act.  63

In accordance with section 513(f)(1) of the Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 360c(f)(1)), devices that were not in commercial distribution before May 28, 1976, the date of enactment of the Medical Device Amendments of 1976 (the amendments), generally referred to as postamendments devices, are classified automatically by statute into class III without any FDA rulemaking process. These devices remain in class III and require premarket approval, unless and until the device is classified or reclassified into class I or II, or FDA issues an order finding the device to be substantially equivalent, in accordance with section 513(i) of the act, to a predicate device that does not require premarket approval. The agency determines whether new devices are substantially equivalent to predicate devices by means of premarket notification procedures in section 510(k) of the act (21 U.S.C. 360(k)) and 21 CFR part 807 of FDA's regulations.

Section 513(f)(2) of the act provides that any person who submits a premarket notification under section 510(k) of the act for a device that has not previously been classified may, within 30 days after receiving an order classifying the device in class III under section 513(f)(1) of the act, request FDA to classify the device under the criteria set forth in section 513(a)(1) of the act. FDA shall, within 60 days of receiving such a request, classify the device by written order. This classification shall be the initial classification of the device. Within 30 days after the issuance of an order classifying the device, FDA must publish a notice in the Federal Register announcing this classification (section 513(f)(2) of the act).

In accordance with section 513(f)(1) of the act, FDA issued an order on February 22, 2007, classifying the Binax NOW® Malaria Test in class III, because it was not substantially equivalent to a device that was introduced or delivered for introduction into interstate commerce for commercial distribution before May 28, 1976, or a device which was subsequently reclassified into class I or class II. On March 22, 2007, Binax, Inc., submitted a petition requesting classification of the Binax NOW® Malaria Test under section 513(f)(2) of the act. The manufacturer recommended that the device be classified into class II (Ref. 1).

In accordance with section 513(f)(2) of the act, FDA reviewed the petition in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the act. Devices are to be classified into class II if general controls, by themselves, are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls to provide reasonable assurance of the safety and effectiveness of the device for its intended use. After review of the information submitted in the petition, FDA determined that the Binax NOW® Malaria Test can be classified in class II with the establishment of special controls. FDA believes these special controls, in addition to general controls, will provide reasonable assurance of safety and effectiveness of the device.

The device is assigned the generic name “ Plasmodium species antigen detection assays.” It is identified as a device that employs antibodies for the detection of specific malaria parasite antigens, including histidine-rich protein-2 (HRP2) specific antigens, and pan malarial antigens in human whole blood. These devices are used for testing specimens from individuals who have signs and symptoms consistent with malaria infection. The detection of these antigens aids in the clinical laboratory diagnosis of malaria caused by the four malaria species capable of infecting humans: Plasmodium falciparum , Plasmodium vivax , Plasmodium ovale , and Plasmodium malariae , and aids in the differential diagnosis of P. falciparum infections from other less virulent Plasmodium species. The device is intended for use in conjunction with other clinical laboratory findings.

FDA has identified the following risks to health associated with the device. Failure of the test to perform as indicated may lead to improper patient management and/or inappropriate public health responses. For example, false negative results may lead to delays in providing, or even failure to provide, definitive diagnosis and appropriate treatment. A false positive test result may subject individuals to unnecessary and/or inappropriate treatment for malaria, and failure to appropriately diagnose and treat the actual disease condition. The unnecessary use of alternative drugs, such as quinine, mefloquine and artemisinin, typically used in high resistance areas outside the United States, is problematic because these drugs are less safe than the first and second line treatments.

In addition, malaria is a significant public health issue and is a reportable disease to the Centers for Disease Control and Prevention. Local and state health departments are required to conduct case investigations upon receiving a report of a malaria infection. A false positive test result could place an undue burden on local and state health department resources and could also lead to unnecessary public health actions (e.g., unnecessary or inappropriate treatment and management of others in the community). On the other hand, a false negative result could lead to a delay in recognition of increased transmission of the parasitic infection.

An error in interpretation of results could also pose a risk, especially decisions about treatment without confirmation of negative results by microscopy, which is more sensitive than antigen detection assays for detecting malaria parasites in blood.

FDA believes the class II special controls guidance document generally addresses the risks to health identified in the previous paragraphs. FDA believes the class II special controls guidance document will aid in mitigating potential risks by providing recommendations on labeling and validation of performance characteristics. The guidance document also provides information on how to meet 510(k) premarket notification submission requirements for the device. FDA believes that the special controls, in addition to general controls, address the risks to health identified previously and provide reasonable assurances of the safety and effectiveness of the device type. Therefore, on June 13, 2007, FDA issued an order to the petitioner classifying the device into class II (Ref. 2). FDA is codifying this classification by adding 21 CFR 866.3402.

Following the effective date of this final classification rule, any firm submitting a premarket notification submission for a Plasmodium species antigen detection assay will need to address the issues covered in the special controls guidance. However, the firm need only show that its device meets the recommendations of the guidance, or in some other way provides equivalent assurance of safety and effectiveness.

Section 510(m) of the act provides that FDA may exempt a class II device from the premarket notification requirements under section 510(k) of the act if FDA determines that premarket notification is not necessary to provide reasonable assurance of the safety and effectiveness of the device. For this type of device, however, FDA has determined that premarket notification is necessary to provide a reasonable assurance of the safety and effectiveness of the device and, therefore, this type of device is not exempt from premarket notification requirements. Persons who intend to market this type of device must submit to FDA a premarket notification, prior to marketing the device, which contains information about the Plasmodium species antigen detection assays they intend to market.

The agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

FDA has examined the impacts of the final rule under Executive Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The agency believes that this final rule is not a significant regulatory action as defined by the Executive order.

The Regulatory Flexibility Act requires agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because classification of this device into class II will relieve manufacturers of the cost of complying with the premarket approval requirements of section 515 of the act (21 U.S.C. 360e), and may permit small potential competitors to enter the marketplace by lowering their costs, the agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities.

Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $127 million, using the most current (2006) Implicit Price Deflator for the Gross Domestic Product. FDA does not expect this final rule to result in any 1-year expenditure that would meet or exceed this amount.

FDA has analyzed this final rule in accordance with the principles set forth in Executive Order 13132. FDA has determined that the rule does not contain policies that have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, the agency has concluded that the rule does not contain policies that have federalism implications as defined in the Executive order and, consequently, a federalism summary impact statement is not required.

This final rule contains no new information collection provisions. Therefore, clearance by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 is not required.

The following references have been placed on display in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday.

Section 7874 provides rules for expatriated entities and their surrogate foreign corporations. An expatriated entity is defined in section 7874(a)(2)(A) as a domestic corporation or partnership with respect to which a foreign corporation is a surrogate foreign corporation, and any U.S. person related (within the meaning of section 267(b) or section 707(b)(1)) to such domestic corporation or partnership. Generally, a foreign corporation is a surrogate foreign corporation under section 7874(a)(2)(B) if, pursuant to a plan or a series of related transactions, certain conditions are met. One such condition depends on the percentage of owner continuity in the foreign corporation after the acquisition. This condition is satisfied if, after the acquisition, at least 60 percent of the stock (by vote or value) of the foreign corporation is held (in the case of an acquisition with respect to a domestic corporation) by former shareholders of the domestic corporation by reason of holding stock in the domestic corporation, or (in the case of an acquisition with respect to a domestic partnership) by former partners of the domestic partnership by reason of holding a capital or profits interest in the domestic partnership. See section 7874(a)(2)(B)(ii).

The treatment of expatriated entities and surrogate foreign corporations varies depending on this percentage (ownership fraction). If the ownership fraction is 80 percent or more, the surrogate foreign corporation is treated as a domestic corporation for all purposes of the Code. If the ownership fraction is 60 percent or more (but less than 80 percent), the surrogate foreign corporation is treated as a foreign corporation, but certain income or gain recognized by the expatriated entity generally cannot be offset by net operating losses or credits from the first date properties are acquired pursuant to the plan through the end of the 10-year period following the completion of the acquisition.

Section 7874(c)(2)(A) provides that stock held by members of the “expanded affiliated group” which includes the foreign corporation is not taken into account for purposes of the ownership fraction (affiliate-owned stock rule). Section 7874(c)(1) defines the term expanded affiliated group (EAG) as an affiliated group defined in section 1504(a), but without regard to the exclusion of foreign corporations in section 1504(b)(3) and with a reduction of the 80 percent ownership threshold of section 1504(a) to a more-than-50 percent threshold.

Section 7874(g) provides that “[t]he Secretary shall provide such regulations as are necessary to carry out this section, including regulations providing for such adjustments to the application of this section as are necessary to prevent the avoidance of the purposes of this section, including the avoidance of such purposes through * * *. the use of related persons, pass-through or other noncorporate entities, or other intermediaries * * *.” Section 7874(c)(6) provides that “[t]he Secretary shall prescribe such regulations as may be appropriate to determine whether a corporation is a surrogate foreign corporation, including regulations * * * to treat stock as not stock.”

On December 28, 2005, a temporary regulation (TD 9238) was published in the Federal Register (70 FR 76685) that related to the disregard of affiliate-owned stock under section 7874(c)(2)(A). A notice of proposed rulemaking (REG-143244-05) cross-referencing the temporary regulation was published in the Federal Register for the same day (70 FR 76732). No public hearing was requested or held. Written and electronic comments responding to the notice of proposed rulemaking were received. After consideration of all the comments, the proposed regulation is adopted, as amended by this Treasury decision, as final, and the corresponding temporary regulation is removed. The revisions are discussed below.

Treasury regulation § 1.7874-1T provides guidance under the affiliated-owned stock rule. Generally, § 1.7874-1T provides that stock owned by members of an EAG is excluded from both the numerator and denominator of the ownership fraction. However, affiliate-owned stock is excluded from the numerator of the ownership fraction, but is included in the denominator of the ownership fraction, in two instances: (1) Certain transactions occurring as part of an internal group restructuring involving a domestic entity; and (2) certain acquisitive business transactions between unrelated parties where the former shareholders or partners of the domestic entity have a minority interest in the acquired properties after the acquisition.

With respect to internal group restructurings, the special rule applies where the common parent of the EAG after the acquisition owns directly or indirectly at least 80 percent of the domestic entity before the acquisition, and non-members of the EAG hold, by reason of holding an interest in the domestic entity, no more than 20 percent of the stock (by vote or value) of the foreign corporation after the acquisition. With respect to transactions between unrelated parties, the special rule applies where, after the acquisition, the former owners of the domestic entity do not own, in the aggregate, directly or indirectly, more than 50 percent of the stock (by vote or value) of any member of the EAG.

Section 1.7874-1T also provides guidance regarding the treatment of certain “subsidiary-owned” interests (which include so-called “hook stock”) for purposes of the exceptions to the general application of the ownership fraction. These rules apply to stock or partnership interests owned by an entity in which at least 50 percent of the stock (by vote or value), or at least 50 percent of the capital or profits interest, is owned directly or indirectly by the issuer of such stock or by the partnership in question.

These rules are included in the final regulations, with revisions as noted below.

Both the numerator and denominator of the ownership fraction take into account stock described in section 1504(a)(4) (so-called “plain vanilla preferred stock”). For purposes of determining whether an affiliated group constitutes an EAG, however, such stock is not treated as stock because of the reference to the rules of section 1504(a). See section 7874(c)(1). Commentators have noted the inconsistent treatment of plain vanilla preferred stock in section 7874. In addition, they point out that, due to the debt-like nature of such stock, it should not be treated as stock for any purpose of section 7874, including the ownership fraction.

The Treasury Department and the IRS note that Congress has expressly stated that section 1504(a)(4) preferred stock is not treated as stock in several Code provisions, including certain provisions of section 7874, as noted above. See, for example, sections 243(c)(1), 246A(c)(4), and 355(g)(2)(B)(iv)(III). In contrast, Congress specifically chose not to exclude plain vanilla preferred stock from the ownership fraction. Although section 7874 grants the Treasury Department and the IRS the authority to treat stock as not stock when such treatment would further the purposes of section 7874, the legislative history to section 7874 does not suggest that the treatment of plain vanilla preferred stock in the ownership fraction is inconsistent with the purposes of section 7874. The Treasury Department and the IRS therefore decline to exercise the regulatory authority to exclude plain vanilla preferred stock in the calculation of the ownership fraction. Accordingly, all classes of stock, including plain vanilla preferred stock, are included in the ownership fraction and treated as stock for purposes of section 7874, other than for purposes of determining the EAG.

The Treasury Department and the IRS considered whether the treatment of plain vanilla preferred stock in the EAG definition should be made consistent with the treatment of plain vanilla preferred stock in the ownership fraction. After studying the issue, the Treasury Department and the IRS believe that taking plain vanilla preferred stock into account for purposes of the definition of an EAG may facilitate the avoidance of the rules regarding EAGs. Consequently, the Treasury Department and the IRS also decline to exercise regulatory authority to amend the treatment of plain vanilla preferred stock for purposes of defining an EAG.

The Treasury Department and the IRS will, however, continue to monitor the use of plain vanilla preferred stock and its treatment under section 7874.

Treasury regulation § 1.7874-1T(c)(1) provides that stock held by a member of an EAG is included in the denominator, but not the numerator, of the ownership fraction if two conditions are satisfied. First, the common parent of the EAG must own directly or indirectly at least 80 percent of the stock (by vote or value) or the capital or profits interest in the domestic entity prior to the acquisition. Second, following the acquisition non-members of the EAG, by reason of holding stock or a capital or profits interest in the domestic entity, must not own more than 20 percent of the stock (by vote or value) of the foreign corporation.

One commentator suggested that the requirement should merely look to the stock ownership of the common parent of the EAG both before and after the acquisition. The Treasury Department and the IRS agree with this suggestion. In addition, the Treasury Department and the IRS have determined that the rule should be modified to consider the stock by vote and value held by the common parent of the EAG. Consequently, stock of a member of an EAG is included in the denominator, but not the numerator of the ownership fraction, if the common parent of the EAG held directly or indirectly at least 80 percent of the stock (by vote and value) or the capital and profits interest, as applicable, of the domestic entity before the acquisition, and holds at least 80 percent of the stock (by vote and value) of the foreign acquiring corporation after the acquisition. Corresponding revisions have been made to the examples.

One commentator requested clarification of the wording of § 1.7874-1T(d) regarding the treatment of hook stock. In response to this comment, the provision is clarified to exclude hook stock from both the numerator and denominator of the fractions that are used to determine whether the exceptions to the general rule apply (that is, the determination of whether the acquisition resulted in an internal group restructuring or a loss of control of the domestic entity).

The Treasury Department and the IRS understand that taxpayers may be taking the position that a foreign corporation that acquires substantially all of the properties of a domestic corporation in a title 11 or similar case may not be a surrogate foreign corporation because it fails to satisfy the stock ownership requirement described in section 7874(a)(2)(B)(ii). These taxpayers maintain that creditors of the domestic corporation, which typically receive all of the stock of the acquiring foreign corporation issued in the title 11 or similar case, are not considered former shareholders of the domestic corporation for purposes of section 7874(a)(2)(B)(ii). Thus, they take the position that the creditors do not hold the stock of the foreign acquiring corporation received by reason of holding stock in the domestic corporation. Under this position, there often would be little or no continuity of ownership for purposes of section 7874(a)(2)(B)(ii) and, as a result, the foreign corporation would not be a surrogate foreign corporation. Taxpayers take this position even though the creditors, in substance, are the equity owners of the domestic corporation at the time of the title 11 or similar case and acquire the stock issued by the acquiring foreign corporation by reason of their status as creditors of the domestic corporation. Helvering v. Alabama Asphaltic Limestone Co., 315 U.S. 179 (1942).

The Treasury Department and the IRS disagree with this characterization under current law and are considering issuing regulations to clarify the proper application of the rules to such transactions. Section 7874(c)(6) provides that the Secretary shall prescribe such regulations as may be appropriate to determine whether a corporation is a surrogate foreign corporation, including regulations: (i) To treat warrants, options, contracts to acquire stock, convertible debt interests, and other similar interests as stock, and (ii) to treat stock as not stock. These regulations would provide, as appropriate, that for purposes of section 7874(a)(2)(B)(ii), creditors of a domestic corporation emerging from a title 11 or similar case are treated as former shareholders of such corporation. The regulations would further provide, as appropriate, that for this purpose, stock issued by the foreign acquiring corporation to such creditors is held by reason of holding stock in the domestic corporation. Similar rules may apply to acquisitions of substantially all the properties constituting a trade or business of a domestic partnership.

The Treasury Department and the IRS also understand that some taxpayers may be taking the position that, where two or more domestic entities described in section 7874(a)(2)(B)(i) are acquired pursuant to an overall plan, section 7874(a)(2)(B) is applied separately to each such domestic entity. For example, taxpayers may take this position where a foreign corporation is formed to acquire, in exchange for its stock, 100 percent of the stock of two domestic corporations that have approximately the same value. In such a case, after the acquisition the former shareholders of the two domestic corporations, in the aggregate, would hold 100 percent of the stock of the foreign acquiring corporation by reason of holding stock in the domestic corporations. However, the taxpayers may claim that the ownership fraction applies separately to each acquisition such that the ownership fraction would be approximately 50 percent, rather than 100 percent. Under this interpretation, the acquiring foreign corporation would not be a surrogate foreign corporation because the condition described in section 7874(a)(2)(B)(ii) would not be satisfied.

The Treasury Department and the IRS disagree with this interpretation under current law and are considering issuing regulations to clarify the proper application of the rules. These regulations would clarify that the references in section 7874(a)(2)(B) to “a domestic corporation” shall, as appropriate, mean “one or more domestic corporations” where the properties of such corporations are, directly or indirectly, acquired pursuant to the same plan. Similar clarifications will be made with respect to acquisitions involving properties of domestic partnerships.

Finally, the Treasury Department and the IRS understand that some taxpayers may be attempting to avoid the application of section 7874 by structuring acquisitions of domestic entities by foreign corporations through the use of intervening partnerships. For example, a foreign acquiring corporation may issue new shares to a newly formed domestic partnership in exchange for a 99 percent interest in the partnership. The shares transferred to the domestic partnership constitute 70 percent of the outstanding stock of the foreign acquiring corporation. An affiliate of the foreign acquiring corporation would transfer cash or other property to the partnership for the remaining one percent interest. The foreign acquiring corporation then transfers its 99 percent interest in the domestic partnership to the shareholders of a domestic corporation in exchange for 100 percent of the stock of the domestic corporation.

The taxpayers take the position that this transaction is not subject to section 7874 even though, in substance, the foreign acquiring corporation acquired 100 percent of the stock of the domestic corporation and the former shareholders of the domestic corporation, through their 99 percent interest in the domestic partnership, hold more than 60 percent of the stock of the foreign acquiring corporation by reason of holding stock in the domestic corporation. Under this interpretation, which relies on treating the partnership as an entity (rather than as an aggregate of its partners), the ownership fraction would be zero because none of the foreign acquiring corporation stock held by the partnership was held by former shareholders of the domestic corporation. Thus, section 7874 would not apply to the transaction.

The Treasury Department and the IRS disagree with this characterization under current law and are considering issuing regulations to clarify the proper application of the rules to these transactions. The regulations would provide, as appropriate, that for purposes of applying section 7874(a)(2)(B)(i) to these structures, the exchange of an interest in a domestic entity for an interest in a partnership shall be treated as an exchange of the interest in the domestic entity for a pro rata share of the assets of the partnership.

The regulations described above, which may be issued in conjunction with the finalization of the § 1.7874-2T regulations, may be effective as of May 20, 2008. However, no inference is intended as to the potential applicability of other Code or regulatory provisions, or judicial doctrines (including substance over form) to the transactions described above.

Section 1.7874-1 applies to acquisitions completed on or after May 20, 2008, subject to transition relief for certain acquisitions entered into pursuant to binding commitments. In addition, taxpayers may elect to apply this section to prior acquisitions, but must apply it consistently to all acquisitions within its scope.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations and because these regulations do not impose a collection of information on small entities, the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comments on its impact on small business.

The principal author of this regulation is Milton Cahn, Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in its development.

MSHA measures a miner's personal exposure to DPM by analyzing the sample for a DPM surrogate, TC. TC is the sum of elemental carbon (EC) and organic carbon (OC). The 160 TC limit was promulgated in the 2001 final rule “Diesel Particulate Matter Exposure of Underground Metal and Nonmetal Miners” which was published in the Federal Register on January 19, 2001 (66 FR 5706) and amended on June 6, 2005 (70 FR 32868) and May 18, 2006 (71 FR 28924).

When the Agency published the 2006 final rule, MSHA stated its intent to issue a proposed rule to convert the 160 TC PEL to a comparable EC PEL prior to the effective date of May 20, 2008, provided sufficient scientific data were available to support a proposed rule. MSHA is not issuing a proposed rule to uniformly convert the 160 TC limit to a comparable EC limit. Instead, MSHA provides a protocol for calculating a location specific adjustment for situations in which the EC on the miner's personal sample is less than 160 micrograms per cubic meter of air times the error factor (EF) for EC, and TC on the miner's personal sample is greater than 160 micrograms per cubic meter of air times the EF for TC. The decision not to issue a uniform conversion factor is based on MSHA's assessment that there is still insufficient evidence suggesting an appropriate conversion factor, and the latest available scientific evidence regarding the relationship between TC and EC at levels as low as 160 TC. MSHA will continue to monitor and encourage research in this field.

The DPM rulemaking record established that a miner's exposure could not be validated simply by adding the EC and OC of a TC sample due to the potential for non-diesel exhaust sources to deposit on the OC part of the sample and interfere with the MSHA sample analysis. These interferences include environmental tobacco smoke, drill oil mist, and ammonium nitrate/fuel oil (ANFO) vapors. When measuring EC, interferences are not a factor in assuring the accuracy of the sample analysis.

Currently, MSHA determines a miner's exposure to the PEL of 350 TC μg/m  3 (350 TC) by conducting an EC analysis to validate that the miner's overexposure to TC is not the result of interferences. In each analysis, MSHA incorporates an error factor to account for variability in sampling and analysis resulting from such things as pump flow rate, filters, and the NIOSH Analytical Method 5040. If the TC measurement is above 350 TC micrograms times the error factor for TC, MSHA looks at the EC measurement from the sample obtained through the NIOSH Analytical Method 5040, and multiplies EC by a conversion factor of 1.3 to produce a statistically valid estimate of what the TC result is without interferences. MSHA issues a citation when the EC measurement times the multiplier is above 350 micrograms times the error factor for EC. The 1.3 multiplier that MSHA uses to estimate TC ( i.e. , EC × 1.3 = estimated TC) is the median value of all TC to EC ratios obtained from valid TC samples ( i.e. , without OC interferences) collected by MSHA during the 31-Mine Study, and it is consistent with NIOSH's determination that TC is 60-80% EC.

In the 2006 final rule (71 FR 28924, May 18, 2006), MSHA retained the 2001 final limit of 160 TC but determined that it should be phased in over a two-year period and stated that:

Also in the 2006 final rule, MSHA discussed its concerns regarding the relationship between TC, EC and OC at lower concentrations and its intent to conduct a separate rulemaking to determine the most appropriate way to convert the 160 TC PEL to a comparable EC PEL by stating:

Although in the 2006 final rule MSHA acknowledged the limitations of sampling a miner's exposure to TC and preferred EC rather than TC as a DPM surrogate, the Agency did not conclude that TC could not be used as an appropriate surrogate for measuring a miner's exposure to DPM. In addition, the court decision in Kennecott Greens Creek Mining Company v. Mine Safety and Health Administration , 476 F.3d 946, 956 (DC Cir. 2007), upholding the DPM standard, allows MSHA to enforce either the 160 TC PEL or a converted elemental carbon (EC) PEL. The court upheld MSHA's selection of TC and EC as appropriate surrogates for DPM. See Id . at 956.

Subsequent to the DPM court decision, MSHA decided to wait for further scientific evidence regarding whether MSHA could reasonably convert the 160 TC PEL using a fixed conversion factor such as the 1.3 conversion factor currently used. The latest available scientific evidence is the study titled “Relationship between Elemental Carbon, Total Carbon, and Diesel Particulate Matter in Several Underground Metal/Non-metal Mines” which was published on February 1, 2007 (J. D. Noll; A. D. Bugarski; L. D. Patts; S. E. Mischler; L. McWilliams, Environ. Sci. & Technol. , Vol. 41, No. 3: February 1, 2007, 710-716). The authors concluded that the variability of the TC-to-EC ratio increases below 230 TC and is high at 160 TC. Therefore, MSHA could not identify a single, constant conversion factor for EC at any level below 230 TC.

In March 2007, MSHA hired an outside expert with experience in DPM sampling methodology and analysis to advise the Agency in developing an enforcement strategy for accurately determining a miner's exposure to TC. The expert also reviewed the latest available data to attempt to devise a scientific method for converting the 160 TC PEL to a comparable EC PEL. The expert was unable to recommend such a method. As an alternative to developing a conversion factor, the expert recommended sampling strategy options for the Agency's consideration in enforcing the DPM final limit in a September 2007 report. MSHA was reviewing the expert's recommendations when it published its December 10, 2007 Semi-Annual Regulatory Agenda in which the Agency continued to state its intent to propose a rule to convert the 160 TC limit. MSHA now has determined that insufficient data exist to proceed with further rulemaking to convert the DPM final limit using a single, constant conversion factor, such as the 1.3 factor currently used for EC for all mines.

MSHA has developed an enforcement strategy for implementation of the DPM 160 TC PEL beginning May 20, 2008. MSHA will continue to determine a miner's exposure to DPM based on a single personal sample taken over the miner's full shift as specified in existing 30 CFR § 57.5061 of the DPM standard. MSHA will use an EC analysis and appropriate sampling methods to ensure that a citation for a miner's overexposure to the 160 TC PEL is valid and not the result of interferences.

MSHA is withdrawing its intent to issue a proposed rule to convert the 160 TC PEL because it has determined that insufficient data exist to support such a rule, and because it has determined that the enforcement strategy it will begin to use on May 20, 2008, is an accurate and effective way of enforcing the DPM standard. This enforcement strategy will provide effective health protections for miners at underground metal and nonmetal mines. In light of MSHA's enforcement action, this notice does not reduce health protections for underground metal and nonmetal miners.

Diesel Particulate Matter Exposure of Underground Metal and Nonmetal Miners is withdrawn from the Regulatory Agenda. This document does not preclude future agency action that MSHA may find to be appropriate.

We encourage you to participate in this rulemaking by submitting comments and related materials. All comments received will be posted, without change, to the docket located at http://www.regulations.gov and will include any personal information you have provided. We have an agreement with the Department of Transportation (DOT) to use the Docket Management Facility. Please see DOT's “Privacy Act” paragraph below.

If you submit a comment, please include the docket number for this rulemaking (USCG-2008-0028), indicate the specific section of this document to which each comment applies, and give the reason for each comment. We recommend that you include your name and a mailing address, an e-mail address, or a phone number in the body of your document so that we can contact you if we have questions regarding your submission. For example, we may ask you to resubmit your comment if we are not be able to read your original submission. You may submit your comments and material by electronic means, mail, fax, or delivery to the Docket Management Facility at the address under ADDRESSES ; but please submit your comments and material by only one means. If you submit them by mail or delivery, submit them in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying and electronic filing. If you submit them by mail and would like to know that they reached the Facility, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this rule in view of them.

To view comments, as well as documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov at any time, click on “Search for Dockets,” and enter the docket number for this rulemaking (USCG-2008-0028) in the Docket ID box, and click enter. You may also visit the Docket Management Facility in Room W12-140 on the ground floor of the DOT West Building, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

Anyone can 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 the Department of Transportation's Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477), or you may visit http://DocketsInfo.dot.gov.

We do not now plan to hold a public meeting. But you may submit a request for one to the Docket Management Facility at the address under ADDRESSES explaining why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register .

The Coast Guard is issuing this interim final rule without prior notice and opportunity to comment pursuant to section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to these amendments because providing opportunity for public comment is unnecessary and would be contrary to the public interest.

The Coast Guard is implementing VSO training and certification requirements that the U.S. has agreed to as a party to the STCW. This will ensure consistency and harmonize U.S. and international standards for VSO training and certification while at the same time ensuring that the U.S. observes its international obligations. Because the STCW VSO training and certification standards are exhaustive and well-established, pre-publication notice and comment procedures are not necessary to further inform the rulemaking, which follows those requirements.

This interim rule also enhances national maritime safety and security by ensuring careful vetting by the Coast Guard of the qualifications of individuals wishing to serve as VSOs. A delay in implementing this rule would be contrary to the public interest in national maritime safety and security.

This interim rule will also permit mariners to continue working in the industry on U.S. seagoing vessels outside of U.S. territorial waters by bringing their training and certification into compliance with STCW requirements. This permits U.S. seagoing vessels to continue to travel to and operate in foreign waters and ports without being subject to possible detention for noncompliance with STCW requirements. The Coast Guard believes that permitting U.S. seagoing vessels to continue to operate internationally consistent with STCW VSO training and certification requirements, and without delay, is clearly within the public interest. For these reasons, it is unnecessary and would be contrary to the public interest to further delay implementation of these requirements.

This interim rule will have a 60-day comment period and the rule will be effective 30 days after publication in the Federal Register . Coast Guard will address comments received on this interim rule before and after the effective date as part of the final rule process. You may submit a request for a public meeting if you believe one would be beneficial. If you would like to request a public meeting, submit your request as described above in PUBLIC MEETING explaining why one would be beneficial. If we determine a public meeting is necessary, the time and place of the public meeting will be announced by a notice in the Federal Register .

On July 1, 2007, the International Maritime Organization's (IMO) Maritime Safety Committee adopted the 2006 amendments to the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended (STCW) and the Seafarer's Training, Certification and Watchkeeping Code (STCW Code) related to training and certification requirements for a vessel security officer (VSO). These amendments support the security requirements in the International Ship and Port Facility Security Code (ISPS) and International Convention for the Safety of Life at Sea (SOLAS), 1974, Amendments, adopted December 2002.

The amendments to the STCW and STCW Code set certification and qualification requirements for VSOs. The STCW set forth qualification standards for Masters, officers and watch personnel on seagoing merchant ships. STCW entered into force in 1984 and the U.S. became a party to the Convention in 1991. As a party to the STCW, the U.S. is committed to implementing the adopted amendments.

The STCW amendments became effective January 1, 2008. Under the STCW amendments, those persons who became vessel security officers (VSOs) on or after January 1, 2008, needed to comply with the new requirements as of January 1, 2008. Those persons who already worked as VSOs prior to January 1, 2008, need to comply with those new requirements by July 1, 2009. This rulemaking is being carried out as expeditiously as possible to ensure that mariners are issued the appropriate international certificates, therefore avoiding vessel detentions for non-compliance with the STCW requirements at foreign ports. Furthermore, the implementation of the rule at this time is meant to ensure there is time for training courses to be developed that comply with the proposed interim regulation and provide all new and existing VSOs with the opportunity to take the course and apply for a VSO endorsement prior to July 1, 2009.

The STCW and STCW Code amendments include: 1. Certification by the Coast Guard of VSOs; 2. completion of sea service requirements; 3. VSO training in accordance with the STCW Code's standard of competence; 4. approval of training courses by the Coast Guard; and 5. continuous monitoring by the Coast Guard through a quality standards system (QSS) of the training courses it accepts. The amendments also contain transitional provisions for persons already serving as VSOs that will expire on July 1, 2009. The STCW and STCW Code amendments were based on the IMO model course for Ship Security Officer.

Currently, 33 CFR 104.215 requires VSOs to have maritime security knowledge which can be obtained through training or equivalent job experience, as self-certified by the owner/operator of the vessel employing the individual. The existing regulations do not require certification by the Coast Guard.

This interim rule amends the current regulations to adopt the STCW and STCW Code amendments related to VSO training and qualifications. To address the primary STCW and STCW Code amendments, the Coast Guard is amending 46 CFR Part 10 to require owner/operators to employ a certified VSO on board each vessel subject to the STCW under current regulations. This includes all seagoing vessels, as defined in 46 CFR 15.1101, to mean self-propelled vessels engaged in commercial service that operate beyond the Boundary Line established by 46 CFR Part 7, except those vessels which have been determined to be otherwise exempt from STCW as per 46 CFR 15.103(e) and (f).

The Coast Guard will also add VSO training requirements in 33 CFR 104.215 to align the regulations with competence-based training requirements in STCW. The regulations currently require VSOs to have maritime security knowledge in a number of areas contained in 33 CFR 104.210 and in 33 CFR 104.215. The Coast Guard has determined that the VSO training requirements should be contained in one place and that the training requirements should be fully aligned with STCW.

The Coast Guard will also add VSO sea service requirements in 33 CFR 104.215 to align the regulations with the STCW requirements. The existing regulations do not include sea service requirements. The Coast Guard will now require sea service of 12 months or, with knowledge of vessel operations, six months. The Coast Guard determined that these two options were necessary to account for traditional mariners and for other personnel, such as security experts, who already possess knowledge and experience of vessel operations.

Section 104.215 of title 33 of the Code of Federal Regulations currently requires VSOs to have maritime security knowledge. This knowledge can be obtained through training or equivalent job experience, as self-certified by the owner/operator of the vessel employing the individual. The existing regulations do not require certification.

In 33 CFR 104.215, the regulation will require Coast Guard certification in the form of a VSO endorsement for persons performing duties as VSOs on board vessels subject to the STCW under current regulations. This includes all seagoing vessels, as defined in 46 CFR 15.1101, to mean self-propelled vessels engaged in commercial service that operate beyond the Boundary Line established by 46 CFR part 7, except those vessels which have been determined to be otherwise exempt from STCW as per 46 CFR 15.103(e) and (f).

Section 104.215 will also require that VSOs meet entry requirements such as: 1. Be at least 18 years old; 2. be able to speak and understand the English language sufficiently as related to VSO duties; 3. hold valid credentials; 4. complete VSO training; and 5. have approved sea service. The training requirements will include competence-based mandatory training in order to qualify for a VSO endorsement. VSOs will be required to be trained to meet six competencies that fully align with the STCW Code, Table A-VI/5, Specifications of minimum standards of proficiency for ship security officers, which may be found in the docket [USCG-2008-0028].

The sea service requirements in § 104.215 will provide two options: 1. 12 months; or 2. 6 months with knowledge of ship operations. In addition to providing evidence of sea service, mariners seeking to qualify for an endorsement using the six-month option will also be required to furnish evidence of knowledge of basic ship operations. A list of ship operations areas is included in this rulemaking at 33 CFR 104.215(d)(3). The list was derived using input from merchant mariners and from maritime instructors.

The STCW requires that all training be approved by the Coast Guard and that the training be continuously monitored through a quality-standard system to ensure achievement of defined objectives. To fulfill this requirement, VSO training courses will be approved and monitored by a Coast Guard-accepted Quality Standards System (QSS) organization acting on behalf of the Coast Guard. The Coast Guard will not directly approve any VSO courses. Any fees charged by the Coast Guard-accepted QSS organizations will be the responsibility of the VSO course provider. As of the publication date of this interim rule, there are three Coast-Guard accepted QSS organizations that may approve and monitor training on behalf of the Coast Guard. The list of these organizations can be found on the following Internet Web site: http://www.uscg.mil/STCW/mmic-appcourses.htm.

It is expected that courses accepted for VSO endorsement by the Coast Guard will be based on the IMO model course for ship security officer, or the MARAD VSO model course. Vessel Security Officer courses must also ensure that persons completing the course can successfully demonstrate proficiency in the basic competencies in 33 CFR 104.215(d)(2). Information on MARAD VSO full and refresher courses can be found on the following Internet Web site: http://www.marad.dot.gov/MTSA/MARAD%20Web%20Site%20for%20MTSA%20Course.html. The Coast Guard will also accept courses approved by MARAD on behalf of the Coast Guard under section 109 of the Maritime Transportation Security Act of 2002, Public Law 107-295 as meeting the requirements of STCW for purposes of fulfilling the regulatory requirements in 33 CFR 104.215(d)(1)(iv) and (d)(2), as referenced in 33 CFR 104.215(d)(6). Information on these approved courses can be found on the following Internet Web site: http://www.marad.dot.gov/MTSA/MARAD%20Web%20Site%20for%20MTSA%20Course.html.

The Coast Guard will also accept a QSS-approved refresher course for persons who can document six months of experience as a VSO, or have successfully completed a course on vessel security that was not approved by MARAD prior to the effective date of this interim rule.

Section 10.811 will require proof of compliance with the entry requirements in 33 CFR 104.215 for mariners seeking a VSO endorsement. It will also require the individual to meet the physical examination requirements in 46 CFR 10.205(d)(1)-(2).

We are adding 46 CFR 15.1113 which will require that VSOs serving on board vessels subject to the STCW hold an endorsement as VSO. This includes all seagoing vessels, as defined in 46 CFR 15.1101 to mean self-propelled vessels engaged in commercial service that operate beyond the Boundary Line established by 46 CFR Part 7, except those vessels which have been determined to be otherwise exempt from STCW as per 46 CFR 15.103(e) and (f).

We developed this interim rule after considering numerous statutes and executive orders related to rulemaking. Below, we summarize our analysis based on 13 of these statutes or executive orders.

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. It has not been reviewed by the Office of Management and Budget (OMB) under that Order.

A combined Regulatory Analysis and an Initial Regulatory Flexibility Analysis is available in the docket where indicated under the “Public Participation and Request for Comments” section of this preamble. A summary of the analysis follows:

The interim rule would require vessel security officers (VSOs) serving on U.S.-flag vessels subject to the International Convention on Standards of Training, Certification, and Watchkeeping for Seafarers, 1978 as amended (STCW) to complete training requirements consistent with STCW amendments on VSO training and qualifications. This would require existing VSOs and persons that intend to serve as VSOs to hold a Coast Guard-issued credential with a VSO endorsement. The affected vessels would be U.S.-flag self-propelled vessels engaged in commercial service that operate beyond the boundary line as specified in 46 CFR part 15.1101.

The Coast Guard does not plan to directly approve any VSO courses. Instead, VSO training must be Coast Guard-accepted. This means that the courses must be approved and monitored by a Coast Guard-accepted Quality Standards System (QSS) organization acting on behalf of the Coast Guard. Any fees charged by the Coast Guard-accepted QSS organizations will be the responsibility of the course provider.

In addition, persons that have already completed a Maritime Administration (MARAD)-approved VSO course before the effective date of this rule would be considered in compliance with the training requirement and would only need to successfully meet the qualification requirements. Persons that have completed a non-MARAD training course before the effective date of this rule can meet the training requirement by completing a Coast-Guard accepted VSO refresher course. They would be able to serve as a VSO upon completion of the training and they would have until July 1, 2009, to complete the refresher course. After that time, they will be required to take a full VSO training course.

There are four cost elements associated with this interim rule (1) A VSO refresher course cost, (2) a full VSO course cost, (3) a training provider cost from a Coast Guard-approved QSS, and (4) a VSO endorsement and travel cost to a regional examination center (REC). We estimate that approximately 716 VSOs would need refresher course training and approximately 237 would need to enroll in a full training course. During the first full year the rule is in effect, or 2009, about 1,769 VSOs will incur a cost associated with an REC, and annually, about 190 VSOs will incur the REC cost (we chose 2009 as the first year of the analysis period since most VSOs would complete the required training during that year). The total population of VSOs potentially affected by this interim rule is approximately 1,974, depending upon the training requirement. Under the current rule, VSO training is optional. The number of training providers affected is dependent upon when the training provider courses expired and the renewal date. We estimate the interim rule to affect about 879 U.S.-flag seagoing vessels engaged in commercial service that operate beyond the boundary line as specified in 46 CFR part 15.1101.

We present the costs of this interim rule in 2007 dollars and discount these costs to their present value (PV) over a 10-year period of analysis, 2009-2018, using both seven and three percent discount rates. We estimate the annuitized costs of this interim rule over the 10-year period of analysis to be about $1.5 million at both seven and three percent discount rates. We estimate the total 10-year (2009-2018) present discounted value or cost of this interim rule to industry to be between $10.5 and $12.3 million at both seven and three percent discount rates, respectively. Table 1 below summarizes the costs of the interim rule.

On August 10, 2006, the Copyright Office published a final rule requiring the submission of royalty fees to be made by electronic funds transfer (“EFT”). 71 FR 45739 (August 10, 2006). The purpose of this notice is to make technical amendments to Section 201.17(i) and other similar rules for satellite carriers and digital audio recording technologies to clarify when interest accrues for late and underpayments in light of the recent EFT requirement. In addition, we intend to re-insert regulatory text, originally contained in Section 201.17(i)(2), that was incorrectly deleted from Title 37 CFR when the EFT requirements were adopted.

Under the new EFT regulations, 37 CFR 201.17(i), a number of changes were made regarding the payment of copyright royalties. The most important change was that payment could only be made through an electronic funds transfer. This change eliminates the options of payment by certified or cashier’s check, or money order. Most payors already use EFTs, and requiring the use of EFTs substantially enhances the efficiency of the collection process. The regulations also require that the parties submit specific identifying and linking information as part of the EFT, and/or as part of a “remittance advice” which accompanies Statement(s) of Account, and that the “remittance advice” be faxed or emailed to the Licensing Division. Failure to submit the EFT in accordance with the rules may require the remitter to resubmit the EFT correctly. Should this occur, the remitter will be responsible for any assessed interest charge that accrues as a result of a late payment or an underpayment.

The rules now include a waiver provision for those situations where there may be circumstances which make it virtually impossible for a remitter to use the electronic payment option or imposes a financial or other hardship. Requests for a waiver must include a statement setting forth the reasons why the waiver should be granted and the statement must be signed by a duly authorized representative of the entity making the payment, certifying that the information provided is true and correct.

Section 201.17(c)(1) states that:

Section 201.17(i)(2) (before it was deleted) stated that:

Morever, Section 201.17(i)(2)(iii) (before it was deleted) stated that “Interest is not required to be paid on any royalty underpayment or late payment from a particular accounting period if the interest charge is less than or equal to five dollars ($5.00).”

It is important to note that the Copyright Office’s regulations concerning interest and accrual vis-a-vis late-filed SOAs for satellite carriers is different than that for cable operators. Section 201.11(i)(1) states:

The Copyright Office’s regulations regarding interest and accrual vis-a-vis late-filed SOAs for digital audio recording devices is comparable to that for satellite carriers. Section 201.28(l)(1) states:

We note that the five-day language, contained in Section 201.17(i)(2) of the Copyright Office’s rules (before it was deleted), does not extend the Statement of Account filing period deadlines. However, the appropriate interest accrual period for late-filed SOAs has been subject to dispute because the “five business day” language of Section 201.17(i)(2) applies, on its face, to underpayments, not to late payments. It has been the Copyright Office’s Licensing Division’s practice that interest on late payments begins to accrue on the first day after the close of the period for filing statements of account until the date payment is received by the Copyright Office. If the “five business day” language applied in the instance of late payments, which it does not under the practices of the Copyright Office, then the amount of interest due would be less.

Given the facts and circumstances, and the need for clarity and administrative consistency, technical amendments to the existing regulations are appropriate. We propose to amend Section 201.17(i) by adding the phrase “late payments” to the existing regulatory language. In the interest of consistency, this change would make the rule largely parallel to Sections 201.11(i) and 201.28(l). As such, all royalty payments made by EFT must be made the day they are due. Interest will begin to accrue the next day for all late-filed submissions and on royalties that are underpaid. The accrual period ends when a full royalty payment is received by the Copyright Office.

We also propose to modify the “five business day” rule, currently found in all three regulations, and apply it only to those circumstances where a waiver of the EFT rule is granted by the Copyright Office. While the Office has received very few waivers since the EFT regulations were implemented, we still believe that special provisions concerning royalty payments by check are appropriate. In cases where a waiver is granted, the accrual period ends on the date the mailed payment is postmarked. However, if the payment is not received by the Copyright Office within five business days of its due date, then the accrual period shall end on the date of the actual receipt by the Copyright Office.

Finally, Section 201.11(i) is amended to recognize that in 2004, Congress expanded Section 119 to include secondary transmissions to commercial establishments. Satellite Home Viewer Extension and Reauthorization Act of 2004, a part of the Consolidated Appropriations Act of 2004. See Pub. L. No. 108-447, 118 Stat. 3394 (2004) (“Section 107”).

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

Effective June 15, 2004, we classified the Ventura County ozone nonattainment area under the Clean Air Act (“Act” or CAA) as “subpart 2/moderate” for the 8-hour ozone national ambient air quality standard (NAAQS). See 69 FR 23858, at 23889 (April 30, 2004); and 40 CFR 81.305. Our classification of Ventura County as a “moderate” ozone nonattainment area establishes a requirement that the area attain the 8-hour ozone NAAQS as expeditiously as practicable, but no later than six years from designation, i.e., June 15, 2010. By letter dated February 14, 2008, the Executive Officer for the California Air Resources Board (CARB) submitted a request to reclassify three California areas designated nonattainment for the 8-hour ozone standard. Ventura was one of the three areas, and for the Ventura County ozone nonattainment area, CARB has requested reclassification from “moderate” to “serious.” We are acting on the request for Ventura in today's document. In a separate document, we will propose a schedule for required plan submittals for Ventura County under the new classification.

We will also act on the requests for the other two areas listed in CARB's February 14, 2008 letter, as well as the reclassification requests previously received from CARB for the San Joaquin Valley, South Coast, and Coachella Valley ozone nonattainment areas, in a separate document. We are deferring action on the State's reclassification requests for the five other areas to allow for notification to, and the opportunity for consultation with, the Indian tribes located within the five areas. No Indian tribes are located within Ventura County. In the separate document, we will also propose schedules for required plan submittals under the new classifications for these areas.

We are reviewing this request as one made pursuant to section 181(b)(3) of the Act which provides for “voluntary reclassification” and states: “The Administrator shall grant the request of any State to reclassify a nonattainment area in that State in accordance with table 1 of subsection (a) of this section to a higher classification. The Administrator shall publish a notice in the Federal Register of any such request and of action by the Administrator granting the request.” While section 181 relates to the 1-hour ozone NAAQS, the same option exists with respect to the 8-hour ozone NAAQS. See 40 CFR 51.903(b) (“A State may request a higher classification for any reason in accordance with section 181(b)(3) of the CAA.”). We find that the plain language of section 181(b)(3) mandates that we approve such a request, and, as such, EPA is granting CARB's request for voluntary reclassification under section 181(b)(3) for the Ventura County ozone nonattainment area from “moderate” to “serious” in today's document. As a result of this action, Ventura County must now attain the 8-hour ozone NAAQS as expeditiously as practicable, but not later than nine years from designation, i.e., June 15, 2013.

EPA has determined that today's action falls under the “good cause” exemption in section 553(b)(3)(B) of the Administrative Procedure Act (APA) which, upon finding “good cause,” authorizes agencies to dispense with public participation where public notice and comment procedures are “impracticable, unnecessary or contrary to the public interest.” EPA has determined that public notice and comment for today's action is unnecessary because our action to approve voluntary reclassification requests under CAA section 181(b)(3) is nondiscretionary both in its issuance and in its content. As such, notice and comment rulemaking procedures would serve no useful purpose.

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. EPA has determined that the voluntary reclassification would not result in any of the effects identified in Executive Order 12866 section 3(f). Voluntary reclassifications under section 181(b)(3) of the CAA are based solely upon request by the State and EPA is required under the CAA to grant them. These actions do not, in and of themselves, impose any new requirements on any sector of the economy. In addition, because the statutory requirements are clearly defined with respect to the differently classified areas, and because those requirements are automatically triggered by classification, reclassification cannot be said to impose a materially adverse impact on State, local or tribal governments or communities. 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).

In addition, I certify 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. ). This action 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), because EPA is required to grant requests by States for voluntary reclassifications and such reclassifications in and of themselves do not impose any federal intergovernmental mandate. 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).

Because EPA is required to grant requests by States for voluntary reclassifications and such reclassifications in and of themselves do not impose any federal intergovernmental mandate, this action also does not have Federalism implications as 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 does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act.

This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant. As discussed above, a voluntary reclassification under section 181(b)(3) of the CAA is based solely on the request of a State and EPA is required to grant such a request. In this context, it would thus be inconsistent with applicable law for EPA, when it grants a State's request for a voluntary reclassification, to use voluntary consensus standards. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by July 21, 2008. 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).)

The Bald and Golden Eagle Protection Act (16 U.S.C. 668-668d) (Eagle Act) prohibits the take of bald eagles and golden eagles unless pursuant to regulations (and in the case of bald eagles, take can be authorized only under a permit). While the bald eagle was listed under the ESA (16 U.S.C. 1531 et seq.), we authorized incidental take of bald eagles through take statements under ESA section 7 and through section 10 incidental take permits (50 CFR 402, Subparts A and B; 50 CFR 17.22(b) and 17.32(b)). Those authorizations were issued with assurances that the Service would exercise enforcement discretion in relation to violations of the Eagle Act (16 U.S.C. 668-668d) and the Migratory Bird Treaty Act (16 U.S.C. 703-712) (MBTA). Since the bald eagle has been removed from the ESA's List of Endangered and Threatened Wildlife throughout most of its range (see 72 FR 37345, July 9, 2007 and 73 FR 23966, May 1, 2008), the prohibitions of the ESA no longer apply except to the Sonoran Desert nesting bald eagle population. However, the potential for human activities to violate Federal law by taking bald eagles (and golden eagles) remains under the prohibitions of the Eagle Act and the MBTA. The Eagle Act defines the “take” of an eagle to include a broad range of actions: “pursue, shoot, shoot at, poison, wound, kill, capture, trap, collect, or molest or disturb.” “Disturb” is defined in our regulations at 50 CFR 22.3 as “to agitate or bother a bald or golden eagle to a degree that causes, or is likely to cause, based on the best scientific information available, (1) injury to an eagle, (2) a decrease in its productivity, by substantially interfering with normal breeding, feeding, or sheltering behavior, or (3) nest abandonment, by substantially interfering with normal breeding, feeding, or sheltering behavior.” Many actions that were considered likely to incidentally “take” (harm or harass) eagles under the ESA may also “take” eagles under the Eagle Act, as those terms have been defined by statute and regulation.

The ESA provides broad substantive and procedural protections for listed species but at the same time allows significant flexibility to permit activities that affect listed species. In particular, sections 7(b)(4) and 10(a)(1)(B) of the ESA provide that we may authorize the incidental take of listed wildlife in the course of otherwise lawful activities. Nationwide, since 2002, the Service issued an average of 52 incidental take statements per year that covered anticipated take of bald eagles under the ESA's section 7 (50 CFR 402, Subpart B). During that same 5-year period, we issued nine incidental take permits that included bald eagles under the ESA's section 10(a)(1)(B). A total of 126 such incidental take permits have been issued for bald eagles and 12 incidental take permits include golden eagles as covered, non-listed species (50 CFR 17.22(b) and 17.32(b)). The statutory and regulatory criteria for issuing those ESA authorizations included minimization, mitigation, or other conservation measures that also satisfied the statutory mandate under that Eagle Act that authorized take must be compatible with the preservation of the bald or golden eagle. Our practice was to provide assurances in each section 7 incidental take statement and section 10 permit that we would not refer the incidental take of a bald eagle for prosecution under the Eagle Act, if the take was in compliance with the terms and conditions of a section 7(b)(4) incidental take statement or the conditions of a section 10(a)(1)(B) incidental take permit.  1 Now that the bald eagle is delisted in most of the U.S., new mechanisms are needed to address take pursuant to the Eagle Act.

The Eagle Act provides that the Secretary of the Interior may authorize certain otherwise-prohibited take of eagles through promulgation of regulations. The Secretary is authorized to prescribe regulations permitting the “taking, possession, and transportation of [bald or golden eagles] * * * for the scientific or exhibition purposes of public museums, scientific societies, and zoological parks, or for the religious purposes of Indian tribes, or * * * for the protection of wildlife or of agricultural or other interests in any particular locality,” provided such permits are “compatible with the preservation of the bald eagle or the golden eagle” (16 U.S.C. 668a). In accordance with this authority, the Secretary has previously promulgated Eagle Act permit regulations for scientific and exhibition purposes (50 CFR 22.21), for Indian religious purposes (50 CFR 22.22), for take of depredating eagles (50 CFR 22.23), for possession of golden eagles for falconry purposes (50 CFR 22.24), and for take of golden eagle nests that interfere with resource development or recovery operations (50 CFR 22.25).

We have not previously promulgated permit regulations to implement the statutory provision which allows the Secretary to authorize take “for the protection of * * * other interests in any particular locality.” This statutory authority accommodates the spectrum of public and private interests (such as utility infrastructure development and maintenance, road construction, operation of airports, commercial or residential construction, resource recovery, recreational use, etc.) that have received authorization to take eagles under the ESA.

Shortly before delisting the bald eagle, we proposed regulations to permit take under the Eagle Act where the take is associated with otherwise lawful activities, and to permit removal of eagle nests for emergency safety needs (see 72 FR 31141, June 5, 2007). That proposed rule also included provisions we are finalizing today under this rule to extend Eagle Act take authorizations to persons previously authorized to take eagles under the ESA, provided the take occurs in compliance with the terms of that ESA authorization. Because the authorizations associated with this final rulemaking are categorically excluded from the requirement to prepare an environmental assessment under the National Environmental Policy Act (NEPA) (42 U.S.C. 4321-4347) under Departmental procedures and we find it is appropriate to have these authorizations available at the earliest practical date, we have bifurcated the proposed rule and are finalizing the ESA-related provisions ahead of the remainder of the proposal. That remainder is currently undergoing a NEPA analysis which we intend to complete later this year.

Eagle take that was prohibited under the ESA is, in many instances, also prohibited under the Eagle Act. Both statutes define take to prohibit killing, wounding, pursuing, shooting, capturing, and collecting the species they protect (16 U.S.C. 668c; 16 U.S.C. 1532(19)). The ESA definition of “take” additionally includes the terms “harm” and “harass,” while the Eagle Act includes “molest or disturb” in its definition of “take.” The regulatory definitions of “harm,” “harass,” and “disturb” differ; however they do overlap in several ways, with the result that an action considered likely to incidentally take eagles under the ESA may also take eagles under the Eagle Act.

Under this final rule, we extend Eagle Act authorizations to holders of existing ESA authorizations as seamlessly as is possible under the applicable laws. There are two mechanisms through which these new regulations provide Eagle Act authorization. First, the rule establishes regulatory provisions under 50 CFR 22.11 to provide take authorization under the Eagle Act to ESA section 10(a)(1)(B) permittees where the bald eagle is covered in a Habitat Conservation Plan (HCP) or the golden eagle is covered as a non-listed species, as long as the permittee is in full compliance with the terms and conditions of the ESA permit. This provision will also apply to the take of bald eagles and golden eagles specifically authorized in any future HCPs, whether or not eagles are then listed under the ESA. This provision also extends Eagle Act take authorization to ESA permits for Scientific Purposes and permits for Enhancement of Propagation or Survival (i.e., Recovery permits) issued under ESA section 10(a)(1)(A).

Second, the rule establishes a new permit category to provide expedited Eagle Act permits to entities authorized to take bald eagles through section 7 incidental take statements. Permits are not available under this new permit for golden eagles because as a non-listed species no take of golden eagles was previously authorized under the ESA's section 7.

Theoretically, this new permit category also may be used to extend Eagle Act take authorization to take exempted under section 7 of the ESA in the future where the bald eagle or golden eagle is protected under the ESA (e.g., for take of Sonoran Desert nesting bald eagles, or if bald eagles or golden eagles become ESA-listed in any portion of their respective ranges). However, in addition to the regulations being finalized herein, we intend to finalize regulations later this year to establish a new permit that will authorize take that is associated with, but not the purpose of, an action (proposed 50 CFR 22.26) (see 72 FR 31141, June 5, 2007). As part of that subsequent rule, we intend to amend the regulations we are promulgating today in a manner to restrict their use to section 7 incidental take statements issued prior to the date this later rule becomes effective. For any incidental take exempted under ESA section 7 that is authorized after the date § 22.26 becomes effective and that also constitutes take under the Eagle Act, the only permit that would be available to provide Eagle Act take authorization would be the new permit to be created by a final version of 50 CFR 22.26. Although the reasonable and prudent measures and associated terms and conditions of section 7 incidental take statements satisfy the statutory mandate of the Eagle Act, once a permit becomes available to authorize eagle take that is not associated with an ESA take authorization, for purposes of accountability and consistency, the same process and procedures should be used to authorize take under the Eagle Act regardless of whether it was also exempted under ESA section 7. Therefore, except for take authorized through ESA section 10 permits (which will confer authority to take under both the ESA and the Eagle Act under the new provision at 50 CFR 22.11), any take we authorize that is associated with, but not the purpose of an activity, would be provided under a single regulatory authority, 50 CFR 22.26, once it becomes available, rather than 50 CFR 22.28. Persons and entities permitted under § 22.28 may apply for a permit under § 22.26 when it becomes available.

The reason why different authorizing mechanisms are needed to extend Eagle Act take authorization to take authorized under ESA section 10 versus take exempted under ESA section 7 is that the Eagle Act requires that any bald eagle take to be authorized must be (1) pursuant to regulations, (2) authorized upon procurement of a permit from the Secretary of the Interior, and (3) compatible with the preservation of the bald eagle. We now find that the previously issued ESA take authorizations are compatible with the preservation of the eagle, and we are able to extend Eagle Act take authorization to holders of ESA permits through this regulation without the need for an additional permit because (1) this regulation satisfies the Eagle Act statutory mandate that take be authorized by regulation, and (2) a permit to take eagles has been procured from the Secretary of the Interior. In contrast, the take authorizations provided under section 7 of the ESA were not provided through a permit, and so the holders of those authorizations cannot be extended an Eagle Act authorization without a permit being procured prior to such taking.

Section 10(a)(1)(B) of the ESA authorizes incidental take permits for activities included in an HCP. One-hundred and twenty-six such permits cover bald eagles. Twelve permits authorize incidental take of golden eagles for ESA purposes (should the golden eagle be listed in the future) by their inclusion as covered non-listed species. Our practice was to issue these permits with a statement of enforcement discretion from the Service that provided assurances that the Service would not refer any take of bald or golden eagles for prosecution under the Eagle Act, as long as the take was in full compliance with the terms and conditions of the permit and HCP. While the bald eagle was protected under the ESA, these assurances also conveyed the Federal Government's commitment to make no additional conservation demands of permittees who were fully implementing the conservation measures within their HCPs.

Now that the bald eagle has been delisted in most portions of its range, all of these ESA permits will continue to provide viable authorizations under the ESA, should the affected eagle population become listed under the ESA in the future. The only change is that the bald eagle became a covered non-listed species under HCPs where it was delisted. However, none of these incidental take permits provided explicit authorization for take under the Eagle Act.

The conservation measures required to cover the bald eagle and the golden eagle under previously issued ESA incidental take permits (which were crafted to safeguard federally listed species, including those that may be listed in the future) are “compatible with the preservation of the bald eagle and the golden eagle” as required by the Eagle Act. Therefore, a separate Eagle Act permit is not required under this final rule. This rule amends the Eagle Act regulations at 50 CFR 22.11 to extend Eagle Act authorization for the take authorized under the ESA to entities who continue to operate in full compliance with the terms and conditions of permits issued under ESA section 10. Failure to abide by the section 10 permit requirements that pertain to eagles may, however, potentially void the Eagle Act authorization for these permits and result in permit revocation.

This final regulation diverges moderately from what we proposed in our June 2007 proposed rule (72 FR 31141). In the proposed rule, we suggested that section 10 incidental take permittees whose permits covered bald eagles as the only ESA-listed species would need to follow the same procedures as persons authorized under section 7 and apply for an expedited Eagle Act permit, rather than be covered by the new provision we are adding to 50 CFR 22.11. Although more cumbersome, we proposed that a new permit would be necessary because we thought that the ESA permit might be effectively “null and void,” since it no longer covered any species listed under the ESA.

However, after further consideration, we now conclude that a single-species HCP does not become null and void if the species is delisted, but instead is ineffective for purposes of providing ESA authorization as long as the species remains off the List of Endangered and Threatened Wildlife. However, should the species be re-listed within the tenure of the permit, the authorization would become effective (in much the same way that a permit under 50 CFR 17.22(d) that covers a Candidate species included in a Candidate Conservation Agreement becomes valid if the species becomes listed). Based on this approach, the seven section 10 permits that covered bald eagles as the only ESA-listed species are not null and void and are eligible to be treated in the same manner as section 10 incidental take permits that cover bald eagles among additional listed species, because both satisfy the Eagle Act permit requirement that a permit be procured before a bald eagle may be taken. Therefore the new provision at 50 CFR 22.11 will cover ESA section 10 incidental take permits that included eagles as the only ESA-listed species without the need for issuance of an additional Eagle Act permit.

The new provision at 50 CFR 22.11 also applies to take covered under future ESA section 10 permits associated with HCPs for multiple species that include bald eagles or golden eagles as covered species, whether or not eagles are listed under the ESA.

Take of bald eagles also was authorized under the ESA's section 10(a)(1)(A) permits for Scientific Purposes and permits for Enhancement of Propagation or Survival (i.e., Recovery permits). Many of these permits specifically provided take authorization under the Eagle Act in addition to the ESA authorization, and those permits will continue to serve as valid take authorizations under the Eagle Act. However, some section 10(a)(1)(A) permits provided take authority only under the ESA and these permits became inactive when the bald eagle was delisted. The new provision at § 22.11 will extend Eagle Act take authorization to the holders of those permits for the duration of the term of the section 10(a)(1)(A) permit, or until the amount or level of take authorized has been met.

As discussed above, the Eagle Act provides that bald eagles may not be taken unless a permit is first procured from the Secretary of the Interior. The new provisions at § 22.11 that extend Eagle Act coverage to holders of section 10 permits do not apply to section 7 incidental take statements, since those authorizations were not provided via issuance of a permit. This final rule establishes a process to issue Eagle Act permits to entities that were subject to ESA section 7 incidental take authorizations and for which there may continue to be a need to take eagles in the future.

Through the ESA section 7 process, when the Service concludes that the agency action will not cause jeopardy or adverse modification, we include an incidental take statement that specifies the amount or extent of incidental take that will be caused by the agency's action and which is exempted from the ESA's take prohibitions. The incidental take statement includes reasonable and prudent measures and associated terms and conditions to which the agency (or any applicant or grantee of the agency) must adhere in order for the take exception to apply (see 16 U.S.C. 1536(o)(2)). Those reasonable and prudent measures and associated terms and conditions in the incidental take statement also satisfy the statutory mandate of the Eagle Act that authorized take must be compatible with the preservation of the eagle. Therefore, criteria for issuing these expedited permits are limited to (1) whether the action agency (or any applicant or grantee of the agency) is implementing the action in full compliance with the terms and conditions of the ESA section 7 incidental take statement with respect to the take of eagles, and (2) whether new information is available to indicate that such take is not compatible with the preservation of the eagle (e.g., that take was or will be exceeded, or the activity will affect eagles in a manner or to an extent not previously considered, or the activity will be modified).

For ESA section 7 take statements issued before the date this rule takes effect, we will not refer such take for prosecution under the Eagle Act during an interim period that will afford the holders of the section 7 take statements a reasonable opportunity to obtain an Eagle Act permit, contingent on their remaining in full compliance with the terms and conditions of their take statements. For these purposes, “reasonable opportunity” means 1 year after the effective date of this rule, i.e., 13 months from the date of publication of this rule in the Federal Register . By that date, such applicants need to submit a completed application under these regulations. For ESA section 7 take statements issued before the date this rule takes effect, only those permittees whose activities will continue to take eagles after this 1-year period need to apply for an Eagle Act permit under these new regulations (as long as any take that occurs between August 8, 2007 (the effective date of the delisting of most bald eagles in the coterminous United States), through the end of this 1-year period is in accordance with the terms and conditions of the previously granted ESA incidental take statement).

For ESA section 7 incidental take statements issued on or after the date this rule takes effect, there will be no conversion period. At the present time, this applies only to the population of eagles found in the Sonoran Desert region of Arizona. Our aforementioned assurances that we will not refer take under the Eagle Act do not apply to take statements issued on or after the date this rule takes effect. If take of eagles is proposed within an ESA-listed population that we could authorize in accordance with the statutory and regulatory requirements of both laws, the Service's Migratory Bird and Endangered Species programs will coordinate the authorization processes with the goal of issuing the Eagle Act and ESA authorizations in a synchronized manner.

A separate authorization under the Migratory Bird Treaty Act is not required. Many impacts authorized under the ESA that will require Eagle Act authorization will not “take” eagles under the MBTA because that statute does not contain a prohibition against harassment or disturbance (without injury) of the birds it protects. Therefore, activities that harass or disturb an eagle would not require MBTA authorization unless the activity also results in injury or some other impact prohibited by the MBTA. Even where MBTA take will occur, a separate MBTA authorization in addition to the Eagle Act authorization is not required because 50 CFR 22.11(a) exempts those who hold Eagle Act permits from the requirement to obtain an MBTA permit.

In extending Eagle Act authorizations to entities authorized to take bald eagles under ESA section 7, we will make the permit available to either the action agency or the agency's grantee or permittee, or both. Either or both the action agency or the third party can request an Eagle Act permit under this section.

In applying for the permit, the applicant must include a written certification that he or she is in full compliance with all terms and conditions of the ESA incidental take statement. In making our determination, we will also review other any other relevant information available to us, including, but not limited to, any monitoring and progress reports required and submitted in furtherance of the ESA incidental take statement.

We anticipate that most permits will be issued with terms and conditions identical to those of the ESA incidental take statement. However, based on comments received on the proposed rule, we added provisions to the final regulation to address re-evaluation of terms and conditions, either at the request of the applicant, or initiated by the Service. Persons previously covered under an ESA incidental take statement, who apply for take authority under the Eagle Act through these regulations, may request a reevaluation from the Service to determine whether the conservation measures required under the ESA authorization are still necessary to satisfy the Eagle Act standard of compatibility with preservation of the bald eagle, or because of proposed modifications to the planned activity. However, if the ESA incidental take statement applies to eagles that are listed under the ESA, the Eagle Act permit cannot and will not remove or annul any terms and conditions contained in the ESA incidental take statement. Re-evaluation of the terms and conditions will likely require more time to process the application than when the applicant seeks to continue the past terms and conditions. Following issuance of the Eagle Act permit (as under most types of permits the Service administers) at any time during the permit tenure, the permittee may request amendment of his or her permit subject to general permit regulations at 50 CFR part 13.

We may initiate re-evaluation of terms and conditions under this rule if certain criteria that previously would have triggered reinitiation of formal consultation are present (see 50 CFR 402.16). Those criteria are any of the following: (1) The amount or extent of incidental take authorized under the take statement is exceeded; (2) new information reveals effects of the action that may affect eagles in a manner or to an extent not previously considered; or (3) the activity will be modified in a manner that causes effects to eagles not previously considered. If any of these factors is extant, depending on the specific circumstances, the Service may modify the terms and conditions as necessary to ensure that the authorized take is compatible with the preservation of the bald eagle or the golden eagle. The Service may re-evaluate the terms and conditions either before issuing the Eagle Act permit, or at any time during the permit tenure that one of the three “reinitiation criteria” triggers such re-evaluation, just as would be the case for the section 7 authorization. We do not anticipate that any such review under the Eagle Act would result in terms and conditions substantially different from those that would result under section 7 of the ESA.

The permit will be valid until the action that will take eagles, as described in the ITS or modified to condition the permit issued under this section, is completed, as long as the permittee complies with the terms and conditions of the permit, including any modified terms and conditions.

There is no permit application form or processing fee for this permit. To apply for a permit under this section, the applicant must send to his or her Regional Migratory Bird Permit Office a signed statement requesting an Eagle Act permit under this section and certifying that he or she is in full compliance with the terms and conditions of his or her ESA incidental take statement. If needed and applicable, the permit office may request the applicant submit copies of any monitoring and progress reports required under the take statement.

As part of establishing the new permit authorizations under 50 CFR 22.28, we are amending the list of permits at 50 CFR 13.12 to add this new permit type. We are also amending 50 CFR 13.11(d), the nonstandard fee schedule, to include this new permit and provide that no processing fee will be charged.

The comments addressed below include only those that pertain to the provisions being finalized in this rule. These include comments from two national environmental advocacy organizations, two industry associations, two law firms on behalf of real estate developers, one consultant, two committees representing multiple State natural resource agencies, and one Federal reclamation project. The remainder of the substantive comments we received in response to the June 5, 2007, proposed rule will be addressed in a subsequent rulemaking.

Comment 1: The criteria for permit issuance should be more stringent. Rather than give these “grandfathering” authorizations the barest of reviews, the Service must establish a system to assess these actions in light of the unique requirements of the Eagle Act. Language should be added to the sections on “Applying for a Permit” and “Required Determinations” to clarify that, before extending Eagle Act authorization, the Service will review whether the taking is necessary to protect an interest in a particular locality and whether the take is compatible with the preservation of the eagle. Before issuing these permits, the Service should also consider whether additional permit conditions or conservation measures are needed.

Service response: The take that will be authorized under the Eagle Act through these permits has been (or will be) reviewed at least twice by the Service. First, at the time the original ESA authorization was issued, the Service reviewed the take under either section 7 or section 10 of the ESA. Prior to issuing a section 7 incidental take statement, the Service assesses the effects of the action and issues the take statement only if we conclude the take would not jeopardize the continued existence of bald eagles. For section 10 permits, the Service determines that the taking will not appreciably reduce the likelihood of survival or recovery of the species. For each of the ESA authorizations we issued, we included a statement that we did not intend to bring enforcement action under either the Eagle Act or the MBTA for the ESA-authorized take. Though the take was not technically authorized under the MBTA or the Eagle Act through the ESA authorization, we determined that the ESA conservation goal was compatible with the statutory mandate of both Acts. We carefully considered the consequences of extending Eagle Act authorization to these actions before proposing to do so in our June 5, 2007, proposed rule (see 72 FR 31141) and since then, as we examined public input on that rule. Our conclusion is that the taking authorized by the ESA authorizations is compatible with the preservation of the bald eagle, individually and cumulatively.

However, the authorizations granted under the ESA were themselves subject to re-evaluation by the Service under certain limited circumstances, and through this final rule, we are extending the same criteria that allowed us to revise terms and conditions under the ESA authorizations to the Eagle Act authorizations granted herein. For section 10 permits, we do this by adding language to the new provision at § 22.11 to clarify that the same regulatory provisions that applied to section 10(a)(1)(B) permits continue to apply, except that the revocation criterion is based on the Eagle Act mandate of compatibility with the preservation of the bald eagle or the golden eagle, rather than the ESA standard of inconsistency with the criterion set forth in 16 U.S.C. 1539(a)(2)(B)(iv). Accordingly, the Service cannot require any additional conservation measure for changed or unforeseen circumstances than we could have required under the ESA permit, but if mutually agreed upon conservation measures cannot assure compatibility with the preservation of the bald eagle or the golden eagle, the Service may revoke a permit that is determined to be incompatible with the preservation of the bald eagle or the golden eagle.

To provide for Service-initiated re-evaluation of the terms and conditions of section 7 authorizations, we have added language to the final regulations that mirrors the criteria for reinitiation of formal consultation under section 7, but is based on the Eagle Act standard of compatibility with the preservation of the bald eagle or the golden eagle.

Regarding whether the Service, before issuing each permit, must make the determination that take is necessary to protect an interest in a particular locality, we believe that extending Eagle Act authorization to take that was previously exempted under the ESA is necessary to protect the legitimate interests of those members of the public, in particular localities, who were proceeding in good faith under previously issued ESA authorizations and were complying with all required conservation measures of their take statements.

Comment 2: The regulations should contain an explicit finding that issuing Eagle Act permits for previously issued ESA authorizations is consistent with the Eagle Act's take authorization provisions at 16 U.S.C. 668a.

Service response: We found above that the permits issued under this rulemaking are consistent with the Eagle Act. Additionally, based on this finding, the final regulations continue to use as the sole criterion for permit issuance whether the applicant is implementing the action as analyzed in the formal consultation and continues to fully comply with the terms and conditions of the previously issued ESA authorization.

Comment 3: The scope of “take” under the Eagle Act is far narrower than under the ESA. Therefore, the expedited permit processing criteria are appropriate.

Service response: Our conclusion that take previously authorized under the ESA is compatible with the preservation of the bald eagle is not based on a relative comparison of the two statutes' definitions of “take.” Rather, it is based on the adequacy of the issuance criteria for ESA authorizations, including minimization, mitigation, and other conservation measures, designed to protect a species classified as threatened under the ESA, that would remain as terms and conditions under the Eagle Act authorization.

Comment 4: In the preamble to the proposed rule, the Service stated that persons applying under this permit would be given the opportunity to ask for a re-evaluation of permit conditions, to ensure that permittees are not compelled to undertake measures that would not otherwise be required to offset take under the Eagle Act. However, no such provisions were included within the proposed regulation itself.

Service response: We have added specific provisions for requesting a re-evaluation of permit conditions to the final rule in two places: In § 22.28(c), Permit conditions; and in § 22.28(e)(2), Applying for an eagle take permit.

Comment 5: The Service should enact a general permit process similar to the U.S. Army Corps of Engineers' section 404(e) permit program under the Clean Water Act. The Eagle Act requirement that a permit must first be procured before bald eagle take can be authorized does not necessarily mean an individual permit is required. Without being automatically authorized via a general permit, some people may be subjected to criminal and civil penalties because they do not realize they need an Eagle Act permit.

Service response: The general permit program administered by the U.S. Army Corps of Engineers (Corps) provides authorization for certain types of activities without the landowner or developer having to obtain an individual site-specific permit in advance. The Clean Water Act specifically authorizes the Corps to issue general permits that are exempt from individual, case-by-case review (33 U.S.C. 1344(e)). No such provision exists within the Eagle Act, which states that “bald eagles may not be taken for any purpose unless, prior to such taking, a permit to do so is procured from the Secretary of the Interior” (16 U.S.C 668a). Because of that provision, we can promulgate regulations that authorize take of golden eagles without a permit, but not bald eagles; a regulation is not sufficient authorization, absent a permit from the Department of the Interior to take bald eagles.

The U.S. Court of Appeals for the District of Columbia Circuit has held that the Corps' nationwide general permits meet the statutory definition of rules because they are “legal prescription[s] of general and prospective applicability” Natl. Assn. of Home Builders vs. U.S. Army Corps of Engineers , 417 F. 3d 1272, 1284, D.C. Cir. 2005. Thus, if we attempted to authorize take of bald eagles with a “prescription of general and prospective applicability” and without individual permits, a reviewing court might find this to be inconsistent with the Eagle Act's requirement that a permit be procured prior to taking bald eagles. Consequently this final rule continues to require an application process, review, and issuance of a permit before take of bald eagles may be authorized under the Eagle Act for ESA section 7 authorizations because they were not provided via a permit from the Secretary of the Interior.

Regarding the issue of liability for unauthorized take, we believe that persons who were previously authorized to take eagles under the ESA should be at least as aware that most bald eagles were delisted and of the need to gain take authorization under the Eagle Act as the average citizen who has never had occasion to consider his legal responsibilities with regard to eagles.

Comment 6: There need to be timelines for issuance of the expedited permits, i.e., if no action is taken by the Service within 45 days, the applicant can conclusively presume that the permit is granted.

Service response: Regardless of any presumption on the part of the applicant, the activity is not authorized under the Eagle Act without a permit. We intend to issue these permits expeditiously, and we may include permit processing targets for these types of permits in forthcoming implementation guidance. However, due to factors not always under our control, such as the volume of requests, incomplete information provided by applicants, etc., we cannot always meet desired targets.

Comment 7: There should be a finite period of time during which people with previously issued incidental take statements must seek their conversion to an Eagle Act permit.

Service response: Elsewhere in the preamble, we have clarified that we expect those persons who wish to be able to continue to rely on the assurances provided in past ESA section 7 incidental take statements to apply for permits under this section within 1 year after this rule takes effect (thirteen months from the date of publication in the Federal Register ). For ESA section 7 take statements issued on or after the date this rule takes effect, there will be no conversion period: The recipient of the take statement needs immediately, or concurrent with the related ESA consultation, to seek a permit under this section (until such time as a permit is available under § 22.26). An Eagle Act permit is required to authorize take under the Eagle Act regardless of whether the take has been exempted under section 7, and our aforementioned assurances that we will not refer take under the Eagle Act will not be included in incidental take statements issued on or after the date this rule is finalized.

Comment 8: The Service needs to issue an Enforcement Directive from the Director to the field providing assurances during the interim period that it will not exercise any enforcement. The directive should be similar to the February 9, 1996, memorandum from the Director to the Regional Directors, which suggested that the Regions include statements in ESA incidental take authorizations they issue to the effect that the Service would not initiate enforcement actions under the Eagle Act and MBTA for the ESA-authorized take of migratory birds and eagles.

Service response: This comment loses some of its urgency with the release of these final regulations. Even so, an “enforcement directive” that would apply for the next year while applicants undergo the Eagle Act permitting process may still be desired. However, we do not agree that an internal memorandum wherein the Director transmits “recommendations to the Regions as interim guidance,” as was the case with the February 9, 1996, memorandum, would provide greater assurances than we have already provided through language contained in four separate rulemaking actions (including this one) published in the Federal Register .

Comment 9: Recipients of technical assistance letters that authorized activities under the ESA that are inconsistent with the National Bald Eagle Management Guidelines (see 72 FR 31156, June 5, 2007) may be subject to Eagle Act prosecution. Eagle Act permits should be expedited for recipients of such technical assistance letters.

Service response: Technical assistance letters could not and did not provide any authorization to take eagles. The only means available to gain authorization to take eagles under the ESA was by means of a permit issued under section 10 or an incidental take statement issued under section 7. The role of technical assistance letters was to inform the landowner or project proponent that the Service did not consider take likely to occur. Generally we issued these letters after providing technical assistance to the project proponent that included recommended modifications to the planned activity to minimize the possibility of take, and after the project proponent agreed to incorporate the measures. Technical assistance letters do not authorize take should it occur despite the recommended measures; only a permit or incidental take statement could absolve a person of liability for take of eagles. In situations where these letters were issued and the activity proceeds, there is no Eagle Act violation unless an eagle is disturbed or otherwise taken, regardless of whether the activity was consistent or not with the National Bald Eagle Management Guidelines.

If take does occur, the Service is unlikely to prioritize enforcement actions against a party that followed the Service's written advice (in the form of the technical assistance letter) regarding what steps were necessary to avoid taking eagles. Furthermore, although take of bald eagles under the Eagle Act can be authorized only by permit, it is not our goal to encourage applications for permits to cover take of eagles that is in fact very unlikely to occur. We believe our conservation mission is best served by helping the public reduce the likelihood of take, and to provide permits in appropriate circumstances where take is likely (and cannot practicably be avoided).

Comment 10: The Service should issue immediate guidance regarding prospective applicants who were in the midst of the HCP process when the bald eagle was delisted. The guidance should provide methods and standards for applicants to follow pending adoption of final take permit rules. Applicants who conform to the process should be given written assurances that the Service will not prosecute for eagle take, and the final rule should provide a means to convert that assurance into a permit.

Service response: This final rule provides a resolution of the issue raised by the commenter for most situations where project proponents were in the midst of developing an HCP that covered eagles when the bald eagle was delisted. The rule provides Eagle Act authorization for eagle take authorized under the ESA, including under future ESA section 10 permits.

However, there are some parties whose uncompleted HCPs were going to cover bald eagles but no other ESA-listed species, and they are no longer able to obtain a section 10 permit under the ESA for delisted eagles and cannot apply for take authorization under the Eagle Act until we finalize our proposed Eagle act take permit regulations. We recognize the difficult position in which these parties find themselves, having expended some effort towards development of HCPs and permit conditions for purposes of obtaining take authorization for bald eagles under the ESA. The best solution is that we expeditiously complete the new permit rule discussed above.

The difficulty with issuing the type of guidance the commenter suggests is that the handful of applicants in this position had reached different stages of the process at the time of bald eagle delisting. A few had nearly finalized development of appropriate minimization, mitigation, and conservation measures, but others had not. Because specific measures are needed in each particular situation to ensure impacts to eagles will be adequately mitigated, general guidance—other than what we provide in the National Bald Eagle Management Guidelines (e.g., how to avoid take)—would not be appropriate. For the handful of applicants who were engaged in the HCP process and cannot avoid taking eagles , we recommend that each such party continue working with our Ecological Services Field Office to implement measures that will minimize take until a means of Eagle Act authorization becomes available. The Service focuses its enforcement resources on investigating and prosecuting individuals and companies that take migratory birds without regard for the consequences of their actions and the law, especially when available conservation measures have not been implemented.

Comment 11: The statement that certain section 10 permits are “null and void” upon delisting should be struck because the minimization and mitigation measures are still required. Also, some of these permits contain the provision that the bald eagle will be covered if re-listed in the future.

Service response: We addressed this issue in the preamble discussion above: We do not consider certain section 10 permits to be “null and void” because eagles were the only listed species they covered. Rather, those permits are “ineffective for purposes of providing ESA authorization.” The commenter is technically incorrect in saying that HCPs that covered bald eagles as the only ESA-listed species contain the provision that the bald eagle will be covered if (delisted and) re-listed in the future. Neither the HCP, nor the permit, nor any implementing agreement included that specific provision. However, even without such a provision, the result is the same: If the bald eagle is re-listed for any reason in the future, we would recognize those permits as valid (within the timeframe for which the original permit was valid). Therefore, the single-species section 10 permit is not null and void, and can be treated under this rulemaking in the same manner as a section 10 permit associated with a multi-species HCP. The validity of the permit for both Eagle Act authorization and for future authorization under the ESA continues to be predicated on the permittee's compliance with the terms and conditions of the ESA permit.

Furthermore, the commenter is correct in noting that, even while the bald eagle remains off the List of Endangered and Threatened Wildlife and the single-species permit is “inactive” or “quiescent” for ESA purposes, if post-delisting take of bald eagles occurs, the permittee remains responsible for required minimization or mitigation measures that pertain to bald eagles in order to avoid liability under the Eagle Act.

On May 18, 2001, the President issued Executive Order 13211, which addresses regulations that affect energy supply, distribution, and use. E.O. 13211 requires agencies to prepare Statements of Energy Effects when undertaking certain actions.

This rule is not expected to significantly affect energy supplies, distribution, and use. Therefore, this action is not a significant energy action, and no Statement of Energy Effects is required.

The Office of Management and Budget (OMB) has determined that this rule is not significant under Executive Order 12866 (E.O. 12866). OMB bases its determination upon the following four criteria:

(a) Whether the rule will have an annual effect of $100 million or more on the economy or adversely affect an economic sector, productivity, jobs, the environment, or other units of the government.

(b) Whether the rule will create inconsistencies with other Federal agencies' actions.

(c) Whether the rule will materially affect entitlements, grants, user fees, loan programs, or the rights and obligations of their recipients.

(d) Whether the rule raises novel legal or policy issues.

Under the Regulatory Flexibility Act (as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996), whenever a Federal agency publishes a notice of rulemaking for any proposed or final rule, it must prepare and make available for public comment a regulatory flexibility analysis that describes the effect of the rule on small entities (i.e., small businesses, small organizations, and small government jurisdictions) (5 U.S.C. 601 et seq. ). However, no regulatory flexibility analysis is required if the head of an agency certifies that the rule would not have a significant economic impact on a substantial number of small entities. Thus, for a regulatory flexibility analysis to be required, impacts must exceed a threshold for “significant impact” and a threshold for a “substantial number of small entities.” See 5 U.S.C. 605(b). SBREFA amended the Regulatory Flexibility Act to require Federal agencies to provide a statement of the factual basis for certifying that a rule would not have a significant economic impact on a substantial number of small entities.

This rule may benefit a variety of small businesses, including real estate developers and brokers; construction companies; forestry and logging, farming, and ranching operations; tourism companies; utility companies; and others who were previously granted authorization to incidentally take eagles under the ESA. However, the benefits are more legal in nature than economic because this rule provides legal coverage under the Eagle Act for activities that are underway and proceeding under assurances provided by the Service that it would use enforcement discretion with regard to the Eagle Act as long as the activities are conducted under the terms and conditions of ESA authorizations. The Eagle Act authorizations will apply to the same activities for which these assurances had been provided a connection with an ESA authorization. Thus, additional economic benefits will not be significant.

The Department of the Interior certifies that this rule would not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule:

a. Will not have an annual effect on the economy of $100 million or more. The principal economic effect of the rule would be to remove uncertainty and facilitate transactions related to activities that may incidentally take bald eagles, where the take had been authorized until the bald eagle was delisted under the ESA. Small entities that benefited from the issuance of permits under the ESA will continue to benefit from permits issued under this rule.

b. Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions. The permits issued under this regulation will not significantly affect costs or prices in any sector of the economy. The rule provides regulatory assurances under the Eagle Act for take that had previously been authorized under the ESA.

c. Will not have a significant adverse effect on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. This regulation establishes a mechanism to permit effects from activities within the United States that were already authorized under a different statute. Therefore, there is no anticipated negative economic effect to small businesses resulting from this rule.

A statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq.) is not required.

a. This rule is not a significant regulatory action under the Unfunded Mandates Reform Act. A Small Government Agency Plan is not required. The permit regulations that are established through this rulemaking will not require actions on the part of small governments.

b. This rule is not a significant regulatory action under the Unfunded Mandates Reform Act. This rule will not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year.

In accordance with Executive Order 12630, the rule does not have significant takings implications. This rule will affect some private property insofar as it provides some land owners Eagle Act authorization for activities on their property that might incidentally take bald eagles, where the take was or is authorized under the ESA. A takings implication assessment is not required.

In accordance with Executive Order 13132, the rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. This rule will not interfere with the States' ability to manage themselves or their funds. Changes in the regulations governing the take of eagles should not result in significant economic impacts because this rule allows for the continuation of a current activity (take of eagles) albeit under a different statute (shifting from the ESA to the Eagle Act). A Federalism Assessment is not required.

In accordance with Executive Order 12988, the Office of the Solicitor has determined that this rule does not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Order.

In accordance with the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951) and 512 DM 2, we have evaluated potential effects on federally recognized Indian tribes and have determined that there are no potential effects. This rule will not interfere with Tribes' ability to manage themselves or their funds. This rule will not affect the process by which members of federally recognized tribes apply for and receive permits to possess eagle parts from the National Eagle Repository or permits to take eagles from the wild for religious purposes.

This rule does not contain new information collection under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.). Any information we collect will be in the form of a certification and is therefore exempt from Paperwork Reduction Act requirements. We may not collect, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB number.

We have considered this action and determined that we do not need to prepare an environmental assessment (EA) or environmental impact statement (EIS) in association with the National Environmental Policy Act of 1969 because this action is categorically excluded from such analysis under the Department of the Interior's NEPA procedures at 516 DM 8.5(A)(1), which covers changes or amendments to an approved action when such changes have no or minor potential environmental impact. The authorizations provided under these regulations are “approved actions” and are being extended with no changes in most cases. If any permits are issued under these regulations with changed permit conditions (at the request of the holder of an ESA authorization) and the changed conditions have the potential for a more than minor impact, the permits will be subject to the NEPA assessment on a case-by-case basis before they are issued. Therefore, relative to those permits, this action is categorically excluded under 516 DM 2, Appendix 1.1.

Section 7(a)(2) of the Endangered Species Act (ESA) of 1973, as amended (16 U.S.C. 1531 et seq.), requires all Federal agencies to “insure that any action authorized, funded, or carried out * * * is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of [critical] habitat.” This rule provides authorizations for impacts that were already assessed under section 7 of the ESA and maintains the requirement to comply with the conservation measures prescribed under those assessments for listed species. This rule has no impact on endangered or threatened species.