Commodity Credit Corporation
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Patent and Trademark Office
Engineers Corps
Navy Department
Federal Energy Regulatory Commission
Presidential Documents
Child Support Enforcement Office
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Child Support Enforcement Office
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Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws.
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Farm Service Agency, USDA.
Final rule.
The Farm Service Agency (FSA) is clarifying and simplifying its regulations governing the number of days interest will be paid on loss claims. The liquidation provisions currently provide a timeframe for the interest payment based upon “the date of the decision to liquidate,” which is often difficult to determine. This final rule will eliminate “the date of the decision to liquidate” as the beginning timeframe for the interest payment on loss claims. In addition, FSA is clarifying the guaranteed lender's responsibility for future recoveries.
Marilyn Z. Meese, Senior Loan Officer, Farm Service Agency; telephone: (202) 690-4002; Facsimile: (202) 690-1196; e-mail:
This final rule clarifies and simplifies the number of days' interest that may be paid on loss claims for the FSA guaranteed farm loan program. FSA guaranteed loans provide conventional agricultural lenders with up to a 95 percent guarantee of the principal loan amount and accrued interest. When a borrower cannot fully repay the guaranteed loan, the lender submits a loss claim request to FSA for payment of the guaranteed percentage of the unpaid debt, if any, after liquidation of the collateral.
As explained in the proposed rule, published on March 27, 2007 (72 FR 14244-14246), there was confusion for both lenders and FSA personnel on how to compute the number of days' interest that may be paid on loss claims. In order to both clarify and simplify this issue the final rule changes the regulations in 7 CFR 762.149(d) to allow a maximum of 210 days of accrued interest from the payment due date.
All lenders within 150 days of the payment due date must prepare a liquidation plan under 7 CFR 762.149(b). The reference to 150 days will replace the current language, “within 30 days of the decision to liquidate.”
Lenders also must file estimated and final loss claims on all accounts in a timely manner. If the lender expects no loss, a zero dollar estimated loss claim is to be filed. The estimated loss claim need not be filed if the account has already been completely liquidated within the 150 days. In that case, the lender would file only the final loss claim. A final loss claim also needs to be completed for any loan to close out the loan on FSA's financial records as to any remaining liability to the lender.
If the loss claim processing exceeds 40 days as a result of FSA's failure to take action on the claim FSA will pay additional interest to the lender after the 40 days.
FSA is providing clarification that the payment of a loss claim to the lender does not automatically relieve the borrower from any liability for the debt owed the lender or the lender of responsibility for any future recoveries. After payment of a loss claim by FSA, the lender will continue to have the responsibility to collect the entire loan balance.
In 7 CFR 762.148(d), FSA is removing the provision that the date the borrower files for Chapter 7 bankruptcy is the date of the decision to liquidate for purposes of calculating liquidation time frames.
If the loan account has been past due prior to the Chapter 7 bankruptcy filing those days will count towards the liquidation timeframes.
Finally, the Agency is amending 7 CFR 762.149(i)(1) by stating that as long as a loan is accruing interest, the sale proceeds from the liquidation of assets will be applied to principal first.
The 60-day comment period for the proposed rule ended on May 29, 2007. Only one comment was received. The commenter agreed with the proposed rule in three areas and disagreed in four. The commenter agreed that: the number of days of interest paid should not exceed 210 days from the payment due date, the new rule would clarify and simplify the issue, and the current language “within 30 days of the decision to liquidate” should be replaced with a reference to 150 days from the payment due date.
The commenter disagreed that a lender should submit an estimated loss claim when no loss is anticipated stating that even though this would help FSA to better monitor the liquidation process it is of no benefit to the lender. It would cause additional time and effort by the lender when they would be terminating the guarantee in the near future. The commenter also stated that the lender has little incentive to submit a zero estimated loss claim report. The commenter indicated that under the current regulation the lender is not required to file an estimated loss claim if no loss is expected and interest stops accruing 90 days after the decision to liquidate. The commenter stated that every time a lender has a loan on which no loss is expected filing a zero dollar estimated loss claim is a waste of time. The current regulation requires the filing of an estimated loss claim if liquidation is expected to take more than 90 days with a specific exception only for loans that will be liquidated in 90 days or less. The regulation also states that “interest accrual will cease 90 days after the decision to liquidate or an estimated loss of zero will be submitted.” It was anticipated that zero estimated loss claims would be filed so FSA could more easily project current loss information. However, that is not happening, and it is hoped that this change will increase awareness and compliance. Additionally, FSA is currently testing an automated loss claim system, which should simplify the process of filing loss claims. We expect that this automated system will
The commenter had the same objections about filing a final zero dollar loss claim for any loan where an estimated loss claim has been filed. This is not a new requirement, but rather existing policy. Once an estimated loss claim has been processed the only way to close out the account is filing a final loss claim. Therefore, no changes were made in the final rule as a result of this comment.
The commenter also objected to the requirement that sale proceeds from the liquidation of assets be applied to principal first as long as the loan is accruing interest. The commenter recognized that this policy would reduce the amount of any loss claim, but felt that the amount would be small. Additionally, the commenter indicated that the requirement would “be inconsistent with normal practices.” The commenter stated that the lender may incur expenses in pursuing collections and the additional interest earned by applying sale proceeds first to interest may be “minimal” but “it still is of some benefit to the lender.” Finally the commenter stated that the argument that since the funds were advanced for the collateral liquidated it was consistent to use the proceeds from the liquidation of those assets to reduce the principal was “not relative on many levels.” No further explanation was provided as to how it was not relative on many levels. The practice of requiring guaranteed lenders to apply the proceeds from the liquidation of collateral principal first is not unique to FSA. Additionally, the requirement only applies while interest is still accruing. It may be a small benefit to FSA, but then FSA bears 90 percent of the risk. No changes were made in the final rule as a result of this comment.
Lastly, the commenter disagreed that interest should be paid up to 90 days after the time period the lender is unable to dispose of acquired property due to state imposed redemption rights, if an estimated loss claim was paid by FSA. The commenter stated that the intention was good, but lenders are handicapped due to redemption rights. The commenter provided calculations based on the number of days involved and suggested that interest should be paid longer. However, the only change that FSA made in this paragraph was in the paragraph number, and did not propose changes to the existing practice. The 90 days time period is adequate in most cases and reasonably limits the cost to the Government. Therefore, no changes were made in the final rule as a result of this comment.
The Office of Management and Budget (OMB) designated this final rule as not significant under Executive Order 12866 and, therefore, this final rule did not require review by OMB.
The Agency certifies that this rule will not have a significant economic effect on a substantial number of small entities. This rule does require actions on the part of the subject program's borrowers or lenders based on their size. Borrowers may be individuals or entities. No distinction is made between small and large entities. The Agency will bear most of the burden under the revised regulations. The Agency anticipates that the final rule will require submission of no significant additional information, further justifying the conclusion that a Regulatory Flexibility Analysis is not required. The Agency, therefore, concludes that it is not required to perform a Regulatory Flexibility Analysis as required by the Regulatory Flexibility Act, Public Law 96-535, as amended (5 U.S.C. 601).
FSA has determined that this final rule would not constitute a major Federal action that would significantly affect the quality of the human environment. Therefore, in accordance with 7 CFR Part 799, Environmental Quality and Related Environmental Concerns—Compliance with the National Environmental Policy Act, implementing the regulations of the Council on Environmental Quality, 40 CFR parts 1500-1508, no environmental assessment or environmental impact statement will be prepared.
This rule has been reviewed in accordance with E.O. 12988, Civil Justice Reform. In accordance with that Executive Order: (1) All State and local laws and regulations that are in conflict with this rule will be preempted; (2) no retroactive effect will be given to this rule except that lender servicing under this rule will apply to loans guaranteed prior to the effective date of the rule to the extent permitted by existing contracts; and (3) administrative proceedings in accordance with 7 CFR part 11 must be exhausted before requesting judicial review.
For reasons contained in the Notice related to 7 CFR part 3015, subpart V (48 FR 29115, June 24, 1983), the programs and activities within this rule are excluded from the scope of Executive Order 12372, which requires intergovernmental consultation with state and local officials.
This rule contains no Federal mandates, as defined by title II of Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, for State, local, and tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA.
The policies contained in this rule do not have any substantial direct effect on 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. Nor does this rule impose substantial direct compliance costs on state and local governments. Therefore, consultation with the states is not required.
The amendments to 7 CFR part 762 contained in this rule require no revisions to the information collection requirements that were previously approved by OMB under control number 0560-0155.
FSA is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.
These changes affect the following FSA programs listed in the Catalog of Federal Domestic Assistance:
10.406—Farm Operating Loans
10.407—Farm Ownership Loans
Agriculture, Banks, Credit, Loan Programs—agriculture.
5 U.S.C. 301; 7 U.S.C. 1989.
(b) * * *
(1) Within 150 days after the payment due date, all lenders will prepare a liquidation plan. Standard eligible and CLP lenders will submit a written liquidation plan to the Agency which includes:
(v) An estimated loss claim must be filed no later than 150 days past the payment due date unless the account has been completely liquidated and then a final loss claim must be filed.
(d)
(2) The lender will discontinue interest accrual on the defaulted loan at the time the estimated loss claim is paid by the Agency. The Agency will not pay interest beyond 210 days from the payment due date. If the lender estimates that there will be no loss after considering the costs of liquidation, an estimated loss of zero will be submitted and interest accrual will cease upon the approval of the estimated loss and never later than 210 days from the payment due date. The following exceptions apply:
(i) In the case of a Chapter 7 bankruptcy, in cases where the lender filed an estimated loss claim, the Agency will pay the lender interest that accrues during and up to 45 days after the discharge on the portion of the chattel only secured debt that was estimated to be secured, but upon final liquidation was found to be unsecured, and up to 90 days after the date of discharge on the portion of real estate secured debt that was estimated to be secured, but was found to be unsecured upon final disposition.
(ii) The Agency will pay the lender interest that accrues during and up to 90 days after the time period the lender is unable to dispose of acquired property due to state imposed redemption rights on any unsecured portion of the loan during the redemption period, if an estimated loss claim was paid by the Agency during the liquidation action.
(i)
(5) The Agency will notify the lender of any discrepancies in the final loss claim or, approve or reject the claim within 40 days. Failure to do so will result in additional interest being paid to the lender for the number of days over 40 taken to process the claim.
Office of Health, Safety and Security, Department of Energy.
Final rule.
The Department of Energy (DOE) is today publishing a final rule to amend regulations that prohibit the unauthorized dissemination of certain unclassified but sensitive information identified as Unclassified Controlled Nuclear Information (UCNI). DOE is amending these regulations to clarify the types of information that may be identified as UCNI; to prevent overly-broad application of UCNI controls; and to streamline the UCNI program by simplifying the process for identifying information as UCNI.
Nicholas G. Prospero, Office of Classification, U.S. Department of Energy, 1000 Independence Ave., SW., Washington, DC 20585-1290, (301) 903-9967; Jo Ann Williams, Office of the General Counsel, U.S. Department of Energy, 1000 Independence Ave., SW., Washington, DC 20585, (202) 586-6899.
Under the Atomic Energy Act of 1954 (42 U.S.C. 2011
In response to this threat, Congress, in 1982, amended the Atomic Energy Act of 1954 (hereafter “the Act”) by adding section 148 (“Prohibition Against the Dissemination of Certain Unclassified Information”), which directed DOE to adopt regulations to safeguard certain types of unclassified but sensitive information from unauthorized dissemination in the interest of protecting both the health and safety of
Section 148 was not without precedent. In 1980, the Congress amended the Act to add section 147. Section 147 of the Act requires the Nuclear Regulatory Commission to prohibit the unauthorized disclosure of Safeguards Information, which includes a licensee's or applicant's procedures and security measures for the protection of special nuclear material, source material, or byproduct material. Under section 147, Safeguards Information also includes security measures for the protection of and location of certain plant equipment vital to the safety of production or utilization facilities. The major purpose of section 148 is to require DOE to control similar sensitive information about its atomic energy defense programs as section 147 protects with respect to commercial and other non-DOE nuclear facilities.
Section 148 directs the Secretary of Energy (the Secretary) to prescribe regulations, after notice and opportunity for public comment, or issue orders as may be necessary to prohibit the unauthorized dissemination of certain unclassified information concerning atomic energy defense programs. This information must pertain to the following:
1. The design of production or utilization facilities;
2. Security measures (including security plans, procedures, and equipment) for the physical protection of (a) production or utilization facilities or (b) nuclear material, regardless of its physical state or form, contained in these facilities or in transit; or,
3. The design, manufacture, or utilization of nuclear weapons or components that were once classified as Restricted Data, as defined in section 11y. of the Act.
In order for the information in the above categories to be controlled under section 148, the Secretary must determine that the unauthorized dissemination of such information could reasonably be expected to have a significant adverse effect on the health and safety of the public or the common defense and security by significantly increasing the likelihood of: (1) The illegal production of nuclear weapons, or (2) the theft, diversion, or sabotage of nuclear materials, equipment, or facilities. UCNI only includes Government information that: (1) is not classified; (2) concerns atomic energy defense programs; (3) falls within at least one of the three categories described above; (4) meets the adverse effect test described above; and (5) is not exempt from being UCNI under these regulations.
On September 14, 2007, DOE published a notice of proposed rulemaking (NOPR) for the purpose of clarifying and updating its UCNI regulations at 10 CFR part 1017. 72 FR 52506. Part 1017 provides for the review of information prior to its designation as UCNI; describes how information is determined to be UCNI; establishes minimum physical protection standards for documents and material containing UCNI; specifies who may have access to UCNI; and establishes a procedure for the imposition of penalties on persons who violate section 148 of the AEA, DOE regulations or any order of the Secretary issued under section 148. As explained in the NOPR, DOE proposed certain changes to simplify and streamline the UCNI program based on experience gained in the program. 72 FR 52507-09.
The following discussion describes the major issues raised in comments received and provides DOE's response to these comments, and describes any resulting changes in the final regulations. DOE has also made a few editorial, stylistic, and format changes for clarity and consistency.
One commenter suggested that the intent of adding the definition of “utilization facility” as described in the NOPR (Section II, Description of Proposed Changes, A.1), did not appear to be consistent with the definition for “utilization facility” in proposed § 1017.4. DOE disagrees. The intent of adding the definition of “utilization facility” is to more precisely define the types of information that can be UCNI. DOE has done this by (1) linking the definition of “utilization facility” to the presence of special nuclear material and (2) including within the definition of “utilization facility” specific categories of equipment and devices that can be UCNI. The proposed definition of “utilization facility” in § 1017.4 is based on the definition from the Act, which defines “utilization facility” as “any equipment or device, except an atomic weapon, determined by rule of the Commission to be capable of making use of special nuclear material in such quantity as to be of significance to the common defense and security.” Therefore, the first condition that must be met in order to determine whether a facility is a “utilization facility” is that it must use or be capable of using special nuclear material. The proposed definition of “utilization facility” also contains specific lists of equipment, devices, or component parts. If the equipment, device, or component part is not on one of the lists provided in the definition, then it does not meet the second condition and therefore cannot be determined to be a “utilization facility.” Our intent as described in the NOPR is to more precisely define what information may be identified as UCNI. Since our proposed definition of “utilization facility” provides this more precise definition, DOE finds them to be consistent.
This commenter was also concerned that the definitions of “utilization facility” and “production facility” in § 1017.4 do not provide adequate information for the contractor to determine whether any of its sites is an “UCNI sensitive facility” for purposes of a DOE internal directive, UCNI General Guideline (GG-5). Because this comment applies to provisions set forth in that directive, not in these regulations, DOE will consider the comment in revising that directive.
This commenter questioned why the language in the NOPR (Section II, A.1.) stating that storage facilities are not considered to be production or utilization facilities was not included in the regulatory text. The definitions for “production facility” and “utilization facility” in § 1017.4 include lists of specific categories of equipment and devices and provide the necessary information for a site to determine whether any of its facilities meet the definition of “production facility” or “utilization facility” and whether any should be subject to UCNI controls. DOE included in the NOPR preamble several examples of facilities, like storage facilities, that do not meet the definition of either “production facility” or “utilization facility” to further clarify the coverage of the definitions. However, DOE sees no need to include examples of what is not covered in the definitions.
The commenter suggested that the definitions of “production facility” and “utilization facility” were phrased incorrectly because they describe “any equipment or device.” DOE disagrees. The terms “production facility” and “utilization facility” are defined in the Act, and both definitions begin with the language “any equipment or device.” These terms have specific meanings in relation to special nuclear material. The plain language definition and usage of the word “facility” should not be
The commenter also suggested that our clarification of the concept of “widely disseminated in the public domain” did not consider the highly motivated malefactor who might use the professional staff at a research or public library to locate a report that was once widely disseminated in the public domain. DOE's position is that if the report can be found by anyone at the library, with or without help, then it is considered “widely disseminated in the public domain” and it cannot be protected as UCNI.
A second commenter pointed out that our proposed criteria for determining whether a document is widely disseminated in the public domain in proposed § 1017.15(a) was too narrow because it did not include documents housed in Government technical information services or depository library systems. We agree with the commenter and have modified the language in § 1017.15(a) to read, “The Reviewing Official must first determine whether the document is widely disseminated in the public domain, which means that the document under review is publicly available from a Government technical information service or depository library, for example, or that it can be found in a public library or an open literature source, or it can be accessed on the Internet using readily available search methods.”
One commenter noted that the language in proposed § 1017.10 discussing the “adverse effect test” described information that could be classified under DOE classification guidance and suggested that the word “significant” before “adverse effect” be deleted. The “significant adverse effect” standard in § 1017.10 is the standard set by paragraph a.(2) of section 148 of the Act, which provides the criteria for DOE to use in determining that information is UCNI.
This commenter also suggested a change to the language in proposed § 1017.17(b) concerning marking a document or material that does not contain UCNI. The commenter points out that while no UCNI markings are required if the document or material does not contain UCNI, other unclassified control markings may be. DOE agrees and has modified the language to read, “No UCNI markings are required in this case.”
The commenter also observed that use of the terms “special nuclear material” and “nuclear material” was blurred throughout the regulations. These terms are used throughout the regulations in the appropriate context. “Nuclear material” is defined in § 1017.4. For convenience, DOE has added a definition of “special nuclear material” to § 1017.4.
DOE received two comments regarding the civil penalty enforcement provisions in the proposed rule. The first comment relates to proposed § 1017.29(l)(5), renumbered as § 1017.29(m)(5), which states that DOE has the burden of going forward with and of proving by a preponderance of the evidence that the violation occurred as set forth in the final notice of violation and that the proposed civil penalty is appropriate. The commenter suggested that the standard of “clear and convincing evidence” was more appropriate than “preponderance of evidence.” DOE rejects this comment because “the preponderance of evidence” is the standard in most civil cases in the United States and it is the standard in “Procedural Rules for the Assessment of Civil Penalties for Classified Information Security Violations” (10 CFR part 824).
This commenter also stated that the proposed civil penalty provisions do not provide for enforcement conferences or provide the opportunity for DOE to mitigate the fines. We have accepted this comment in part and added a new § 1017.29(e) “Enforcement conference” that is modeled after § 820.22 “Informal conference” of “Procedural Rules for DOE Nuclear Activities” (10 CFR part 820). The Director may convene this conference to obtain and discuss information including mitigating circumstances. DOE notes, however, that mitigation was already provided for in DOE's proposed regulations. Proposed section 1017.29(m)(1), renumbered in the final rule as § 1017.29(n)(1), sets out the mitigating factors that the hearing officer will consider in determining the amount of the civil penalty. The mitigating factors listed are identical to those set forth in 10 CFR 824.13 related to classified information. Section 1017.29(n)(2) in the final rule also provides that the Secretary reviewing an initial decision may modify the amount of any civil penalty proposed.
Today's regulatory action has been determined not to be a “significant regulatory action” under Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735 (October 4, 1993). Accordingly, this notice of final rulemaking was not subject to review by OMB under the Executive Order.
The Regulatory Flexibility Act (5 U.S.C. 601
Today's final rule amends DOE's policies and procedures regarding UCNI. The rule will apply to all agencies, persons, and entities that generate and maintain UCNI documents or material. DOE estimates that fewer than five Federal Government entities have access to UCNI documents or material. Each of these Government entities may, in turn, have contractors or consultants who have access to UCNI documents or material.
Section 1017.14 imposes on Government and non-Government entities the requirement that persons who review documents for UCNI be properly trained and certified. The economic impact of the training requirement on non-Government entities would be limited to the labor hours required to familiarize those persons reviewing documents for UCNI with the training materials provided by DOE.
Section 1017.16 requires that Government and non-Government Reviewing Officials clearly mark or authorize the marking of a new document or material to convey that it contains UCNI. The burden of the marking requirement would vary depending on the number of documents or amount of material the entity generates. DOE considers the proper marking of a controlled document to be an act integrated in the act of creating the document. As such, the marking of documents or material containing UCNI imposes minimal costs on the entity
DOE recognizes that in most cases non-Government entities that generate documents or material containing UCNI will do so pursuant to a Government contract. In such cases, any costs incurred in compliance with these regulations will be charged back to the Government. Infrequently, DOE may enter into an agreement (e.g., a Cooperative Research and Development Agreement) with a non-Government entity in which DOE provides UCNI to the entity without any vehicle for reimbursement by the Government for increased security costs. However, since UCNI is protected in a manner similar to how a company protects proprietary or employees' personal information, the incremental cost of protecting UCNI would be negligible. In these cases, this rule will have only a minor economic impact on very few small entities.
On the basis of the foregoing, DOE certifies that the rule will not have a significant economic impact on a substantial number of small entities. No comments were received regarding this certification or the economic impact of this rule. Accordingly, DOE has not prepared a regulatory flexibility analysis for this rulemaking.
No new information or record keeping requirements are imposed by this rulemaking. Accordingly, no OMB clearance is required under the Paperwork Reduction Act (44 U.S.C. 3501
DOE has concluded that promulgation of this rule falls into a class of actions that would not individually or cumulatively have a significant impact on the human environment, as determined by DOE's regulations implementing the National Environmental Policy Act of 1969 (42 U.S.C. 4321
Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999) imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. Agencies are required to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and carefully assess the necessity for such actions. The Executive Order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations (65 FR 13735). DOE has examined today's final rule and has determined that it does not preempt State law and does 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. No further action is required by Executive Order 13132.
With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard and promote simplification and burden reduction. Section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and, (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this final rule meets the relevant standards of Executive Order 12988.
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires a Federal agency to perform a written assessment of the anticipated costs and benefits of any rule that includes a Federal mandate which may result in costs to State, local, or tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year (adjusted annually for inflation). 2 U.S.C. 1532(a) and (b). Section 204 of that title requires each agency that proposes a rule containing a significant Federal intergovernmental mandate to develop an effective process for obtaining meaningful and timely input from elected officers of State, local, and tribal governments. 2. U.S.C. 1534.
This final rule will not impose a Federal mandate on State, local and tribal governments or on the private sector. Accordingly, no assessment or analysis is required under the Unfunded Mandates Reform Act of 1995.
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This final rule will not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.
The Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed today's notice under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.
Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001) requires Federal agencies to
As required by 5 U.S.C. 801, DOE will report to Congress promulgation of this rule prior to its effective date. The report will state that it has been determined that the rule is not a “major rule” as defined by 5 U.S.C. 804.
Administrative practice and procedure, Government contracts, Nuclear energy, Penalties, Security measures.
42 U.S.C. 7101
(a) This part implements section 148 of the Atomic Energy Act (42 U.S.C. 2168) which prohibits the unauthorized dissemination of certain unclassified Government information. This information identified by the term “Unclassified Controlled Nuclear Information” (UCNI) consists of certain design and security information concerning nuclear facilities, nuclear materials, and nuclear weapons.
(b) This part:
(1) Provides for the review of information prior to its designation as UCNI;
(2) Describes how information is determined to be UCNI;
(3) Establishes minimum physical protection standards for documents and material containing UCNI;
(4) Specifies who may have access to UCNI; and,
(5) Establishes a procedure for the imposition of penalties on persons who violate section 148 of the Atomic Energy Act or any regulation or order of the Secretary issued under section 148 of the Atomic Energy Act, including this part.
(c) This part does not apply to information controlled under 10 U.S.C. 128 by the Department of Defense.
This part applies to any person who is or was authorized access to UCNI, requires authorized access to UCNI, or attempts to gain or gains unauthorized access to UCNI.
The Department of Energy (DOE) strives to make information publicly available to the fullest extent possible. Therefore, this part must be interpreted and implemented to apply the minimum restrictions needed to protect the health and safety of the public or the common defense and security consistent with the requirement in section 148 of the Atomic Energy Act to prohibit the unauthorized dissemination of UCNI.
As used in this part:
(1) Developing, producing, testing, sampling, maintaining, repairing, modifying, assembling or disassembling, using, transporting, or retiring nuclear weapons or components of nuclear weapons; or
(2) Producing, using, or transporting nuclear material that could be used in nuclear weapons or military-related utilization facilities.
(1) Any equipment or device capable of producing special nuclear material in such quantity as to be of significance to the common defense and security or in such manner as to affect the health and safety of the public; or
(2) Any important component part especially designed for such equipment or device.
(3) For the purposes of this part, equipment and devices described in paragraphs (1) and (2) of this definition include only:
(i) Government uranium isotope enrichment equipment or devices and any other uranium isotope enrichment equipment or devices that use related technology provided by the Government; or
(ii) Government plutonium production reactors, isotope enrichment equipment or devices, and separation and purification equipment or devices and other such equipment or devices that use related technology provided by the Government.
(1) Plutonium, uranium enriched in the isotope 233 or in the isotope 235, and any other material which DOE or the Nuclear Regulatory Commission, pursuant to the provisions of section 51 of the Atomic Energy Act (42 U.S.C. 2071), determines to be special nuclear material, but does not include source material; or
(2) Any material artificially enriched by any of the foregoing, but does not include source material.
(1) Any equipment or device, or any important component part especially designed for such equipment or device, except for a nuclear weapon, that is capable of making use of special nuclear material in such quantity as to be of significance to the common defense and security or in such manner as to affect the health and safety of the public. For the purposes of this part, such equipment or devices include only Government equipment or devices that use special nuclear material in the research, development, production, or testing of nuclear weapons, nuclear weapon components, or nuclear material capable of being used in nuclear weapons; or
(2) Any equipment or device, or any important component part especially designed for such equipment or device, except for a nuclear weapon, that is peculiarly adapted for making use of nuclear energy in such quantity as to be of significance to the common defense and security or in such manner as to affect the health and safety of the public. For the purposes of this part, such equipment or devices include only:
(i) Naval propulsion reactors;
(ii) Military reactors and power sources that use special nuclear material;
(iii) Tritium production reactors; and,
(iv) Government research reactors.
(a) Any person may request a deviation, or condition that diverges from the norm and that is categorized as:
(1) A variance (i.e., an approved condition that technically varies from a requirement in these regulations);
(2) A waiver (i.e., an approved nonstandard condition that deviates from a requirement in these regulations and which, if uncompensated, would create a potential or real vulnerability); or
(3) An exception (i.e., an approved deviation from a requirement in these regulations for which DOE accepts the risk of a safeguards and security vulnerability) according to the degree of risk involved.
(b) In writing, the person must:
(1) Identify the specific requirement for which the deviation is being requested;
(2) Explain why the deviation is needed; and,
(3) If appropriate, describe the alternate or equivalent means for meeting the requirement.
(c) DOE employees must submit such requests according to internal directives. DOE contractors must submit such requests according to directives incorporated into their contracts. Other individuals must submit such requests to the Office of Classification, Office of Health, Safety and Security, U.S. Department of Energy, 1000 Independence Ave., SW., Washington, DC 20585-1290. The Office of Classification's decision must be made within 30 days.
The Secretary, or his or her designee, determines whether information is UCNI. These determinations are incorporated into guidance that each Reviewing Official and Denying Official consults in his or her review of a document or material to decide whether the document or material contains UCNI.
To be identified as UCNI, the information must meet each of the following criteria:
(a) The information must be Government information as defined in § 1017.4;
(b) The information must concern atomic energy defense programs as defined in § 1017.4;
(c) The information must fall within the scope of at least one of the three subject areas eligible to be UCNI in § 1017.8;
(d) The information must meet the adverse effect test described in § 1017.10; and
(e) The information must not be exempt from being UCNI under § 1017.11.
To be eligible for identification as UCNI, information must concern at least one of the following categories:
(a) The design of production or utilization facilities as defined in this part;
(b) Security measures (including security plans, procedures, and equipment) for the physical protection of production or utilization facilities or nuclear material, regardless of its physical state or form, contained in these facilities or in transit; or
(c) The design, manufacture, or utilization of nuclear weapons or components that were once classified as Restricted Data, as defined in section 11y. of the Atomic Energy Act.
(a) The Secretary may determine that a material other than special nuclear material, byproduct material, or source material as defined by the Atomic Energy Act is included within the scope of the term “nuclear material” if it meets the following criteria:
(1) The material is used in the production, testing, utilization, or assembly of nuclear weapons or components of nuclear weapons; and
(2) Unauthorized acquisition of the material could reasonably be expected to result in a significant adverse effect on the health and safety of the public or the common defense and security because the specific material:
(i) Could be used as a hazardous radioactive environmental contaminant; or
(ii) Could be of significant assistance in the illegal production of a nuclear weapon.
(b) Designation of a material as a nuclear material under paragraph (a) of this section does not make all information about the material UCNI. Specific information about the material must still meet each of the criteria in § 1017.7 prior to its being identified and controlled as UCNI.
In order for information to be identified as UCNI, it must be determined that the unauthorized dissemination of the information under review could reasonably be expected to result in a significant adverse effect on the health and safety of the public or the common defense and security by significantly increasing the likelihood of:
(a) Illegal production of a nuclear weapon; or
(b) Theft, diversion, or sabotage of nuclear material, equipment, or facilities.
Information exempt from this part includes:
(a) Information protected from disclosure under section 147 of the Atomic Energy Act (42 U.S.C. 2167) that is identified as Safeguards Information and controlled by the United States Nuclear Regulatory Commission;
(b) Basic scientific information (i.e., information resulting from research directed toward increasing fundamental scientific knowledge or understanding rather than any practical application of that knowledge);
(c) Radiation exposure data and all other personal health information; and,
(d) Information concerning the transportation of low level radioactive waste.
Information, documents, and material must not be identified as being or containing UCNI in order to:
(a) Conceal violations of law, inefficiency, or administrative error;
(b) Prevent embarrassment to a person or organization;
(c) Restrain competition; or,
(d) Prevent or delay the release of any information that does not properly qualify as UCNI.
The Office of Classification or successor office shall issue a report by the end of each quarter that identifies any new information that has been determined for the first time to be UCNI during the previous quarter, explains how each such determination meets the criteria in § 1017.7, and explains why each such determination protects from disclosure only the minimum amount of information necessary to protect the health and safety of the public or the common defense and security. A copy of the report may be obtained by writing to the Office of Classification, Office of Health, Safety and Security, U.S. Department of Energy, 1000 Independence Ave., SW., Washington, DC 20585-1290.
(a)
(2)
(3)
(b) I
(2)
(c)
(2)
(a)
(1) If the document is determined to be widely disseminated in the public domain, it cannot be controlled as UCNI. The Reviewing Official returns the document to the person who sent it to the Reviewing Official and informs him or her why the document cannot be controlled as UCNI. This does not preclude control of the same information as UCNI if it is contained in another document that is not widely disseminated.
(2) If the document is not determined to be widely disseminated in the public domain, the Reviewing Official evaluates the information in the document using guidance to determine whether the document contains UCNI. If the Reviewing Official determines that the document does contain UCNI, the Reviewing Official marks or authorizes the marking of the document as specified in § 1017.16. If the Reviewing Official determines that the document does not contain UCNI, the Reviewing Official returns the document to the person who sent it and informs him or her that the document does not contain UCNI. For documentation purposes, the Reviewing Official may mark or authorize the marking of the document as specified in § 1017.17(b).
(3) If no applicable guidance exists, but the Reviewing Official thinks the information should be identified as UCNI, then the Reviewing Official must send the document to the appropriate official identified in applicable DOE directives issued by the Secretary or his or her designee. The Reviewing Official should also include a written recommendation as to why the information should be identified as UCNI.
(b)
(c)
(a)
(1) Front marking. The following marking must appear on the front of the document:
(2) Page marking. The marking “Unclassified Controlled Nuclear Information” must be placed on the bottom of the front of the document and on the bottom of each interior page of the document that contains text or if more convenient, on the bottom of only those interior pages that contain UCNI. The page marking must also be placed on the back of the last page. If space limitations do not allow for use of the full page marking, the acronym “UCNI” may be used as the page marking.
(3) Classified documents. UCNI front and page markings are not applied to a classified document that also contains UCNI. If a classified document is portion marked, the acronym “UCNI” is used to indicate those unclassified portions that contain UCNI.
(4) Obsolete “May Contain UCNI” marking. The “May Contain UCNI” marking is no longer used. Any document marked with the “May Contain UCNI” marking is considered to contain UCNI and must be protected accordingly until a Reviewing Official or Denying Official determines otherwise. The obsolete “May Contain UCNI” marking reads as follows:
Not for Public Dissemination May contain Unclassified Controlled Nuclear Information subject to section 148 of the Atomic Energy Act of 1954 (42 U.S.C. 2168). Approval by the Department of Energy prior to release is required.
(b)
(a)
(b)
If a document or material marked as containing UCNI is under consideration for decontrol and falls under the cognizance of another DOE organization or other Government agency, the Reviewing Official or Denying Official must coordinate the decontrol review with that DOE organization or other Government agency. Any disagreement concerning the control or decontrol of any document or material that contains UCNI that was originated by or for DOE or another Government agency is resolved by the Secretary or his or her designee.
A person may only have access to UCNI if he or she has been granted routine access by an Authorized Individual (see § 1017.20) or limited access by the DOE Program Secretarial Officer or NNSA Deputy or Associate Administrator with cognizance over the UCNI (see § 1017.21). The Secretary, or his or her designee, may impose additional administrative controls concerning the granting of routine or limited access to UCNI to a person who is not a U.S. citizen.
(a)
(b)
(1) A U.S. citizen who is:
(i) An employee of any branch of the Federal Government, including the U.S. Armed Forces;
(ii) An employee or representative of a State, local, or Indian tribal government;
(iii) A member of an emergency response organization;
(iv) An employee of a Government contractor or a consultant, including those contractors or consultants who need access to bid on a Government contract;
(v) A member of Congress or a staff member of a congressional committee or of an individual member of Congress;
(vi) A Governor of a State, his or her designated representative, or a State government official;
(vii) A member of a DOE advisory committee; or,
(viii) A member of an entity that has entered into a formal agreement with the Government, such as a Cooperative Research and Development Agreement or similar arrangement; or,
(2) A person who is not a U.S. citizen but who is:
(i) A Federal Government employee or a member of the U.S. Armed Forces;
(ii) An employee of a Federal Government contractor or subcontractor;
(iii) A Federal Government consultant;
(iv) A member of a DOE advisory committee;
(v) A member of an entity that has entered into a formal agreement with the Government, such as a Cooperative Research and Development Agreement or similar arrangement;
(vi) An employee or representative of a State, local, or Indian tribal government; or,
(vii) A member of an emergency response organization when responding to an emergency; or,
(3) A person who is not a U.S. citizen but who needs to know the UCNI in conjunction with an activity approved by the DOE Program Secretarial Officer
(a) A person who is not eligible for routine access to specific UCNI under § 1017.20 may request limited access to such UCNI by sending a written request to the DOE Program Secretarial Officer or NNSA Deputy or Associate Administrator with cognizance over the information. The written request must include the following:
(1) The name, current residence or business address, birthplace, birth date, and country of citizenship of the person submitting the request;
(2) A description of the specific UCNI for which limited access is being requested;
(3) A description of the purpose for which the UCNI is needed; and,
(4) Certification by the requester that he or she:
(i) Understands and will follow these regulations; and
(ii) Understands that he or she is subject to the civil and criminal penalties under Subpart F of this part.
(b) The decision whether to grant the request for limited access is based on the following criteria:
(1) The sensitivity of the UCNI for which limited access is being requested;
(2) The approving official's evaluation of the likelihood that the requester will disseminate the UCNI to unauthorized individuals; and,
(3) The approving official's evaluation of the likelihood that the requester will use the UCNI for illegal purposes.
(c) Within 30 days of receipt of the request for limited access, the appropriate DOE Program Secretarial Officer or NNSA Deputy or Associate Administrator must notify the requester if limited access is granted or denied, or if the determination cannot be made within 30 days, of the date when the determination will be made.
(d) A person granted limited access to specific UCNI is not an Authorized Individual and may not further disseminate the UCNI to anyone.
(a) An Authorized Individual who grants routine access to specific UCNI under § 1017.20 to a person who is not an employee or contractor of the DOE must notify the person receiving the UCNI of protection requirements described in this subpart and any limitations on further dissemination.
(b) A DOE Program Secretarial Officer or NNSA Deputy or Associate Administrator who grants limited access to specific UCNI under § 1017.21 must notify the person receiving the UCNI of protection requirements described in this subpart and any limitations on further dissemination.
An Authorized Individual or a person granted limited access to UCNI under § 1017.21 must maintain physical control over any document or material marked as containing UCNI that is in use to prevent unauthorized access to it.
A document or material marked as containing UCNI must be stored to preclude unauthorized disclosure. When not in use, documents or material containing UCNI must be stored in locked receptacles (e.g., file cabinet, desk drawer), or if in secured areas or facilities, in a manner that would prevent inadvertent access by an unauthorized individual.
A document marked as containing UCNI may be reproduced without the permission of the originator to the minimum extent necessary consistent with the need to carry out official duties, provided the reproduced document is marked and protected in the same manner as the original document.
A document marked as containing UCNI must be destroyed, at a minimum, by using a cross-cut shredder that produces particles no larger than 1/4-inch wide and 2 inches long. Other comparable destruction methods may be used. Material containing or revealing UCNI must be destroyed according to agency directives.
(a) Physically transmitting UCNI documents or material.
(1) A document or material marked as containing UCNI may be transmitted by:
(i) U.S. First Class, Express, Certified, or Registered mail;
(ii) Any means approved for transmission of classified documents or material;
(iii) An Authorized Individual or person granted limited access under § 1017.21 as long as physical control of the package is maintained; or,
(iv) Internal mail services.
(2) The document or material must be packaged to conceal the presence of the UCNI from someone who is not authorized access. A single, opaque envelope or wrapping is sufficient for this purpose. The address of the recipient and the sender must be indicated on the outside of the envelope or wrapping along with the words “TO BE OPENED BY ADDRESSEE ONLY.”
(b) Transmitting UCNI documents over telecommunications circuits. Encryption algorithms that comply with all applicable Federal laws, regulations, and standards for the protection of unclassified controlled information must be used when transmitting UCNI over a telecommunications circuit (including the telephone, facsimile, radio, e-mail, Internet).
UCNI may be processed or produced on any AIS that complies with the guidance in OMB Circular No. A-130, Revised, Transmittal No. 4, Appendix III, “Security of Federal Automated Information Resources,” or is certified for classified information.
(a)
(1) 10 CFR Part 1017—Identification and Protection of Unclassified Controlled Nuclear Information; or
(2) Any other DOE regulation related to the safeguarding or security of UCNI if the regulation provides that violation of its provisions may result in a civil penalty pursuant to section 148 of the Act.
(b)
(c)
(d)
(e)
(f)
(g)
(i) The date, facts, and nature of each act or omission constituting the alleged violation;
(ii) The particular provision of the regulation or compliance order involved in each alleged violation;
(iii) The proposed remedy for each alleged violation, including the amount of any civil penalty proposed;
(iv) The right of the person to submit a written reply to the Director within 30 calendar days of receipt of such preliminary notice of violation; and,
(v) The fact that upon failure of the person to pay any civil penalty imposed, the penalty may be collected by civil action.
(2) A reply to a preliminary notice of violation must contain a statement of all relevant facts pertaining to an alleged violation. The reply must:
(i) State any facts, explanations, and arguments that support a denial of the alleged violation;
(ii) Demonstrate any extenuating circumstances or other reason why a proposed remedy should not be imposed or should be mitigated;
(iii) Discuss the relevant authorities that support the position asserted, including rulings, regulations, interpretations, and previous decisions issued by DOE;
(iv) Furnish full and complete answers to any questions set forth in the preliminary notice; and
(v) Include copies of all relevant documents.
(3) If a person fails to submit a written reply within 30 calendar days of receipt of a preliminary notice of violation:
(i) The person relinquishes any right to appeal any matter in the preliminary notice; and
(ii) The preliminary notice, including any remedies therein, constitutes a final order.
(4) The Director, at the request of a person notified of an alleged violation, may extend for a reasonable period the time for submitting a reply or a hearing request letter.
(h)
(2) Based on a determination by the Director that a person has violated or is continuing to violate an UCNI security requirement, the Director may issue to the person a final notice of violation that concisely states the determined violation, the amount of any civil penalty imposed, and further actions necessary by or available to the person. The final notice of violation also must state that the person has the right to submit to the Director, within 30 calendar days of the receipt of the notice, a written request for a hearing under paragraph (i) of this section.
(3) The Director must send a final notice of violation by certified mail, return receipt requested, within 30 calendar days of the receipt of a reply.
(4) Subject to paragraphs (h)(7) and (h)(8) of this section, the effect of final notice shall be:
(i) If a final notice of violation does not contain a civil penalty, it shall be deemed a final order 15 days after the final notice is issued.
(ii) If a final notice of violation contains a civil penalty, the person must submit to the Director within 30 days after the issuance of the final notice:
(A) A waiver of further proceedings; or
(B) A request for an on-the-record hearing under paragraph (i) of this section.
(5) If a person waives further proceedings, the final notice of violation shall be deemed a final order enforceable against the person. The person must pay the civil penalty set forth in the notice of violation within 60 days of the filing of waiver unless the Director grants additional time.
(6) If a person files a request for an on-the-record hearing, then the hearing process commences.
(7) The Director may amend the final notice of violation at any time before the time periods specified in paragraphs (h)(4)(i) or (h)(4)(ii) of this section expire. An amendment shall add 15 days to the time period under paragraph (h)(4) of this section.
(8) The Director may withdraw the final notice of violation, or any part thereof, at any time before the time periods specified in paragraphs (h)(4)(i) or (h)(4)(ii) of this section expire.
(i)
(2) Upon receipt from a person of a written request for a hearing, the Director shall:
(i) Appoint a Hearing Counsel; and
(ii) Select an administrative law judge appointed under 5 U.S.C. 3105, to serve as Hearing Officer.
(j)
(1) Represents DOE;
(2) Consults with the person or the person's counsel prior to the hearing;
(3) Examines and cross-examines witnesses during the hearing; and
(4) Enters into a settlement of the enforcement proceeding at any time if settlement is consistent with the objectives of the Act and DOE security requirements.
(k)
(1) Is responsible for the administrative preparations for the hearing;
(2) Convenes the hearing as soon as is reasonable;
(3) Administers oaths and affirmations;
(4) Issues subpoenas, at the request of either party or on the Hearing Officer's motion;
(5) Rules on offers of proof and receives relevant evidence;
(6) Takes depositions or has depositions taken when the ends of justice would be served;
(7) Conducts the hearing in a manner which is fair and impartial;
(8) Holds conferences for the settlement or simplification of the issues by consent of the parties;
(9) Disposes of procedural requests or similar matters;
(10) Requires production of documents; and,
(11) Makes an initial decision under paragraph (n) of this section.
(l)
(1) Testify or present evidence through witnesses or by documents;
(2) Cross-examine witnesses and rebut records or other physical evidence, except as provided in paragraph (m)(4) of this section;
(3) Be present during the entire hearing, except as provided in paragraph (m)(4) of this section; and
(4) Be accompanied, represented, and advised by counsel of the person's choosing.
(m)
(2) Except as provided in paragraph (m)(4) of this section, the Hearing Officer may receive any oral or documentary evidence, but shall exclude irrelevant, immaterial, or unduly repetitious evidence.
(3) Witnesses shall testify under oath and are subject to cross-examination, except as provided in paragraph (m)(4) of this section.
(4) The Hearing Officer must use procedures appropriate to safeguard and prevent unauthorized disclosure of classified information, UCNI, or any other information protected from public disclosure by law or regulation, with minimum impairment of rights and obligations under this part. The UCNI status shall not, however, preclude information from being introduced into evidence. The Hearing Officer may issue such orders as may be necessary to consider such evidence
(5) DOE has the burden of going forward with and of proving by a preponderance of the evidence that the violation occurred as set forth in the final notice of violation and that the proposed civil penalty is appropriate. The person to whom the final notice of violation has been addressed shall have the burden of presenting and of going forward with any defense to the allegations set forth in the final notice of violation. Each matter of controversy shall be determined by the Hearing Officer upon a preponderance of the evidence.
(n)
(i) The nature, circumstances, extent, and gravity of the violation or violations;
(ii) The violator's ability to pay;
(iii) The effect of the civil penalty on the person's ability to do business;
(iv) Any history of prior violations;
(v) The degree of culpability; and,
(vi) Such other matters as justice may require.
(2) The Hearing Officer shall serve all parties with the initial decision by certified mail, return receipt requested. The initial decision shall include notice that it constitutes a final order of DOE 30 days after the filing of the initial decision unless the Secretary files a Notice of Review. If the Secretary files a Notice of Review, he shall file a final order as soon as practicable after completing his review. The Secretary, at his discretion, may order additional proceedings, remand the matter, or modify the amount of the civil penalty assessed in the initial decision. DOE shall notify the person of the Secretary's action under this paragraph in writing by certified mail, return receipt requested. The person against whom the civil penalty is assessed by the final order shall pay the full amount of the civil penalty assessed in the final order within 30 days unless otherwise agreed by the Director.
(o)
(2) The Attorney General has the exclusive power to uphold, compromise or mitigate, or remit any civil penalty imposed by the Secretary under this section and referred to the Attorney General for collection.
(p)
(i) Subpoenas;
(ii) Orders to compel attendance;
(iii) Disclosures of information or documents obtained during an investigation or inspection;
(iv) Preliminary notices of violation; and,
(v) Final notice of violations.
(2) The Administrator shall act after consideration of the Director's recommendation. If the Administrator disagrees with the Director's recommendation, and the disagreement cannot be resolved by the two officials, the Director may refer the matter to the Deputy Secretary for resolution.
Any person who violates section 148 of the Atomic Energy Act or any regulation or order of the Secretary issued under section 148 of the Atomic Energy Act, including these regulations, may be subject to a criminal penalty under section 223 of the Atomic Energy Act (42 U.S.C. 2273). In such case, the Secretary shall refer the matter to the Attorney General for investigation and possible prosecution.
Federal Aviation Administration (FAA), DOT.
Final rule.
We are adopting a new airworthiness directive (AD) for certain Short Brothers Model SD3-60 airplanes. This AD requires deactivation of auxiliary fuel tank systems installed in accordance with Supplemental Type Certificate SA00404AT. This AD results from fuel tank system review requirements done in accordance with Special Federal Aviation Regulation No. 88 (SFAR 88), which identified potential unsafe conditions. We are issuing this AD to prevent the potential of ignition sources inside fuel tanks, which, in combination with flammable fuel vapors, could result in fuel tank explosions and consequent loss of the airplane.
This AD is effective July 15, 2008.
You may examine the AD docket on the Internet at
Robert Bosak, Aerospace Engineer, Propulsion and Services Branch, ACE-118A, FAA, Atlanta Aircraft Certification Office, One Crown Center, 1895 Phoenix Boulevard, Suite 450, Atlanta, Georgia 30349; telephone (770) 703-6094; fax (770) 703-6097.
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an airworthiness directive (AD) that would apply to certain Short Brothers Model SD3-60 airplanes. That NPRM was published in the
We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM or on the determination of the cost to the public.
We reviewed the relevant data and determined that air safety and the public interest require adopting the AD as proposed.
The following table provides the estimated costs for the 1 U.S.-registered airplane to comply with this AD.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
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.
Air transportation, Aircraft, Aviation safety, Safety.
49 U.S.C. 106(g), 40113, 44701.
(a) This airworthiness directive (AD) is July 15, 2008.
(b) None.
(c) This AD applies to Short Brothers Model SD3-60 airplanes, certificated in any category, and equipped with an auxiliary fuel tank system installed in accordance with Atlantic Reconnaissance Supplemental Type Certificate (STC) SA00404AT.
(d) This AD results from fuel tank system review requirements done in accordance with Special Federal Aviation Regulation No. 88 (SFAR 88), which were not conducted by the STC holder, for identification of potential unsafe conditions and corrective actions. We are issuing this AD to prevent the potential of ignition sources inside fuel tanks, which, in combination with flammable fuel vapors, could result in fuel tank explosions and consequent loss of the airplane.
(e) You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done.
(f) Within 45 days after the effective date of this AD, submit a report to the Manager, Atlanta Aircraft Certification Office (ACO), FAA. The report must include the information listed in paragraphs (f)(1) and (f)(2) of this AD. Under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
(1) The airplane registration and serial number.
(2) The usage frequency in terms of total number of flights per year and total number of flights per year for which the auxiliary fuel tank system is used.
(g) Before December 16, 2008, deactivate the auxiliary fuel tank system, in accordance with a deactivation procedure approved by the Manager of the Atlanta ACO. Any auxiliary fuel tank system component that remains on the airplane must be secured and must have no effect on the continued operational safety and airworthiness of the airplane. Deactivation may not result in the need for additional Instructions for Continued Airworthiness (ICA).
Appendix A of this AD provides criteria that must be included in the deactivation procedure. The proposed deactivation procedures should be submitted to the Atlanta ACO as soon as possible to ensure timely review and approval, prior to implementation.
For technical information, contact Robert Bosak, Aerospace Engineer, Propulsion and Services Branch, ACE-118A, Atlanta ACO, One Crown Center, 1895 Phoenix Boulevard, Suite 450, Atlanta, Georgia 30349; telephone (770) 703-6094; fax (770) 703-6097.
(h)(1) The Manager, Atlanta ACO, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.
(2) To request a different method of compliance or a different compliance time for this AD, follow the procedures in 14 CFR 39.19. Before using any approved AMOC on any airplane to which the AMOC applies, notify your appropriate principal inspector (PI) in the FAA Flight Standards District Office (FSDO), or lacking a PI, your local FSDO.
(i) None.
The auxiliary fuel tank system deactivation procedure required by paragraph (g) of this AD must address the following actions.
(1) Permanently drain the auxiliary fuel tank system tanks, and clear them of fuel vapors to eliminate the possibility of out-gassing of fuel vapors from the emptied auxiliary tank.
(2) Disconnect all auxiliary fuel tank system electrical connections from the fuel quantity indication system (FQIS), float, pressure and transfer valves and switches, and all other electrical connections required for auxiliary fuel tank system operation, and stow them at the auxiliary fuel tank interface.
(3) Disconnect all auxiliary fuel tank system fuel supply and fuel vent plumbing interfaces with airplane original equipment manufacturer (OEM) fuel tanks, cap them at the airplane tank side, and secure them. All disconnected auxiliary fuel tank system vent systems must not alter the OEM fuel tank vent system configuration or performance. All empty auxiliary fuel tank system tanks must be vented to eliminate the possibility of structural deformation during cabin decompression. The configuration must not permit the introduction of fuel vapor into any compartments of the airplane.
(4) Pull and collar all circuit breakers used to operate the auxiliary fuel tank system.
(5) Revise the weight and balance document, if required, and obtain FAA approval for any changes to the weight and balance document.
(6) Amend the applicable sections of the applicable airplane flight manual (AFM) to indicate that the auxiliary fuel tank system is deactivated. Remove auxiliary fuel tank system operating procedures to ensure that only the OEM fuel system operational procedures are contained in the AFM. Amend the Limitations Section of the AFM to indicate that the AFM Supplement for the STC is not in effect. Place a placard in the flight deck indicating that the auxiliary fuel tank system is deactivated. The AFM revisions specified in this paragraph may be accomplished by inserting a copy of this AD into the AFM.
(7) Amend the applicable sections of the applicable airplane maintenance manual to remove auxiliary fuel tank system maintenance procedures.
(8) After the auxiliary fuel tank system is deactivated, accomplish procedures such as leak checks, pressure checks, and functional checks deemed necessary before returning the airplane to service. These procedures must include verification that the basic airplane OEM FQIS, fuel distribution, and fuel venting systems function properly and have not been adversely affected by deactivation of the auxiliary fuel tank system.
(9) Include with the proposed deactivation procedures any relevant information or additional steps that are deemed necessary by the operator to comply with the deactivation of the auxiliary fuel tank system and return of the airplane to service.
Office of Foreign Assets Control, Treasury.
Final rule.
The Treasury Department's Office of Foreign Assets Control (“OFAC”) is amending its regulations to reflect amendments to the penalty provisions of the International Emergency Economic Powers Act (“IEEPA”) made by the International Emergency Economic Powers Enhancement Act (the “Act”).
Effective June 10, 2008.
Assistant Director, Civil Penalties, tel.: 202/622-6140, Assistant Director, Policy, tel.: 202/622-4855, Office of Foreign Assets Control, or Chief Counsel (Foreign Assets Control), tel.: 202/622-2410, Office of the General Counsel, Department of the Treasury (not toll free numbers).
This document and additional information concerning OFAC are available from OFAC's Web site (
On October 16, 2007, the President signed the Act into law as Public Law 110-96. Section 2 of the Act amended section 206 of IEEPA (50 U.S.C. 1705) by, among other things, raising the maximum civil penalty to an amount not to exceed the greater of $250,000 or an amount twice the amount of the transaction that is the basis of the violation. The Act also amended IEEPA's provisions relating to the imposition of criminal penalties.
Accordingly, OFAC is amending the current IEEPA-based sanctions programs regulations to reflect the revised description of unlawful acts and the revised penalties prescribed by the Act. In particular, the amended regulations cross-reference IEEPA for the maximum civil penalty amount rather than specify such amount in the regulations themselves. OFAC posted an interim policy concerning its implementation of
Because the regulations at issue involve a foreign affairs function, the provisions of Executive Order 12866 and the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, opportunity for public participation, and delay in effective date are inapplicable. In addition, OFAC finds that, because the rule merely amends the penalties provisions of certain sanctions regulations to conform with the statutory changes provided in the Act, good cause exists under 5 U.S.C. 553(b)(B) to waive the notice and public participation procedures, as well as under 5 U.S.C. 553(d)(3) to waive the delay in effective date. Because no notice of proposed rulemaking is required for this rule, the Regulatory Flexibility Act (5 U.S.C. 601-612) does not apply.
Administrative practice and procedure, Banks, banking, Currency, Foreign claims, Foreign investments in United States, Iran, Penalties, Reporting and recordkeeping requirements, Securities.
Administrative practice and procedure, Banks, banking, Drug traffic control, Penalties, Reporting and recordkeeping requirements.
Administrative practice and procedure, Banks, banking, Burma, Currency, Foreign investments in United States, Foreign trade, Penalties, Reporting and recordkeeping requirements, Securities.
Administrative practice and procedure, Banks, banking, Currency, Foreign investments in United States, Foreign trade, Penalties, Reporting and recordkeeping requirements, Securities, Sudan.
Administrative practice and procedure, Arms and munitions, Imports, Penalties, Reporting and recordkeeping requirements.
Administrative practice and procedure, Nuclear materials, Penalties, Reporting and recordkeeping requirements, Russian Federation, Uranium.
Administrative practice and procedure, Banks, banking, Blocking of assets, Penalties, Reporting and recordkeeping requirements, Securities, Services, Zimbabwe.
Administrative practice and procedure, Banks, banking, Blocking of assets, Credit, Penalties, Reporting and recordkeeping requirements, Securities, Services, Syria.
Administrative practice and procedure, Afghanistan, Banks, banking, Foreign investments in United States, Foreign trade, Penalties, Reporting and recordkeeping requirements, Travel restrictions.
Administrative practice and procedure, Exports, Humanitarian aid, Imports, Iran, Penalties, Reporting and recordkeeping requirements.
Administrative practice and procedure, Banks, banking, Foreign investments in United States, Foreign trade, Penalties, Reporting and recordkeeping requirements, Securities, Transportation, United States investments abroad, Yugoslavia.
Administrative practice and procedure, Banks, banking, Foreign investments in United States, Foreign trade, Penalties, Reporting and recordkeeping requirements, Securities, Transportation, United States investments abroad, Yugoslavia.
Administrative practice and procedure, Banks, banking, Foreign investments in United States, Foreign trade, Penalties, Reporting and recordkeeping requirements, Securities, United States investments abroad, Yugoslavia.
Administrative practice and procedure, Banks, banking, Penalties, Reporting and recordkeeping requirements, Securities, Western Balkans.
Administrative practice and procedure, Banks, Banking, Blocking of assets, Credit, Foreign Trade, Imports, Liberia, Penalties, Reporting and recordkeeping requirements, Securities.
Administrative practice and procedure, Banks, banking, Penalties, Reporting and recordkeeping requirements, Terrorism.
Administrative practice and procedure, Banks, banking, Currency, Foreign investments in United States, Penalties, Reporting and recordkeeping requirements, Securities, Terrorism.
3 U.S.C. 301; 18 U.S.C. 2332d; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 12170, 44 FR 65729, 3 CFR, 1979 Comp., p. 457; E.O. 12205, 45 FR 24099, 3 CFR, 1980 Comp., p. 248; E.O. 12211, 45 FR 26685, 3 CFR, 1980 Comp., p. 253; E.O. 12276, 46 FR 7913, 3 CFR, 1981 Comp., p. 104; E.O. 12279, 46 FR 7919, 3 CFR, 1981 Comp., p. 109; E.O. 12280, 46 FR 7921, 3 CFR, 1981 Comp., p. 110; E.O. 12281, 46 FR 7923, 3 CFR, 1981 Comp., p. 110; E.O. 12282, 46 FR 7925, 3 CFR, 1981 Comp., p. 113; E.O. 12283, 46 FR 7927, 3 CFR, 1981 Comp., p. 114; and E.O. 12294, 46 FR 14111, 3 CFR, 1981 Comp., p. 139.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 12978, 60 FR 54579, 3 CFR, 1995 Comp., p. 415; E.O. 13286, 68 FR 10619, 3 CFR, 2003 Comp., p. 166.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Sec. 570, Pub. L. 104-208, 110 Stat. 3009; Pub. L. 108-61, 117 Stat. 864; Pub. L. 110-96, 121 Stat. 1011; E.O. 13047, 62 FR 28301, 3 CFR, 1997 Comp., p. 202; E.O. 13310, 68 FR 44853, 3 CFR, 2003 Comp., p. 241.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b) Adjustments to penalty amounts. (1) The civil penalties provided in the Act are subject to adjustment pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, as amended, 28 U.S.C. 2461 note).
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 18 U.S.C. 2339B, 2332d; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 106-387, 114 Stat. 1549; Pub. L. 109-344, 120 Stat. 1869; Pub. L. 110-96, 121 Stat. 1011; E.O. 13067, 62 FR 59989, 3 CFR, 1997 Comp., p. 230; E.O. 13412, 71 FR 61369, 3 CFR, 2006 Comp., p. 244.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 22 U.S.C. 2751-2799aa-2; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 12938, 59 FR 59099, 3
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13159, 65 FR 39279, 3 CFR, 2000 Comp., p. 277.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13288, 68 FR 11457, 3 CFR, 2003 Comp., p. 186.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13338, 69 FR 26751, 3 CFR, 2004 Comp., p. 168.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13129, 64 FR 36759, 3 CFR, 1999 Comp., p. 200.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 18 U.S.C. 2339B, 2332d; 22 U.S.C. 2349aa-9; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 106-387, 114 Stat. 1549; Pub. L. 110-96, 121 Stat. 1011; E.O. 12613, 52 FR 41940, 3 CFR, 1987 Comp., p. 256; E.O. 12957, 60 FR 14615, 3 CFR, 1995 Comp., p. 332; E.O. 12959, 60 FR 24757, 3 CFR, 1995 Comp., p. 356; E.O. 13059, 62 FR 44531, 3 CFR, 1997 Comp., p. 217.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 22 U.S.C. 287c; 31 U.S.C. 321(b); 49 U.S.C. 40106; 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 12808, 57 FR 23299, 3 CFR, 1992 Comp., p. 305; E.O. 12810, 57 FR 24347, 3 CFR, 1992 Comp., p. 307; E.O. 12831, 58 FR 5253, 3 CFR, 1993 Comp., p. 576; E.O. 12846, 58 FR 25771, 3 CFR, 1993 Comp., p. 599; E.O. 12934, 59 FR 54117, 3 CFR, 1994 Comp., p. 930; E.O. 13304, 68 FR 32315, 3 CFR, 2003 Comp., p. 229.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13088, 63 FR 32109, 3 CFR, 1998 Comp., p. 191; E.O. 13121, 64 FR 24021, 3 CFR, 1999 Comp., p. 176; E.O. 13192, 66 FR 7379, 3 CFR, 2001 Comp., p. 733; E.O. 13304, 68 FR 32315, 3 CFR, 2003 Comp., p. 229.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 22 U.S.C. 287c; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13088, 63 FR 32109, 3 CFR, 1998 Comp., p. 191; E.O. 13121, 64 FR 24021, 3 CFR, 1999 Comp., p. 176; E.O. 13192, 66 FR 7379, 3 CFR, 2001 Comp., p. 733; E.O. 13304, 68 FR 32315, 3 CFR, 2003 Comp., p. 229.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13219, 66 FR 34777, 3 CFR, 2001 Comp., p. 778; E.O. 13304, 68 FR 32315, 3 CFR, 2003 Comp., p. 229.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; 22 U.S.C. 287c; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13348, 69 FR 44885, 3 CFR, 2004 Comp., p. 189.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 22 U.S.C. 287c; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 13224, 66 FR 49079, 3 CFR, 2001 Comp., p. 786; E.O. 13268, 67 FR 44751, 3 CFR, 2002 Comp., p. 240; E.O. 13284, 68 FR 4075, 3 CFR, 2003 Comp., p. 161.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 110-96, 121 Stat. 1011; E.O. 12947, 60 FR 5079, 3 CFR, 1995 Comp., p. 319; E.O. 13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 208.
(a) * * *
(1) A civil penalty not to exceed the amount set forth in Section 206 of the Act may be imposed on any person who violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition issued under the Act.
As of June 10, 2008, the Act provides for a maximum civil penalty not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
(2) A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of a violation of any license, order, regulation, or prohibition shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.
(b)
(2) The criminal penalties provided in the Act are subject to adjustment pursuant to 18 U.S.C. 3571.
Privacy Office, Office of the Secretary, DHS.
Notice of proposed rulemaking.
The Department of Homeland Security is amending its regulations to exempt portions of a system of records from certain provisions of the Privacy Act. Specifically, the Department proposes to exempt portions of the Electronic System for Travel Authorization (ESTA) from one or more provisions of the Privacy Act because of criminal, civil, and administrative enforcement requirements.
In accordance with 5 U.S.C. 552a(e)(4) and (11), the public is given a 30-day period in which to comment on this notice; and the Office of Management and Budget (OMB), which has oversight responsibility under the Act, requires a 40-day period in which to conclude its review of the system. Therefore, the public, OMB, and Congress are invited to submit comments July 21, 2008.
You may submit comments, identified by DOCKET NUMBER DHS-2008-0053 by one of the following methods:
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•
•
For general questions please contact: Laurence E. Castelli (202-572-8790), Chief, Privacy Act Policy and Procedures Branch, U.S. Customs and Border Protection, Regulations and Rulings, Office of International Trade, Mint Annex, 1300 Pennsylvania Ave., NW., Washington, DC 20229. For privacy issues please contact: Hugo Teufel III (703-235-0780), Chief Privacy Officer, Privacy Office, U.S. Department of Homeland Security, Washington, DC 20528.
The Department of Homeland Security (DHS), elsewhere in this edition of the
CBP currently does not require a visa for qualifying nationals traveling from countries that participate in the Visa Waiver Program (VWP). To ensure the VWP national does not pose a security risk or have a law enforcement reason to prevent his or her travel to the United States and in response to a Congressional mandate to do so, DHS/CBP will be implementing an Electronic System for Travel Authorization (ESTA) to permit nationals of VWP countries to electronically submit biographic and admissibility information in advance of their travel to the United States so that CBP can determine whether the applicant is eligible to travel to the United States.
Applicants under this program will electronically provide information, as specified in the ESTA Interim Final Rule, prior to traveling to the United States by air or sea, which will be stored in the ESTA system in an account. The individual will have the opportunity to verify the accuracy of the information entered in ESTA during the application process and before the application is submitted through ESTA. Applicants will be given a tracking number which, combined with some personal information already provided to the system, will allow the applicant to submit updates to data elements that do not affect their admissibility or apply for a new ESTA.
Once an applicant has verified the application information and submitted the required information to ESTA, the information supplied by the applicant will be used to automatically query terrorist and law enforcement databases to determine whether the applicant is eligible to travel to the United States under VWP. When possible matches to derogatory information are found, the applications will be vetted through normal CBP procedures. During this time, the applicant will receive a “pending” status. If the applicant is cleared to travel under the VWP, he or she will receive an “authorized to travel” status via the ESTA Web site. If the applicant is not cleared for travel, the applicant will receive a “not authorized to travel” status and be directed to the State Department Web site to obtain information on how to apply for a visa at a U.S. consulate or embassy. The Department of State will have access to the information supplied by the applicant and the ESTA results to assist in determining whether to issue a visa.
Carriers, when querying the applicant through the Advance Passenger Information System/APIS Quick Query (APIS/AQQ) to determine whether a boarding pass should be issued, will be notified whether the applicant traveler has been authorized to travel, pending, not authorized, or has not applied for an ESTA. VWP travelers must have an authorized ESTA or a visa to be issued a boarding pass.
No exemption shall be asserted with respect to information maintained in the system as it relates to data submitted by or on behalf of a person who travels to visit the United States, nor shall an exemption be asserted with respect to the resulting determination (authorized to travel, not authorized to travel, pending).
This system may contain records or information pertaining to the accounting of disclosures made from ESTA to other law enforcement agencies (Federal, State, Local, Foreign, International or Tribal) in accordance with the published routine uses. For the accounting of these disclosures only, in accordance with 5 U.S.C. 552a (j)(2), and (k)(2), DHS will claim the original exemptions for these records or information from subsection (c)(3), (e) (8), and (g) of the Privacy Act of 1974, as amended, as necessary and appropriate to protect such information. Moreover, DHS will add this exemption to Appendix C to 6 CFR Part 5, DHS Systems of Records Exempt from the Privacy Act. Such exempt records or information may be law enforcement or national security investigation records,
DHS needs these exemptions in order to protect information relating to law enforcement investigations from disclosure to subjects of investigations and others who could interfere with investigatory and law enforcement activities. Specifically, the exemptions are required to: Preclude subjects of investigations from frustrating the investigative process; avoid disclosure of investigative techniques; protect the identities and physical safety of confidential informants and of law enforcement personnel; ensure DHS's and other federal agencies' ability to obtain information from third parties and other sources; protect the privacy of third parties; and safeguard sensitive information.
Nonetheless, DHS will examine each request on a case-by-case basis, and, after conferring with the appropriate component or agency, may waive applicable exemptions in appropriate circumstances and where it would not appear to interfere with or adversely affect the law enforcement or national security investigation.
Again, DHS will not assert any exemption with respect to information maintained in the system that is collected from a person and submitted by that person's air or vessel carrier, if that person, or his or her agent, seeks access or amendment of such information.
Changes to Federal regulations must undergo several analyses. In conducting these analyses, DHS has determined:
This rule is not a significant regulatory action under Executive Order 12866, “Regulatory Planning and Review” (as amended). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB). Nevertheless, DHS has reviewed this rulemaking, and concluded that there will not be any significant economic impact.
Pursuant to section 605 of the Regulatory Flexibility Act (RFA), 5 U.S.C. 605(b), as amended by the Small Business Regulatory Enforcement and Fairness Act of 1996 (SBREFA), DHS certifies that this rule will not have a significant impact on a substantial number of small entities. The rule would impose no duties or obligations on small entities. Further, the exemptions to the Privacy Act apply to individuals, and individuals are not covered entities under the RFA.
This rulemaking will not constitute a barrier to international trade. The exemptions relate to criminal investigations and agency documentation and, therefore, do not create any new costs or barriers to trade.
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), (Pub. L. 104-4, 109 Stat. 48), requires Federal agencies to assess the effects of certain regulatory actions on State, local, and tribal governments, and the private sector. This rulemaking will not impose an unfunded mandate on State, local, or tribal governments, or on the private sector.
The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501
This action will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government, and therefore will not have federalism implications.
DHS has reviewed this action for purposes of the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4347) and has determined that this action will not have a significant effect on the human environment.
The energy impact of this action has been assessed in accordance with the Energy Policy and Conservation Act (EPCA) Public Law 94-163, as amended (42 U.S.C. 6362). This rulemaking is not a major regulatory action under the provisions of the EPCA.
Freedom of information, Privacy.
For the reasons stated in the preamble, DHS proposes to amend Chapter I of Title 6, Code of Federal Regulations, as follows:
1. The authority citation for part 5 continues to read as follows:
Public Law 107-296, 116 Stat. 2135, 6 U.S.C. 101
2. At the end of Appendix C to part 5, add the following new paragraph:
6. DHS/CBP-009, Electronic System for Travel Authorization (ESTA). A portion of the following system of records is exempt from 5 U.S.C. 552a(c)(3), (e)(8), and (g) pursuant to 5 U.S.C. 552a(j)(2),and (k)(2). Further, no exemption shall be asserted with respect to information maintained in the system as it relates to data submitted by or on behalf of a person who travels to visit the United States and crosses the border, nor shall an exemption be asserted with respect to the resulting determination (approval or denial). After conferring with the appropriate component or agency, DHS may waive applicable exemptions in appropriate circumstances and where it would not appear to interfere with or adversely affect the law enforcement purposes of the systems from which the information is recompiled or in which it is contained.
(a) From subsection (c)(3) (Accounting for Disclosure) because making available to a record subject the accounting of disclosures from records concerning him or her would specifically reveal any investigative interest in the individual. Revealing this information could reasonably be expected to compromise ongoing efforts to investigate a violation of U.S. law, including investigations of a known or suspected terrorist, by notifying the record subject that he or she is under investigation. This information could also permit the record subject to take measures to impede the investigation,
(b) From subsection (e)(8) (Notice on Individuals) because to require individual notice of disclosure of information due to compulsory legal process would pose an impossible administrative burden on DHS and other agencies and could alert the subjects of counterterrorism or law enforcement investigations to the fact of those investigations when not previously known.
(c) From subsection (g) (Civil Remedies) to the extent that the system is exempt from other specific subsections of the Privacy Act.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for the products listed above. This proposed AD results from mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as:
One ATR 42-300 experienced a collapse of the Right (RH) Main Landing Gear (MLG) when taxiing, caused by failure of the side brace assembly. Investigations revealed a crack propagation that occurred from a corrosion pit, in a very high stressed area of the upper arm. * * *
The unsafe condition is cracking of the upper arms of the secondary side brace assemblies of the MLG, which could result in collapse of the MLG during takeoff or landing, damage to the airplane, and possible injury to the flightcrew and passengers. The proposed AD would require actions that are intended to address the unsafe condition described in the MCAI.
We must receive comments on this proposed AD by July 10, 2008.
You may send comments by any of the following methods:
•
•
•
•
You may examine the AD docket on the Internet at
Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone (425) 227-1137; fax (425) 227-1149.
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2007-0263, dated October 3, 2007 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:
ONE ATR 42-300 experienced a collapse of the Right (RH) Main Landing Gear (MLG) when taxiing, caused by failure of the side brace assembly. Investigations revealed a crack propagation that occurred from a corrosion pit, in a very high stressed area of the upper arm. Dimensions of the corrosion pit were lower than the minimum defect size that can be detected by usual inspection means used during landing gear overhaul. The superseded EASA (European Aviation Safety Agency) Airworthiness Directive (AD) 2007-0112 was issued to require repetitive inspections on affected high stressed areas on MLG side brace assemblies for crack detection and to replace the affected side brace assembly if any defect was found.
Since the issuance of [EASA] AD 2007-0112, a modification of [the] side brace upper arm has been developed as terminating action. However, production non-conformity of the inspection tool was discovered.
In order to correct the discrepancy of the initial tool, new inspection tool components have been manufactured and the Service Bulletin (SB) Messier Dowty 631-32-191 has been updated to revision 2 accordingly. This directive mandates re-inspection of MLG side brace assemblies previously inspected in accordance with revision 1 of the Messier Dowty SB 631-32-191 and reduces the inspection interval initially proposed in [EASA] AD 2007-0112 in order to maintain the same level of confidence.
Messier-Dowty has issued Special Inspection Service Bulletin 631-32-191, Revision 2, dated August 30, 2007, and Service Bulletin 631-32-194, dated June 6, 2007. ATR has issued Service Bulletin ATR42-32-0092, dated June 25, 2007. ATR has also issued Technical Instruction ATR42-07-01, dated February 5, 2007. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.
This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.
We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.
We might also have proposed different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are highlighted in a NOTE within the proposed AD.
Based on the service information, we estimate that this proposed AD would affect about 31 products of U.S. registry. We also estimate that it would take about 35 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $80 per work-hour. Required parts would cost about $0 per product. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $86,800, or $2,800 per product.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and
3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.
Air transportation, Aircraft, Aviation safety, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. The FAA amends § 39.13 by adding the following new AD:
(a) We must receive comments by July 10, 2008.
(b) None.
(c) This AD applies to ATR Model ATR42-200, -300, and -320 airplanes, certificated in any category; excluding airplanes on which ATR Modification 8463 has been done.
(d) Air Transport Association (ATA) of America Code 32: Landing gear.
(e) The mandatory continuing airworthiness information (MCAI) states:
One ATR 42-300 experienced a collapse of the Right (RH) Main Landing Gear (MLG) when taxiing, caused by failure of the side brace assembly. Investigations revealed a crack propagation that occurred from a corrosion pit, in a very high stressed area of the upper arm. Dimensions of the corrosion pit were lower than the minimum defect size that can be detected by usual inspection means used during landing gear overhaul. The superseded EASA (European Aviation Safety Agency) Airworthiness Directive (AD) 2007-0112 was issued to require repetitive inspections on affected high stressed areas on MLG side brace assemblies for crack detection and to replace the affected side brace assembly if any defect was found.
Since the issuance of [EASA] AD 2007-0112, a modification of [the] side brace upper arm has been developed as terminating action. However, production non-conformity of the inspection tool was discovered.
In order to correct the discrepancy of the initial tool, new inspection tool components have been manufactured and the Service Bulletin (SB) Messier Dowty 631-32-191 has been updated to revision 2 accordingly. This directive mandates re-inspection of MLG side brace assemblies previously inspected in accordance with revision 1 of the Messier Dowty SB 631-32-191 and reduces the inspection interval initially proposed in [EASA] AD 2007-0112 in order to maintain the same level of confidence.
The unsafe condition is cracking of the upper arms of the secondary side brace assemblies of the MLG, which could result in collapse of the MLG during takeoff or landing, damage to the airplane, and possible injury to the flightcrew and passengers.
(f) For MLG side brace assemblies with part number (P/N) D22710000, without suffix “-9”: Unless already done, do the following actions.
(1) For airplanes on which the MLG side brace assemblies have not been inspected as of the effective date of this AD, in accordance with the Accomplishment Instructions of Messier-Dowty Service Bulletin 631-32-191, Revision 1, dated February 26, 2007: Perform the initial eddy current inspection for cracking of the MLG side brace, in accordance with the Accomplishment Instructions of Messier-Dowty Special Inspection Service Bulletin 631-32-191, Revision 2, dated August 30, 2007, at the applicable time specified in Table 1 of this AD. Unless otherwise specified, the flight cycles and times indicated in Table 1 of this AD must be interpreted as total flight cycles since overhaul, or time since overhaul, and as total flight cycles since new or time since manufacture for side brace assemblies that have not undergone any overhaul yet.
(2) For airplanes on which the MLG side brace assemblies have been inspected as of the effective date of this AD, in accordance with the Accomplishment Instructions of Messier-Dowty Service Bulletin 631-32-191, Revision 1, dated February 26, 2007: Within 1,000 flight cycles after the last inspection or within 200 flight cycles after the effective date of this AD, whichever occurs later, perform an eddy current inspection for cracking of the MLG side brace, in accordance with the Accomplishment Instructions of Messier-Dowty Special Inspection Service Bulletin 631-32-191, Revision 2, dated August 30, 2007.
(3) After accomplishment of the inspection required by paragraph (f)(1) or (f)(2) of this AD, repeat the inspection at intervals not to exceed 2,600 flight cycles in accordance with the Accomplishment Instructions of Messier-Dowty Special Inspection Service Bulletin 631-32-191, Revision 2, dated August 30, 2007.
(4) If any crack is found during any inspection required by paragraphs (f)(1), (f)(2) and (f)(3) of this AD, before further flight, replace the affected side brace in accordance with the Accomplishment Instructions of Messier-Dowty Special Inspection Service Bulletin 631-32-191, Revision 2, dated August 30, 2007.
(5) At the applicable time specified in paragraph (f)(5)(i) or (f)(5)(ii) of this AD: Inspect for cracking, corrosion, and defects of the MLG side brace assemblies with P/N D22710000, without suffix “-9”, in accordance with the Accomplishment Instructions of Messier Dowty Service Bulletin 631-32-194, dated June 6, 2007.
(i) For airplanes having side brace assemblies on which Messier-Bugatti Service Bulletin 631-32-072 has not been incorporated: Before accumulating 16,000 total flight cycles or within 8 years after the effective date of this AD, whichever occurs first.
(ii) For airplanes having side brace assemblies on which Messier-Bugatti Service Bulletin 631-32-072 has been incorporated: Before accumulating 19,000 total flight cycles or within 8 years after the effective date of this AD, whichever occurs first.
(6) If no cracking, corrosion, or defect is found during any inspection required by paragraph (f)(5) of this AD, before further flight, modify and re-identify (by adding a suffix “-9” to P/N D22710000) the MLG side brace assemblies in accordance with the Accomplishment Instructions of ATR Service Bulletin ATR42-32-0092, dated June 25, 2007.
(7) If any cracking, corrosion, or defect is found during any inspection required by paragraph (f)(5) of this AD, before further flight, replace the discrepant MLG side brace assembly with a modified and re-identified MLG side brace assembly in accordance with the Accomplishment Instructions of ATR Service Bulletin ATR42-32-0092, dated June 25, 2007.
This AD differs from the MCAI and/or service information as follows: Although the MCAI or service information allows further flight if a crack is found during compliance with the required inspections, this AD requires that you repair the crack before further flight.
(g) The following provisions also apply to this AD:
(1)
(2)
(3)
(h) Refer to MCAI EASA Airworthiness Directive 2007-0263, dated October 3, 2007, and the service information specified in Table 2 of this AD, for related information.
Federal Trade Commission.
Announcement of public workshop; request for public comment.
The Federal Trade Commission (“FTC” or “Commission”) is planning to host a public workshop on July 15, 2008, to examine developments in green building and textile claims and consumer perception of such claims. The workshop is a component of the Commission’s regulatory review of the Guides for the Use of Environmental Marketing Claims, announced on November 26, 2007.
The workshop will be held on Tuesday, July 15, 2008, from 9:00 AM to 5:00 PM at the FTC’s Satellite Building Conference Center, located at 601 New Jersey Avenue, N.W., Washington, D.C. Any written comments in response to this Notice must be received by August 15, 2008.
Under the Freedom of Information Act (“FOIA”) or other laws, we may be required to disclose to outside organizations the information you provide. For additional information, including routine uses permitted by the Privacy Act, see the Commission’s Privacy Policy at (
Comments filed in electronic form should be submitted by following the instructions on the web-based form at (
The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives, whether filed in paper or electronic form. Comments received will be available to the public on the FTC website, to the extent practicable, at
Robin Rosen Spector, Attorney, 202-326-3740 or Janice Podoll Frankle, Attorney, 202-326-2022, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission.
FTC staff is planning to conduct a one-day workshop on July 15, 2008, addressing environmental advertising claims regarding building and textiles. The workshop will explore environmental or “green” building and textile claims, consumer perception of those claims, and substantiation issues. The workshop is one component of the Commission’s regulatory review of the Guides for the Use of Environmental Marketing Claims (“Green Guides” or “Guides”), 16 CFR Part 260, which the FTC announced on November 26, 2007.
This Notice provides background on the Green Guides and the Green Guides regulatory review; briefly discusses consumer protection issues raised by green building and textile claims; and includes questions for comment.
This
The Commission issued the Green Guides to help marketers avoid making unfair or deceptive environmental
The Green Guides outline general principles that apply to all environmental marketing claims. The Guides provide that all marketers making express or implied claims about the environmental attributes of their product or service must have a reasonable basis for their claims at the time they make them. They describe the basic elements necessary to substantiate environmental marketing claims and present options for qualifying specific claims to avoid deception.
The Guides then specifically address general environmental benefit claims, such as “environmentally friendly,” “environmentally preferable,” “Eco-safe,” and more specific claims. The specific claims the Guides address include: degradable, compostable, recyclable, recycled content, source reduction, refillable, and ozone-safe/ozone-friendly claims. For each, the Guides explain how reasonable consumers are likely to interpret the claim and describe the basic elements necessary to substantiate the claim. Additionally, they present options for qualifying specific claims to avoid deception. These illustrative examples provide “safe harbors” for marketers seeking certainty about how to make environmental claims, but do not represent the only permissible approaches to qualifying a claim. The illustrative examples currently do not address textile or building products; thus, the questions for comment, below, ask whether the Guides should be revised to include examples regarding these products.
On November 27, 2007, the FTC published a
On January 8, 2008, the Commission conducted its first public meeting relating to the Green Guides review, a workshop on “Carbon Offsets and Renewable Energy Certificates.”
Since the Commission last revised the Green Guides in 1998, there has been a significant increase in environmental claims concerning textiles, building products, and construction. In the textile market, we have seen a marked increase in advertisements for green textiles, such as organic cotton, bamboo fiber clothing, and bedding materials. In the building market, green claims are prevalent for a wide range of building products including flooring, carpeting, paint, wallpaper, lighting, insulation, and windows. In addition, builders are making claims that the homes they build are green. These green building claims often are based upon third-party certification programs, which have grown substantially since the last revision of the Guides.
The nature of these textile and building product claims, consumer understanding of the claims, and the marketers’ substantiation of these claims all raise consumer protection issues that we plan to explore at the workshop. Below, we discuss the environmental marketing in the textile and building products markets and the consumer protection issues these claims raise.
The market for green textiles, both clothing and bedding products, is burgeoning. A 2007 fashion white paper reported that consumer demand for organic cotton clothing had grown by 300%, and the number of clothing brands made with organic materials had increased by 150% over a three year period.
In addition to making environmental claims for textiles made from organic cotton, marketers also are making eco-fabric and “natural” claims for products derived from such plants as hemp and bamboo. Certain marketers claim that bamboo is one of the world’s most sustainable resources because unlike trees, which can take up to 25 years to mature, bamboo is ready to harvest after
Marketers’ assertions about the environmental benefits of textile products raise issues regarding consumer perception of, and substantiation for, such claims. It is unclear how consumers perceive claims regarding the environmental benefits of textile products, such as organic cotton and bamboo, and the type of substantiation necessary to support such claims. For example, consumers could believe that claims that textiles made from bamboo are “sustainable,” “renewable,” or “natural”
The market for green homes and products is growing. A 2007 study found that the market for green homes is expected to rise from $2 billion to $20 billion over five years.
Claims that building products are “environmentally friendly” raise potential consumer perception and substantiation issues. Sellers and marketers are making green claims for a wide variety of products and are making claims not presently addressed in the Green Guides, including such terms as “sustainable” and “renewable.” In addition, some marketers advise consumers to consider the life cycle of the building products before purchasing,
In the green building market, many sellers use certification programs to highlight the environmentally friendly aspects of homes and buildings. There are several third-party certification programs that establish criteria for green homes.
The Commission invites written comments on any or all of the following questions regarding environmental claims for textile and building products. The Commission requests that responses to these questions be as specific as possible, including a reference to the question being answered, and reference to empirical data or other evidence wherever available and appropriate.
(1) How effective have the Guides’ provisions regarding general environmental claims been in preventing consumer deception and providing business guidance with respect to environmental claims for textile products? Please provide any evidence that supports your answer.
(2) Has there been a change in consumer perception of environmental claims for textiles since the Guides were revised?
(a) If so, please describe this change and provide any evidence that supports your answer.
(b) Should the Guides be revised to address any such change? If so, how?
(3) Are there environmental claims for textiles in the marketplace that are misleading? If so, please describe these claims and provide any evidence that supports your answer.
(4) To the extent not addressed in your previous answers, please explain whether and how the Guides should be revised to prevent consumer deception, provide business guidance, and/or reduce costs that following the Guides may impose on businesses, particularly small businesses, with respect to environmental claims for textiles. Please provide any evidence that supports your answer.
(1) Should the Guides be revised to include guidance regarding environmental claims for organically grown textile products? If so, why, and what guidance should be provided? If not, why not?
(a) What evidence supports making your proposed revision(s)? Please provide this evidence.
(b) What evidence is available concerning consumer understanding of the term “organic” when used to describe a textile product? Please provide this evidence.
(c) What evidence constitutes a reasonable basis to support an organic textile claim? Please provide this evidence.
(2) Should the Guides be revised to include guidance regarding environmental claims for so-called “natural” textile products? If so, why, and what guidance should be provided? If not, why not?
(a) What evidence supports making your proposed revision(s)? Please provide this evidence.
(b) What evidence is available concerning consumer understanding of the term “natural” when used to describe a textile product? Please provide this evidence.
(c) What evidence constitutes a reasonable basis to support a natural textile claim? Please provide this evidence.
(3) Are there claims regarding organically grown or natural textiles in the marketplace that are misleading? If so, please describe these claims and
(4) To the extent not addressed in your previous answers, please explain whether and how the Guides should be revised to prevent consumer deception, provide business guidance, and/or reduce costs that following the Guides may impose on businesses, particularly small businesses, with respect to environmental claims for organically grown or natural textiles. Please provide any evidence that supports your answer.
(1) How effective have the Guides’ provisions regarding general environmental claims been in preventing consumer deception and providing business guidance with respect to environmental claims for building products and buildings? Please provide any evidence that supports your answer.
(2) Has there been a change in consumer perception of environmental claims for building products and buildings since the Guides were revised?
(a) If so, please describe this change and provide any evidence that supports your answer.
(b) Should the Guides be revised to address any such change? If so, how?
(3) Are there environmental claims for building products and buildings in the marketplace that are misleading? If so, please describe these claims and provide any evidence that supports your answer.
(4) To the extent not addressed in your previous answers, please explain whether and how the Guides should be revised to prevent consumer deception, provide business guidance, and/or reduce costs that following the Guides may impose on businesses, particularly small businesses, with respect to environmental claims for building products and buildings. Please provide any evidence that supports your answer.
(1) How effective have the Guides’ provisions regarding third-party certifications and seals been in preventing consumer deception and providing business guidance with respect to environmental claims for textiles, building products, or buildings? Please provide any evidence that supports your answer.
(2) Has there been a change in consumer perception claims using third-party certifications and seals for textiles, building products, or buildings since the Guides were revised?
(a) If so, please describe this change and provide any evidence that supports your answer.
(b) Should the Guides be revised to address any such change? If so, how?
(3) What criteria are third-party certifiers using to substantiate claims made with third-party certification or seals for textiles, building products, or buildings? Are those criteria appropriate? Please provide any evidence that supports your answers.
(4) Are there environmental claims for textiles, building products, or buildings using third-party certifications and seals in the marketplace that are misleading? If so, please describe these claims and provide any evidence that supports your answer.
(5) To the extent not addressed in your previous answers, please explain whether and how the Guides should be revised to prevent consumer deception, provide business guidance, and/or reduce costs that following the Guides may impose on businesses, particularly small businesses, with respect to environmental claims using third-party certifications and seals for textiles, building products, and buildings. Please provide any evidence that supports your answer.
(1) Should the Guides be revised to include guidance regarding “sustainable” or “renewable” claims for textiles and building products? If so, why, and what guidance should be provided? If not, why not?
(a) What evidence supports making your proposed revision(s)? Please provide this evidence.
(b) What evidence is available concerning consumer understanding of the terms “sustainable” or “renewable” with respect to textiles and building products? Please provide this evidence.
(c) What evidence constitutes a reasonable basis to support a “sustainable” or “renewable” claim with respect to textiles and building products? Please provide this evidence.
(2) Should the Guides be revised to include guidance regarding life cycle claims for building products?
(a) If so, why, and what guidance should be provided? If not, why not? Please provide any evidence that supports your answer.
(b) What evidence is available concerning consumer understanding of life cycle claims with respect to building products? Please provide this evidence.
(c) Is there an appropriate scientific methodology to evaluate life cycle claims for building products? If so, please provide any evidence that supports your answer.
(3) Are there other environmental claims concerning textiles or building products not currently addressed by the Guides, and if so what are they? Please provide any evidence that supports your answer.
(a) Should the Guides be revised to include guidance regarding these claims? If so, why, and what guidance should be provided? If not, why not?
(b) What evidence is available concerning consumer understanding of these claim(s)? Please provide this evidence.
(c) What evidence constitutes a reasonable basis to support these claim(s)? Please provide this evidence.
By direction of the Commission.
United States Army Corps of Engineers, Department of Defense.
Notice of proposed rulemaking and request for comments.
The U.S. Army Corps of Engineers (Corps) is proposing to amend the existing regulations for a restricted area at Blount Island Command, located on Marine Corps Support Facility-Blount Island, Jacksonville, Florida. Blount Island Command is responsible for managing the United States Marine Corps Prepositioning Programs. Due to the importance of this mission, the current restricted area in this section must be extended due to Department of Defense (DoD) directives that require the implementation of specified force protection measures by all DoD components. This amendment to the existing regulation is necessary to protect U.S. government personnel, equipment, and facilities from potential terrorist attack by providing stand-off corridors encompassing the waters immediately contiguous to Marine Corps Support Facility—Blount Island.
Written comments must be submitted on or before July 10, 2008.
You may submit comments, identified by docket number COE-2007-0037, by any of the following methods:
Consideration will be given to all comments received within 30 days of the date of publication of this notice.
Mr. David Olson, Headquarters, Operations and Regulatory Community of Practice, Washington, DC at 202-761-4922 or Mr. Jon M. Griffin, U.S. Army Corps of Engineers, Jacksonville District, Regulatory Division, at 904-232-1680.
Pursuant to its authorities in Section 7 of the Rivers and Harbors Act of 1917 (40 Stat. 266; 33 U.S.C. 1) and Chapter XIX of the Army Appropriations Act of 1919 (40 Stat. 892; 33 U.S.C. 3) the Corps is proposing to amend the regulations in 33 CFR part 334 by modifying § 334.515. The modification to the existing restricted area is described below.
The amendment to this regulation will allow the Commanding Officer, Blount Island Command and Marine Corps Support Facility—Blount Island to restrict passage of persons, watercraft, and vessels in waters contiguous to this Command, thereby ensuring that DoD force protection requirements are met and antiterrorism measures are properly implemented as required by DoD directives.
a.
b.
c.
d.
Danger zones, Navigation (water), Restricted areas, Waterways.
For the reasons set out in the preamble, the Corps proposes to amend 33 CFR part 334 as follows:
1. The authority citation for part 334 continues to read as follows:
40 Stat. 266 (33 U.S.C. 1) and 40 Stat. 892 (33 U.S.C. 3).
2. Revise § 334.515 to read as follows:
(a)
(2)
(3)
(4)
(b)
(2) The restriction noted in paragraph (b)(1) of this section is in effect 24 hours a day, 7 days a week.
(3) Warning signs will be posted near the NCSF-BI shoreline advising boaters of the restrictions in this section.
(c)
(2) Enforcement of the regulations in this section will be accomplished utilizing the Department of Defense Force Protection Condition (FPCON) System. From the lowest security level to the highest, Force Protection Conditions levels are titled Normal, Alpha, Bravo, Charlie and Delta. The regulations in this section will be enforced as noted in paragraph (b) of this section, or at the discretion of the Commanding Officer.
Environmental Protection Agency (EPA).
Extension of public comment period.
EPA is announcing the extension of the public comment period on the proposed reconsideration of the amendments to the new source performance standards for coal preparation plants. EPA originally requested comments on the proposed rule by June 12, 2008. EPA is extending the deadline to July 14, 2008, and is now requesting written comments by that date. EPA received a request for a 30-day extension to the comment period from the Sierra Club and the National Association of Clean Air Agencies. The reason given for the request for the extension was the need for additional time to gather data and review the proposed amendments. Since the original comment period was 45 days, EPA finds this request reasonable.
•
•
•
•
•
Mr. Christian Fellner, Energy Strategies Group, Sector Policies and Programs Division (D243-01), U.S. EPA, Research Triangle Park, NC 27711, telephone number (919) 541-4003, facsimile number (919) 541-5450, electronic mail (e-mail) address:
Environmental protection, Administrative practice and procedure, Air pollution control, Intergovernmental relations, Reporting and recordkeeping requirements.
Office of Child Support Enforcement, Administration for Children and Families, Department of Health and Human Services.
Notice of open consultation.
Notice is hereby given for the dates and locations for one informational meeting and three Tribal consultations on the Computerized Tribal IV-D Systems and Office Automation Notice of Proposed Rulemaking (NPRM). On June 11, 2008, the
The public comment period for this regulation will be 60 days from the date of the publication of the NPRM. The Federal Office of Child Support Enforcement (OCSE) will host one meeting to introduce the proposed rule and three consultations to receive public comment on the proposed rule. This notification provides specific information for the informational meeting and consultations.
The informational meeting will be held on June 11, 2008 in Cherokee, North Carolina and will begin promptly at 9:15 a.m. and end at 12:30 p.m. The consultations will be held June 27, 2008 in Seattle, Washington; July 8, 2008 in Catoosa, Oklahoma and July 9, 2008 in Milwaukee, Wisconsin. The consultation in Seattle, Washington will begin promptly at 10 a.m. and end at 3 p.m. with an hour lunch break. The consultation in Catoosa, Oklahoma will begin at 10 a.m. and end at 3 p.m. with an hour lunch break. The consultation in Milwaukee, Wisconsin will begin at 1 p.m. and end at 5 p.m. Please note that participants must arrange and pay for their own travel, lodging, meals and incidental expenses.
The informational meeting will be held at Harrah's Cherokee Casino and Hotel, 777 Casino Drive, in Cherokee, North Carolina 28719. The telephone number for hotel reservations is (828) 497-7777. The first consultation, June 27, 2008, will be held at the Administration for Children and Families (ACF) Region X Federal Facility, 2201 6th Avenue, Suites 204-205, in Seattle, Washington 98121. Participants may be required to present a government issued photo ID in order to enter the ACF Region X Federal Facility. The second consultation, July 8, 2008, will be held at the Cherokee Casino Resort Hotel, 777 West Cherokee Street in Catoosa, Oklahoma 74015. The telephone number for hotel reservations is (918) 266-6700. The third consultation, July 9, 2008, will be held at Potawatomi Bingo & Casino in Milwaukee, Wisconsin 74015. The telephone number for hotel reservations is (414) 389-1298. These are not toll-free numbers. All interested parties are invited to attend these public consultations. Seating may be limited and will be available on a first-come, first-serve basis. Persons needing special assistance should contact the Division of Special Staffs, OCSE, at the address listed below.
Ms. Tanesha Canzater, Division of Special Staffs, OCSE, Fourth Floor East, 370 L'Enfant Promenade, SW., Washington, DC 20447 (telephone (202) 205-4922; or e-mail
The purpose of these consultations is to provide an overview of the proposed regulation and to elicit public comment. Persons who attend the consultations may make oral presentations and/or provide written comments for the record at the consultation. We strongly encourage persons who make oral presentations at the consultations to submit written comments in support of their presentations.
At the meetings, OCSE cannot address participants' concerns regarding the proposed rules, or respond to questions about the proposed rules other than questions asking for clarification. It is expected that individuals attending these meetings will have read the NPRM. OCSE will consider comments and recommendations provided at the consultations, and written comments and recommendations submitted as we prepare the final version of these regulations.
Minutes of the public meeting will be available for public inspection and copying at the Department of Health and Human Services (HHS) 14 days after the conclusion of the consultations. At HHS, these documents will be available through the Director, Division of Special
Office of the Chief Acquisition Officer, General Services Administration (GSA).
Proposed rule.
The General Services Administration (GSA) is proposing to amend the General Services Acquisition Regulation (GSAR) to establish a GSA Mentor-Protégé Program. The GSA Mentor-Protégé Program is designed to encourage GSA prime contractors to assist small businesses, small disadvantaged businesses, women-owned small businesses, veteran-owned small businesses, service-disabled veteran-owned small businesses, and HUBZone small businesses in enhancing their capabilities to perform GSA contracts and subcontracts, foster the establishment of long-term business relationships between these small business entities and GSA prime contractors, and increase the overall number of small business entities that receive GSA contract and subcontract awards.
Interested parties should submit written comments to the Regulatory Secretariat on or before August 11, 2008 to be considered in the formulation of a final rule.
Submit comments identified by GSAR Case 2006-G501 by any of the following methods:
• Regulations.gov:
• Fax: 202-501-4067.
• Mail: General Services Administration, Regulatory Secretariat (VPR), 1800 F Street, NW, Room 4041, ATTN: Laurieann Duarte, Washington, DC 20405.
For clarification of content, contact Ms. Rhonda Cundiff at (202) 501-0044. For information pertaining to the status or publication schedules, contact the Regulatory Secretariat (VPR), Room 4041, GS Building, Washington, DC 20405, (202) 501-4755. Please cite GSAR Case 2006-G501.
This proposed rule amends the General Services Administration Acquisition Regulation (GSAR) by adding a new Subpart, 519.70, GSA Mentor-Protégé Program, which outlines the Agency's Mentor-Protégé Program.
Associated contract clauses are added at 552.219-75, GSA Mentor-Protégé Program, and 552.219-76, Mentor Requirements and Evaluation. GSA strongly supports increasing opportunities for small business concerns, recognizing the continuing need to develop the capabilities of small business, small disadvantaged business, HUBZone small businesses, veteran-owned small businesses, service-disabled veteran-owned small businesses and women-owned small businesses to perform contracts and subcontracts for GSA.
This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.
The changes may have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,
An Initial Regulatory Flexibility Analysis (IRFA) has been prepared. The analysis is summarized as follows:
This proposed rule establishes a GSA Mentor-Protégé Program to encourage GSA prime contractors to assist small businesses, small disadvantaged businesses, women-owned small businesses, veteran-owned small businesses, service-disabled veteran-owned small businesses, and HUBZone small businesses in enhancing their capabilities to perform GSA contracts and subcontracts, foster the establishment of long-term business relationships between these small business entities and GSA prime contractors, and increase the overall number of small business entities that receive GSA contract and subcontract awards.
In accordance with the Small Business Act, it is the policy of the Government to provide maximum practicable opportunities in its acquisitions to these small business concerns and allow them to have the maximum practicable opportunity to participate as subcontractors in the contracts awarded by any executive agency, consistent with efficient contract performance. The General Services Administration Mentor-Protégé Program is designed to assist in this policy by encouraging GSA prime contractors to assist small businesses in enhancing their capabilities to perform contracts and subcontracts.
The entities to which this rulemaking would apply are small business protégés. It is estimated that there will be approximately 150 small business concerns impacted by this rule. The protégés (small businesses) will be completing the Agreement with the mentor. In addition, the protégés may complete voluntary reports pertaining to the GSA Mentor-Protégé Program.
The Regulatory Secretariat will be submitting a copy of the IRFA to the Chief Counsel for Advocacy of the Small Business Administration. A copy of the IRFA may be obtained from the Regulatory Secretariat. GSA will consider comments from small entities concerning the affected GSAR parts 519 and 552 in accordance with 5 U.S.C. 610. Comments must be submitted separately and should cite 5 U.S.C. 601,
The Paperwork Reduction Act (Pub. L. 104-13) applies because the proposed rule contains information collection
Public reporting burden for this collection of information is estimated to average 3 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.
The annual reporting burden is estimated as follows:
Submit comments, including suggestions for reducing this burden, not later than August 11, 2008 to: GSAR Desk Officer, OMB, Room 10102, NEOB, Washington, DC 20503, and a copy to the General Services Administration, Regulatory Secretariat (VPR), 1800 F Street, NW, Room 4041, Washington, DC 20405.
Public comments are particularly invited on: whether this collection of information is necessary for the proper performance of functions of the GSAR, and will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.
Requester may obtain a copy of the justification from the General Services Administration, Regulatory Secretariat (VPR), Room 4041, Washington, DC 20405, telephone (202) 501-4755. Please cite OMB Control Number 3090-XXXX, GSAR Case 2006-G501, The GSA Mentor-Protégé Program, in all correspondence.
Government procurement.
Therefore, GSA proposes to amend 48 CFR parts 519 and 552 as set forth below:
1. The authority citation for 48 CFR parts 519 and 552 continues to read as follows:
40 U.S.C. 121(c).
2. Add Subpart 519.70 to read as follows:
The GSA Mentor-Protégé Program is designed to encourage and motivate GSA prime contractors to assist small businesses, small disadvantaged businesses, women-owned small businesses, veteran-owned small businesses, service-disabled veteran-owned small businesses, and HUBZone small businesses, and enhance their capabilities to perform GSA contracts and subcontracts, foster the establishment of long-term business relationships between these small business entities and GSA prime contractors, and increase the overall number of small business entities that receive GSA contract and subcontract awards.
The definitions of small business concern, small disadvantaged business concern, HUBZone small business concern, women-owned small business concern, veteran-owned small business concern, and service-disabled veteran-owned small business concern are the same as found in FAR 2.101. (Also, see 13 CFR Parts 121, 124, 125 and 126 of the Small Business Administration Regulation.)
(a)
(b)
(c)
(a) A large business prime contractor which meets the requirements at 519.7006 and is approved as a mentor firm by the Mentor-Protégé Program Manager may enter into an Agreement with a small business, small disadvantaged business, women-owned small business, veteran-owned small business and HUBZone small business which meets the requirements for being a protégé (see 519.7007) to provide appropriate developmental assistance to enhance the capabilities of the protégé to perform as a subcontractor and supplier.
(b) A small business prime contractor which is capable of providing developmental assistance to protégés, may also be approved as a mentor.
(c) An active mentor-protégé arrangement requires the Protégé to be a subcontractor under the mentor's prime contract with GSA.
(d) A firm's status as a protégé under a GSA contract shall not have an effect on the firm's ability to seek other prime contracts or subcontracts.
(e) Mentors may join the GSA Mentor-Protégé Program at any time as long as they meet the requirements at 519.7006.
(a) Under the Small Business Act, 15 U.S.C. 637(d)(4)(E), the GSA is authorized to provide appropriate incentives to encourage subcontracting opportunities for small business consistent with the efficient and economical performance of the contract. This authority is limited to negotiated procurements.
(b) Costs incurred by a mentor to provide developmental assistance, as described in 519.7012 to fulfill the terms of their agreement(s) with a protégé firm(s), are not reimbursable as a direct cost under a GSA contract. If
(c) In addition to paragraph (b) of this section, contracting officers may give mentors evaluation credit under FAR 15.101-1 considerations for subcontracts awarded pursuant to their Mentor-Protégé Agreements and their subcontracting plans. Therefore—
(1) Contracting officers may evaluate subcontracting plans containing Mentor-Protégé Agreements more favorably than subcontracting plans without Mentor-Protégé Agreements; and
(2) Contracting officers may assess the prime contractor's compliance with the subcontracting plans submitted in previous contracts as a factor in evaluating past performance under certain circumstances (see FAR 15.304(b)(3), and 15.305(a)(2)(v)), and determining contractor responsibility 19.705-5(a)(1).
(d)
(e)
The overall success of the GSA Mentor-Protégé Program encompassing all participating mentors and protégés will be measured by the extent to which it results in—
(a) An increase in the number, dollar value and percentage of subcontracts awarded to protégés by mentor firms under GSA contracts since the date of entry into the Program;
(b) An increase in the number and dollar value of contract and subcontract awards to protégé firms since the time of their entry into the Program (under GSA contracts, contracts awarded by other Federal agencies, and under commercial contracts);
(c) An increase in the number and dollar value of subcontracts awarded to a protégé firm by its mentor firm; and
(d) An increase in subcontracting with protégé firms in industry categories where they have not traditionally participated within the mentor firm's activity.
(a) Mentors must be—
(1) A large business prime contractor that is currently, or has performed under at least one approved subcontracting plan awarded under a negotiated contract within the last five years, as required by FAR Subpart 19.7; Small business mentors are exempted; or
(2) A small business prime contractor that can provide developmental assistance to enhance the capabilities of protégés to perform as subcontractors and suppliers;
(b) Must be eligible (not listed in the “Excluded Parties List System”) for U.S. Government contracts and not excluded from the GSA Mentor-Protégé Program under 519.7014(b);
(c) Must be able to provide developmental assistance that will enhance the ability of protégé to perform as subcontractors; and
(d) Must provide semi-annual reports detailing the assistance provided and the cost incurred in supporting protégés.
(a) For selection as a protégé, a firm must be—
(1) A small business concern, small disadvantaged business concern, veteran-owned small business concern, service-disabled veteran-owned small business concern, HUBZone small business concern, or women-owned small business concern;
(2) Small for the NAICS code the prime contractor/mentor assigns to the subcontract; and
(3) Eligible (not listed in the “Excluded Parties List System”) for U.S. Government contracts and not excluded from the GSA Mentor-Protégé Program under 519.7014(b);
(b) A protégé firm may self-represent to a mentor firm that it meets the requirements set forth in paragraph (a) of this section. Mentors may check the Central Contractor Registration (CCR) at www.ccr.gov to verify the self-representations of the potential protégés that they meet the specified small business and socioeconomic category eligibility requirements (see 19.703(b) and (d)). HUBZone and small disadvantaged business status eligibility and documentation requirements are determined according to 13 CFR parts 124 and 126.
(c) A protégé firm must not have another formal, active mentor-protégé relationship under GSA's Mentor-Protégé Program but may have an active mentor-protégé relationship in another agency's program.
(a) Mentor firms will be solely responsible for selecting protégé firms. Mentors are encouraged to select from a broad base of small business including small disadvantaged business, women-owned small business, veteran-owned small business, service-disabled veteran-owned small business, and HUBZone small business.
(b) Mentor firms may have more than one protégé.
(c) The selection of protégé firms by mentor firms may not be protested, except for a protest regarding the size or eligibility status of an entity selected by a mentor to be a protégé. Such protests shall be handled in accordance with FAR 19.703(b). The contracting officer shall notify the Office of Small Business Utilization (OSBU) of the protest.
(a) Prime contractors interested in becoming a mentor firm must submit a request to be approved under the Program to the GSA Mentor-Protégé Program Manager, at GSA Office of Small Business Utilization (E), Washington, DC 20405. The Application will be evaluated on the extent to which the company plans to provide developmental assistance.
(b) The request must contain—
(1) A statement that the mentor firm is currently performing under at least one active approved subcontracting plan (small business exempted) and that they are eligible, as of the date of Application, for the award of Federal contracts;
(2) The number of proposed protégé arrangements;
(3) Data on all current GSA contracts, and subcontracts to include the contract/subcontract number(s), type of contract(s), period of performance (including options), contract/subcontract value(s) including options, technical Program effort(s) (Program title), name of GSA Project Manager or Contracting Officer's Representative (including contact information), name of contracting officer(s)and contact information, and awarding GSA installation;
(4) Data on total number and dollar value of subcontracts awarded under GSA prime contracts within the past 2 years and the number and dollar value of such subcontracts awarded to entities who are proposed protégés;
(5) Information on the proposed types of developmental assistance. For each
(6) A Letter of Intent signed by both parties. At a minimum, the Letter of Intent must include the stated commitment that the parties intend to enter into a mentor-protégé Agreement under the GSA Program, that they intend to cooperate in the establishment of a suitable developmental assistance Program to meet their respective needs, and that they agree to comply with the obligations in 519.7013 and all other applicable provisions governing the Program.
(a)(1)
(2) If the Mentor-Protégé Program Manager approves the Application, then the mentor—
(i) Negotiates a mentor-protégé Agreement with the protégé; and
(ii) Submits an original and two (2) copies of the Agreement to the GSA Mentor-Protégé Program Manager for approval.
(3) If Mentor-Protégé Program Manager disapproves the application, then the mentor may provide additional information for reconsideration. The review of any supplemental material will be completed within 30 days after receipt by the Mentor-Protégé Program Manager. Upon finding deficiencies that GSA considers correctable, the Mentor-Protégé Program Manager will notify the mentor and request information to be provided within 30 days that may correct the deficiencies.
(b) The Mentor-Protégé Program Manager will provide a copy of the Agreement to the contracting officer, and if applicable the cognizant GSA technical Program Manager, for a parallel review and concurrence. The Mentor-Protégé Program Manager, the GSA technical Program Manager, and the contracting officer must approve or disapprove the Agreement within 60 days.
(c) Upon notification by the Mentor-Protégé Program Manager that all the GSA parties have approved the Agreement, the mentor may implement a developmental assistance Program.
(d) The contracting officer will incorporate an approved Agreement into the mentor's contract(s) with GSA. It should be added to the subcontracting plan.
The contents of the Agreement must contain—
(a) Names, addresses (including facsimile, e-mail, and homepage) and telephone numbers of mentor and protégé firms and the name, telephone number, and position title within both firms of the person who will oversee the Agreement;
(b) An eligibility statement from the protégé stating that it is a small business, its primary NAICs code, and when applicable the type of small business (small disadvantaged business concern, HUBZone small business concern, women-owned small business concern, veteran-owned small business concern, service-disabled veteran-owned small business concern);
(c) A description of the type of developmental Program that will be provided by the mentor firm to the protégé firm (see 519.7012);
(d) Milestones for providing the identified developmental assistance;
(e) Factors to assess the protégé firms developmental progress under the Program;
(f) The anticipated dollar value and type of subcontracts that may be awarded to the protégé firm consistent with the extent and nature of mentor firm's business, and the period of time over which they may be awarded;
(g)
(h)
(i)
(j) Plan for accomplishing contract work should the Mentor-Protégé Agreement be terminated or a party excluded under 519.7014(b). The mentor prime's contract with GSA continues even if the Mentor-Protégé Agreement or the GSA Mentor-Protégé Program is discontinued;
(k) The protégé must agree to provide input into the mentor firm's semi-annual reports (see 519.7015). The protégé must submit a “lessons learned” evaluation along with the mentor firm at the conclusion of the Mentor-Protégé agreement; and
(l) Other terms and conditions, as appropriate.
The forms of developmental assistance a mentor can provide to a protégé include—
(a) Management guidance relating to—
(1) Financial management;
(2) Organizational management;
(3) Overall business management/planning; and
(4) Business development;
(b) Engineering and other technical assistance;
(c) Loans;
(d) Rent-free use of facilities and/or equipment;
(e) Temporary assignment of personnel to the protégé for purpose of training;
(f) Subcontracts awarded to protégé firms under this Program are exempt from competition requirements, notwithstanding 52.244-5. However, price reasonableness should still be determined; or
(g) Any other types of permissible, mutually beneficial assistance.
(a) The mentor or protégé may terminate the Agreement in accordance with 519.7011. The mentor will notify the Mentor-Protégé Program Manager and the contracting officer, in writing, at least 30 days in advance of the mentor firm's intent to voluntarily withdraw from the Program or to terminate the Agreement, or upon receipt of a protégé’s notice to withdraw from the Program.
(b) Mentor and protégé firms will submit a “lessons learned” evaluation to the GSA Mentor-Protégé Program Manager at the conclusion of each Mentor-Protégé Agreement.
(a) The GSA Mentor-Protégé Program Manager will manage the Program. Internal controls will be established by the Mentor-Protégé Program Manager to achieve the stated Program objectives (by serving as checks and balances
(1) Reviewing and evaluating mentor Applications for realism, validity and accuracy of provided information.
(2) Reviewing any semi-annual progress reports submitted by mentors and protégés on protégé development to measure protégé progress against the master plan contained in the approved Agreement.
(b) GSA has the authority to exclude mentor or protégé firms from participating in the GSA Program.
(1) The contracting officer or technical Program Manager can recommend exclusion and the length of exclusion from the Program. These actions shall be approved by the GSA Mentor-Protégé Program Manager.
(2) If GSA has good cause to exclude a mentor or a protégé from the Program, the GSA Office of Small Business Utilization will deliver to the contractor a Notice specifying the reason for Program exclusion and the effective date.
(3) The exclusion from the Program does not constitute a termination of the subcontract between the mentor and the protégé.
(a) Semi-annual reports shall be submitted by the mentor to the GSA Mentor-Protégé Program Manager to include information as outlined in 552.219-76(c).
(b) Protégés must agree to provide input into the mentor firm's semi-annual reports detailing the assistance provided and goals achieved since agreement inception. However, for cost reimbursable contracts, costs associated with the preparation of these reports are unallowable costs under these Government contracts and will not be reimbursed by the Government.
(c) The GSA contracting officer, or if applicable the technical Program Manager, shall include an assessment of the prime contractor's (mentor's) performance in the Mentor-Protégé Program in a quarterly ‘Strengths and Weaknesses’ evaluation report. A copy of this assessment will be provided to the Mentor-Protégé Program Manager and to the mentor and protégé.
At the conclusion of each year in the GSA Mentor-Protégé Program (anniversary date of the GSA Mentor-Protégé Program), the prime contractor and protégé, as appropriate, will formally brief the GSA Mentor-Protégé Program Manager, the technical Program Manager, and the contracting officer regarding Mentor-Protégé Program accomplishments pertaining to the approved Agreement.
(a) The contracting officer shall insert the clause at 552.219-75, GSA Mentor-Protégé Program, in all unrestricted solicitations and contracts that exceed the simplified acquisition threshold.
(b) The contracting officer shall insert the clause at 552.219-76, Mentor Requirements and Evaluation, in contracts anticipated to exceed the simplified acquisition threshold.
3. Add sections 552.219-XX and 552.219-YY to read as follows:
As prescribed in 519.7017(a), insert the following clause:
GSA Mentor-Protégé Program (DATE)
(a) Prime Contractors, including small businesses, are encouraged to participate in the GSA Mentor-Protégé Program for the purpose of providing developmental assistance to eligible protégé entities to enhance their capabilities and increase their participation in GSA contracts.
(b) The Program consists of—
(1) Mentor firms, which are large prime Contractors with at least one active subcontracting plan, or which are eligible small businesses;
(2) Protégés, which are subcontractors to the prime Contractor, include small business concerns, small disadvantaged business concerns, veteran-owned small business concerns, service-disabled veteran-owned small business concerns, HUBZone small business concerns, and women-owned small business concerns meeting the qualifications specified in Subpart 519.70; and
(3) Mentor-protégé Applications and Agreements, approved by the Mentor-Protégé Program Manager in the GSA Office of Small Business Utilization (OSBU).
(c) Mentor participation in the Program means providing technical, managerial and financial assistance to aid protégés in developing requisite high-tech expertise and business systems to compete for and successfully perform GSA contracts and subcontracts.
(d) Contractors interested in participating in the Program are encouraged to read GSAR Subpart 19.7 and to contact the GSA Office of Small Business Utilization (E), Washington, DC 20405, (202) 501-1021, for further information.
(End of clause)
As prescribed in 519.7017(b), insert the following clause:
Mentor Requirements and Evaluation (DATE)
(a) The purpose of the GSA Mentor-Protégé Program is for a GSA prime Contractor to provide developmental assistance to certain subcontractors qualifying as protégés. Eligible protégés include small business concerns, small disadvantaged business concerns, veteran-owned small business concerns, service-disabled veteran-owned small business concerns, HUBZone small business concerns, and women-owned small business concerns meeting the qualifications specified in 519.7007. The Program requires an Application process and an Agreement between the mentor and the protégé. See GSAR Subpart 519.70 for more information.
(b) GSA will evaluate a GSA mentor's performance on the following factors:
(1) Specific actions taken by the Contractor, during the evaluation period, to increase the participation of its protégé as a subcontractor and supplier.
(2) Specific actions taken by the Contractor during this evaluation period to develop the technical and corporate administrative expertise of its protégé as defined in the Agreement.
(3) To what extent the protégé has met the developmental objectives in the Agreement.
(4) To what extent the firm's participation in the GSA Mentor-Protégé Program resulted in the protégé receiving competitive contract(s) and subcontract(s) from private firms other than the mentor, and from agencies.
(c) Semi-annual reports shall be submitted by a GSA the mentor to the GSA Mentor-Protégé Program Manager, GSA Office of Small Business Utilization (E), Washington, DC 20405. The reports must include information as outlined in paragraph (b) of this clause.
(d) A GSA mentor will notify the GSA Mentor-Protégé Program Manager and the Contracting Officer, in writing, at least 30 days in advance of the mentor firm's intent to voluntarily withdraw from the GSA Program or terminate the Agreement, or upon receipt of a protégé’s notice to withdraw from the Program.
(e) GSA mentor and protégé firms will submit a “lessons learned” evaluation to the GSA Mentor-Protégé Program Manager at the conclusion of the Mentor-Protégé Agreement. At the end of each year in the GSA Mentor-Protégé Program, the mentor and protégé, as appropriate, will formally brief the GSA Mentor-Protégé Program Manager, the
(f) GSA has the authority to exclude mentor or protégé firms from participating in the GSA Program. The Contracting Officer or technical Program Manager can recommend exclusion and the length of exclusion from the Program. These actions shall be approved by the GSA Mentor-Protégé Program Manager. If GSA has good cause to exclude a mentor or a protégé from the Program, the GSA Office of Small Business Utilization will deliver to the Contractor a Notice specifying the reason for Program exclusion and the effective date. The exclusion from the Program does not constitute a termination of the subcontract between the mentor and the protégé. A plan for accomplishing the subcontract effort should the Agreement be terminated shall be submitted with the Agreement as required in 519.7011(j).
(g) Subcontracts awarded to GSA protégé firms under this Program are exempt from competition requirements, notwithstanding 52.244-5. However, price reasonableness should still be determined.
(End of clause)
Office of the Secretary, USDA.
Proposed new system of records notice; notice of indefinite suspension of effective date.
This notice suspends indefinitely the effective date for the proposed new Privacy Act system of records entitled “National Animal Identification System (NAIS), USDA/APHIS-16,” published at 73 FR 23412 on April 30, 2008.
This notice of suspension is hereby effective immediately.
Ms. Barbara S. Good, Attorney-Advisor, Office of the General Counsel, General Law Division, Room 3311 South Agriculture Building, 1400 Independence Avenue, SW., Washington, DC 20250-1415. Ms. Good may also be reached at 202-720-8045, or
Although USDA published notice under the Privacy Act of this proposed new system with an effective date of June 9, 2008, in an intervening civil action entitled “Mary-Louise Zanoni v. United States Department of Agriculture, Civil Action No.: 08-939 (EGS),” the U.S. District Court District of Columbia has ordered USDA to transmit a notice to the
Commodity Credit Corporation, USDA.
Notice.
The Commodity Credit Corporation (CCC) will extend Marketing Assistance Loans (MAL) and Loan Deficiency Payments (LDP) for the 2008 crop. The loan commodities covered by this
Candace Thompson, Director, Price Support Division, Farm Service Agency, USDA, STOP 0512, 1400 Independence Avenue, SW., Washington, DC 20250-0512; telephone: (202) 720-7901 or fax: (202) 690-3307; e-mail:
CCC administers the loan program including MAL and LDP, which provides short-term financing to allow farmers to pay their bills soon after harvest and facilitate orderly marketing throughout the rest of the year. The loan program also provides significant income support when market prices are below statutory loan rates. Current regulations for MAL and LDP apply to the 2002 through 2007 crop years.
The Food, Conservation, and Energy Act of 2008 (Pub. L. 110-234) (2008 Farm Bill) authorized the continuation of MAL and LDP, under the regulations found at 7 CFR parts 1421, 1425, and 1434, for all loan commodities for the 2008 through 2012 crops.
With the pending harvest of 2008-crop loan commodities, this notice announces that CCC will implement immediately MAL and LDP provisions for 2008-crop wheat, corn, grain sorghum, barley, oats, soybeans, rice, sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, sesame seed, graded and non-graded wool, mohair, honey, dry peas, lentils, and small chickpeas based on the current regulation in:
• 7 CFR Part 1421, Grains and Similarly Handled Commodities—Marketing Assistance Loans and Loan Deficiency Payments for the 2002 through 2007 Crop Years;
• 7 CFR Part 1425, Cooperative Marketing Associations; and
• 7 CFR Part 1434, Nonrecourse Marketing Assistance Loan and LDP Regulations for Honey.
CCC plans to amend the applicable regulations to reflect changes provided by the 2008 Farm Bill by August 31, 2008.
In addition, as a result of this notice, CCC will be able to announce applicable 2008-crop loan rates, schedules of premiums and discounts, and other related rates.
FSA has determined that this change would not constitute a major Federal action that would significantly affect the quality of the human environment. Therefore, in accordance with the 7 CFR Part 799, Environmental Quality and Related Environmental Concerns—
Forest Service, USDA.
Notice of intent to prepare an environmental impact statement.
The Department of Agriculture, Forest Service, will prepare an Environmental Impact Statement (EIS) on a integrated restoration proposal to restore terrestrial and aquatic conditions by improving the health, vigor and resilience of forest stands of infected, dead and high risk trees; restoration and maintenance of grass and shrub communities through prescribed burning; the restoration of aspen age classes and diversity; improving recreation opportunities and grazing; capturing the economic value of the dead and dying mountain pine beetle infested and high risk trees; understory thinning, followed with prescribed burning, on small understory conifer trees; enhancing water quality and quantity and maintaining and restoring conditions for native fish populations. The integrated restoration EIS will also improve public safety and infrastructure by reconstructing, relocating, maintaining and improving signing, design and linkage of forest trails, road densities and travel management. The EIS will address the obliteration of roads as well as provide mitigation measures to avoid introducing and spreading invasive vegetation. The proposed action will occur on a project area of approximately 39,000 acres of National Forest System land. The Forest Service will be using the Healthy Forest Restoration Act (HFRA). The East Deer Lodge Valley Landscape Restoration Project developed in response to the Healthy Forest Restoration Act (HFRA) of 2003 (PL 108-148). Title 1 of HFRA contains provisions to expedite hazardous fuel reduction and forest restoration projects on certain National Forest System lands at risk from wildland fire or are currently experiencing (or show imminent risk to) insect and disease epidemics (HFRA 2003, p. 15). Section 1 02(a)(4) of the HFRA authorizes expedited vegetation management projects where conditions such as the existence of an insect or disease epidemic “* * * (poses) a significant threat to an ecosystem component, or forest or rangeland resource on the Federal land or adjacent non-Federal land.” (Ibid. p. 20).
Title 1 of HFRA encourages federal agencies to involve state and local governments and citizens when developing plans and projects for vegetation treatment on federal and adjacent non-federal lands (Ibid., p. 7). A stewardship contract will be let upon reaching the project decision and implementation. The Record of Decision will disclose whether and where the Forest Supervisor decides to provide integrated restoration proposals for both the terrestrial and aquatic environments.
A public mailing outlining the project timeline and public involvement opportunities is planned the summer and fall of 2008. Individuals who want to receive this mailing should contact us within 30 days of the publication of this NOI. To be most useful, comments concerning the scope of this project should be received by July 30, 2008. The Draft Environmental Impact Statement is anticipated in the spring or summer of 2009 followed by a 45-day public comment period. The Final Environmental Impact Statement and Record of Decision should be completed by the spring of 2010.
Please send written comments to the Pintler Ranger District, Beaverhead-Deerlodge National Forest, Attn: Charlene Bucha Gentry, East Deer Lodge Valley Landscape Restoration Management EIS, 88 Business Loop, Philipsburg, MT 59858. The FAX number is (406) 859-3689. E-Mail comments can be submitted to the project leader,
Questions about the proposal and EIS should be directed to Charlene Bucha Gentry, District Ranger, Pintler Ranger District, Beaverhead-Deerlodge National Forest, 88 Business Loop, Philipsburg, MT 59858; telephone (406) 859-3211 or David Fletcher, Interdisciplinary Team Leader, Beaverhead-Deerlodge National Forest, Butte Ranger District/SO Annex, 1820 Meadowlark Lane, Butte, MT 59701 telephone (406) 494-0235. E-mail comments can be sent to
The Forest Service believes, at this early stage, it is important to give reviewers notice of several court rulings related to public participation in the environmental review process. First, reviewers of Draft Environmental Impact Statements must structure their participation in the environmental review of the proposal so that it is meaningful and alerts an agency to the reviewer's position and contentions.
To assist the Forest Service in identifying and considering issues and concerns of the proposed action, comments during scoping and comments on the Draft Environmental Impact Statement should be as specific as possible. It is also helpful if comments refer to specific pages or chapters of the Draft Environmental Impact Statement. Comments may also address the adequacy of the Draft Environmental Impact Statement or the merits of the alternatives formulated and discussed in the statement. Reviewers may wish to refer to the Council on Environmental Quality Regulations for implementing the procedural provisions of the National Environmental Policy Act at 40 CFR 1503.3 in addressing these points. Comments received in response to this solicitation, including names and addresses of those who comment, will be considered part of the public record on this proposed action and will be available for public inspection. Comments submitted anonymously will be accepted and considered; however, those who submit anonymous comments will not have standing to appeal the subsequent decision under 36 CFR Parts 215 or 217. Additionally, pursuant to 7 CFR 1.27(d), any person may request the agency to withhold a submission from the public record by showing how the Freedom of Information Act (FOIA) permits such confidentiality. Requesters should be aware that, under FOIA, confidentiality may be granted in only very limited circumstances, such as to protect trade secrets. The Forest Service will inform the requester of the agencys decision regarding the request for confidentiality, and where the request is denied; the agency will return the submission and notify the requester that the comments may be resubmitted with or without name and address within 7 days.
40 CFR 1501.7 and 1508.22; Forest Service Handbook 1909.15, Section 21.
Import Administration, International Trade Administration, Department of Commerce.
June 10, 2008.
Magd Zalok or Drew Jackson, AD/CVD Operations, Office 4, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC, 20230; telephone: (202) 482-4162 and (202) 482-4406, respectively.
On February 6, 2008, the Department of Commerce (the Department) initiated the antidumping duty investigation of small diameter graphite electrodes from the People's Republic of China.
On May 28, 2008, the Petitioners
For the reasons identified by the Petitioners, and because there are no compelling reasons to deny the request, the Department is postponing this preliminary determination under section 733(c)(1)(A) of the Tariff Act of 1930, as amended (the Act) by 50 days from June 25, 2008 to August 14, 2008. The deadline for the final determination will continue to be 75 days after the date of the preliminary determination, unless extended.
This notice is issued and published pursuant to sections 733(c)(2) and 777(i)(1) of the Act, and 19 CFR 351.205(f)(1).
Import Administration, International Trade Administration, Department of Commerce.
On February 5, 2008, the Department of Commerce (“Department”) published
We invited interested parties to comment on our
June 10, 2008.
Frances Veith or Blanche Ziv, AD/CVD Operations, Office 8, Import Administration, International Trade Administration, U.S. Department of Commerce, 14
On February 5, 2008, the Department published the
On March 6, 2008, the Department received a case brief from Trade Pacific PLLC on behalf of its clients Laizhou Auto Brake Equipment Company (“LABEC”), Yantai Winhere Auto-Part Manufacturing Co., Ltd. (“Winhere”), Longkou Haimeng Machinery Co., Ltd. (“Haimeng”), Laizhou Luqi Machinery Co., Ltd. (“Luqi”), Laizhou Hongda Auto Replacement Co., Ltd. (“Hongda”), Qingdao Meita Automotive Industry Co., Ltd. (“Meita”), Dixion Brake System (Longkou) Ltd. (“Dixion”), and Laizhou Wally Automobile Co., Ltd. (“Wally”) (collectively, “the Trade Pacific respondents”). On March 11, 2008, we received a rebuttal brief from the Coalition for the Preservation of American Brake Drum and Rotor Aftermarket Manufacturers (“petitioner”).
We conducted these reviews in accordance with sections 751 and 777(i)(1) of the Tariff Act of 1930, as amended (“the Act”), and 19 CFR 351.213 and 19 CFR 351.221, as appropriate.
The POR is April 1, 2006, through March 31, 2007.
The products covered by this order are brake rotors made of gray cast iron, whether finished, semifinished, or unfinished, ranging in diameter from 8 to 16 inches (20.32 to 40.64 centimeters) and in weight from 8 to 45 pounds (3.63 to 20.41 kilograms). The size parameters (weight and dimension) of the brake rotors limit their use to the following types of motor vehicles: automobiles, all-terrain vehicles, vans and recreational vehicles under “one ton and a half,” and light trucks designated as “one ton and a half.”
Finished brake rotors are those that are ready for sale and installation without any further operations. Semi-finished rotors are those on which the surface is not entirely smooth, and have undergone some drilling. Unfinished rotors are those which have undergone some grinding or turning.
These brake rotors are for motor vehicles, and do not contain in the casting a logo of an original equipment manufacturer (“OEM”) which produces vehicles sold in the United States (
Brake rotors are currently classifiable under subheading 8708.39.5010 of the
All issues raised in the case and rebuttal briefs filed by parties in these reviews are addressed in the Memorandum from Stephen J. Claeys, Deputy Assistant Secretary for Import Administration, to David M. Spooner, Assistant Secretary for Import Administration, “Issues and Decision Memorandum for the 2006-2007 Administrative and New Shipper Reviews of the Antidumping Duty Order on Brake Rotors From the People's Republic of China,” dated June 4, 2008 (“
In the
In our
Based on our analysis of comments received from interested parties and information on the record of these reviews, we made changes to the margin calculations as noted below.
We have made certain changes to the financial ratio calculations for the final results. For further details,
We determine that the following final weighted-average dumping margins exist for the period April 1, 2006, through March 31, 2007:
The Department will disclose calculations performed for the final results to the parties within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
The Department has determined, and U.S. Customs and Border Protection (“CBP”) shall assess, antidumping duties on all appropriate entries covered by these reviews. The Department intends to issue assessment instructions to CBP 15 days after the publication date of the final results of these reviews. In accordance with 19 CFR 351.212(b)(1), for Haimeng and Meita, we calculated an exporter/importer (or customer)-specific assessment rate for the merchandise subject to these reviews. For Tylon, we calculated an exporter/producer/importer (or customer)-specific assessment rate for the merchandise subject to these reviews. Where the respondent has reported reliable entered values, we calculated importer (or customer)-specific
For the companies receiving a separate rate that were not selected for individual review (
The following cash deposit rates will be effective upon publication of this notice of final results for all shipments of subject merchandise exported by Tylon entered or withdrawn from warehouse, for consumption on or after publication date of this notice: (1) zero cash deposit will be required for subject merchandise manufactured and exported by Tylon; and (2) for subject merchandise exported by Tylon but not manufactured by Tylon, the cash deposit rate will be the PRC-wide rate of 43.32 percent.
The following cash deposit requirements will be effective upon publication of this notice of final results for all other shipments of brake rotors from the PRC entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided by section 751(a)(1) of the Act: (1) for Haimeng, Meita, Winhere, LABEC, Hongda, Wally, Dixion, Gren, ZLAP, TLC, ZGOLD, Luqi, Yinghao, and Jinzheng, zero cash deposit will be required; (2) the cash deposit rate for previously investigated or reviewed PRC and non-PRC exporters who received a separate rate in a prior segment of the proceeding (which were not reviewed in this segment of the proceeding) will continue to be the rate assigned in that segment of the proceeding; (3) the cash deposit rate for all PRC exporters of subject merchandise that have not been found to be entitled to a separate rate will be the PRC-wide rate of 43.32 percent; and (4) the cash deposit rate for all non-PRC exporters or exporter/producer combination of subject merchandise which have not received their own rate will be the rate applicable to the PRC exporter that supplied that non-PRC exporter. These requirements shall remain in effect until further notice.
This notice serves as a final reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Pursuant to 19 CFR 351.402(f)(3), failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of doubled antidumping duties.
This notice also serves as a reminder to parties subject to administrative protective order (“APO”) of their responsibility concerning the disposition of proprietary information disclosed under APO, in accordance with 19 CFR 351.305 and as explained in the APO itself. Timely written notification of the return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation.
This notice of final results of the administrative and new shipper reviews is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of open public meeting.
Notice is hereby given of a meeting of the Marine Fisheries Advisory Committee (MAFAC). This will be the first meeting to be held in calendar year 2008 to review and advise NOAA on management policies for living marine resources. Agenda topics are provided under the
The meetings will be held July 1, 2008, from 9 a.m. to 4 p.m., July 2, 2008, from 9 a.m. to 4:30 p.m., and July 3, 2008, from 9 a.m. to 4:30 p.m.
The meetings will be held at the Radisson Martinique Hotel, 49 West 32nd Street, New York, NY 10001; (212) 277-2702
Mark Holliday, Director, NMFS Office of Policy; telephone: (301) 713-2239 x120.
As required by section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. App. 2, notice is hereby given of a meeting of MAFAC. MAFAC was established by the Secretary of Commerce (Secretary) on February 17, 1971, to advise the Secretary on all living marine resource matters that are the responsibility of the Department of Commerce. This committee advises and reviews the adequacy of living marine resource policies and programs to meet the needs of commercial and recreational fisheries, and environmental, State, consumer, academic, tribal, governmental and other national interests. The complete charter and summaries of former meetings are located online at
The order in which these matters is considered is subject to change.
The meeting will begin with opening remarks and introductions to the full committee from Dr. Jim Balsiger, Acting Assistant Administrator for NOAA Fisheries. MAFAC administrative matters will be discussed, including findings and recommendations of the MAFAC charter working group. The afternoon is dedicated to separate Subcommittee and working group meetings, including Strategic Planning, Commerce (aquaculture, ecolabeling, and seafood safety/quality), and Recreational Fisheries Statistics improvements.
Updates will be presented on Aquaculture, Magnuson-Stevens Act Reauthorization, and International Fisheries, and legislative updates. Other topics to be discussed are the Vision 2020 Working Group; a Strategic Planning Subcommittee report on the present draft of a MAFAC Transition Paper; NOS/NMFS interactions; and National Monuments, Sanctuaries, and Marine Protected Areas.
The full Committee will reconvene from 9 a.m. to 4 p.m. to discuss findings and recommendations on Seafood Safety and Quality; receive a briefing on climate change impacts and NOAA Climate Service; and discuss findings and recommendations on Ecolabeling and Seafood Certification. The meeting will conclude with a review of action items and next steps, and the time and place of the Fall meeting.
These meetings are physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Mark Holliday, Director, NMFS Office of Policy; telephone: (301) 713-2239 x120 by 5 p.m., June 15, 2008.
U.S. Army Corps of Engineers, DoD.
Notice of availability.
The U.S. Army Corps of Engineers (USACE) is issuing this notice to advise the public that a Draft Environmental Impact Statement (Draft EIS) has been completed and is available for review and comment.
In accordance with the National Environmental Policy Act (NEPA), we have filed the Draft EIS with the U.S. Environmental Protection Agency (EPA) for publication of their notice of availability in the
A public meeting for this Draft EIS will be held on Wednesday, June 25, 2008, from 6 to 9 p.m. at University of Florida, Institute of Food and Agricultural Sciences, Everglades Research and Education Conference Center, 3200 E. Palm Beach Road, Belle Glade, FL 33430. The purpose of this public meeting is to provide the public the opportunity to comment, either orally or in writing, on the Draft EIS. Notification of the meeting will be announced following same format as the Scoping Meetings announcements.
The Draft EIS can be viewed online at
Ms. Tori White, Section Chief, U.S. Army Corps of Engineers, Jacksonville District, 4400 PGA Boulevard, Suite 500, Palm Beach Gardens, Florida 33410, Telephone: 561-472-3517, Fax: 561-626-6971.
The South Florida Water Management District (SFWMD) proposes to construct and operate stormwater treatment areas (STAs) on Compartments B and C of the Everglades Agricultural Area in Palm Beach and Hendry Counties, Florida. Compartment B STA will consist of approximately 6,700 acres of effective treatment area, and will be operated in close coordination with the existing STA 2 to assist in the phosphorus reduction capability of this STA, which discharges into Water Conservation Area (WCA) 2A. The SFWMD also proposes that the Compartment B STA be used to receive flows that otherwise would be directed to STA 1W and STA 1E assuming there is capacity in the existing canals. The Compartment C STA will consist of approximately 6,200 acres of effective treatment area, and will be operated in close coordination with existing STA 5 and STA 6 to assist in the phosphorus reduction capability of these two STAs, which discharge into WCA 3A and Rotenberger Wildlife Management Area. As proposed, the project would impact approximately 7,591 acres and 5,918 acres of jurisdictional wetlands and other waters of the United States associated with the construction of Compartments B and C, respectively. The SFWMD would need to obtain a Department of the Army permit pursuant to Section 404 of the Clean Water Act from the USACE and an interim land use approval from Department of the Interior for construction of Compartments B and C which were purchased with federal funds for Everglades restoration. This Draft Environmental Impact Statement evaluates the environmental effects of 5 alternatives including the SFWMD's preferred alternative described above, 2 additional alternatives that utilize Compartments B and C but with a different operational regime for Compartment B, an alternative that includes other lands for construction of an STA to assist existing STA 1W and STA 1E, and the no action alternative.
Department of the Navy, DoD.
Notice.
Pursuant to section (102)(2)(c) of the National Environmental Policy Act of 1969, and the regulations implemented by the Council on Environmental Quality (40 CFR parts 1500-1508), the Department of the Navy (Navy) announces its intent to prepare an Environmental Impact Statement (EIS) to evaluate the potential environmental impacts associated with the construction and operation of a proposed new Explosives Handling Wharf (EHW) located adjacent to, but separate from, the existing EHW on Hood Canal, NBK-Bangor, WA, to support TRIDENT submarines.
The proposed action consists of in-water and land-based construction and infrastructure enhancements including a covered ordnance operations area, a support building on the wharf, and a warping wharf. As part of the Navy's sea-based strategic deterrence mission, the Navy Strategic Systems Programs (SSP) directs research, development, manufacturing, test, evaluation, and operational support of the TRIDENT Fleet Ballistic Missile program. SSP is the Action Proponent and the Navy is the lead agency for this project.
The Navy will hold a public scoping meeting for the purpose of further identifying the scope of issues to be addressed in the EIS. Federal, State, and local agencies and the public are invited to participate in the scoping process for the EIS. Comments are being solicited to help identify significant issues or concerns related to the proposed action, determine the scope of issues to be addressed in the EIS, and identify and refine alternatives to the proposed action.
The Navy will conduct a public scoping meeting to receive oral and/or written comments on environmental concerns that should be addressed in the EIS. The public scoping meeting will be conducted in English and will be arranged in an informal, open house format. Attendees will be asked to sign in and will be directed to various stations manned by Navy representatives and technical staff assigned to provide information and answer questions. Several large display boards will be located throughout the meeting location to assist attendees in understanding the project and the alternatives. A comment table, supplied with comment sheets, will be placed in an easily accessible and comfortable location. Fact sheets about the project and alternatives will be available to participants.
The public scoping meeting will be held on Thursday, June 26, 2008 from 5:30 p.m. to 8:30 p.m. at the Silverdale Community Center, 9729 Silverdale Way, NW., Evergreen Room, Silverdale, WA 98383.
Mr. Jack Spiller, Public Affairs Officer, Department of the Navy, Strategic Systems Programs, 2521 South Clark Street, Suite 1000, Arlington, VA 22202-3930, telephone: 703-601-9009, e-mail at:
The proposed action is to construct and operate a proposed new EHW located adjacent to, but separate from, the existing EHW on Hood Canal, NBK-Bangor, WA, to support TRIDENT submarines. The purpose of the proposed action is to meet current and future technical program requirements for the TRIDENT mission. The need for the proposed action is to provide capability for loading and unloading missiles and torpedoes on submarines homeported at NBK-Bangor.
The new EHW is needed to maintain operational availability of the TRIDENT Program. The original plan for the TRIDENT base at Bangor, described in an environmental impact statement dated July 1974 provided for three EHWs. Two EHWs were constructed for the TRIDENT base at Kings Bay, Georgia, and operations at Kings Bay have demonstrated the efficiency and
Alternatives for the proposed action were identified based on capability for meeting TRIDENT Program mission requirements, ability to avoid or minimize environmental impacts, siting requirements including proximity to existing infrastructure, availability of waterfront property, constructability of essential project features, and master planning issues such as explosives safety restrictions.
Alternatives to be considered include: (1) Deep-Water Trestle EHW; (2) Onshore Trestle EHW; (3) No Action Alternative. For both action alternatives, the EHW would be located in deep water, parallel to and 600 feet from the shore, and placement of structures over the intertidal zone would be minimized. The new EHW would include a covered operations area approximately 600 feet long and 250 feet wide, supplemented by an uncovered wharf extension approximately 700 feet long and 40 feet wide.
The wharf would either be an anchored floating structure or a structure supported by piles. Separate pile-supported entrance and exit trestles, or bridges, would provide a roadway for missile transport vehicles to travel from shore to the EHW and back to shore. For both action alternatives, the entrance trestle would be constructed from the end of the existing EHW access road to connect to the north end of the new EHW. The two action alternatives differ in the location of the exit trestle, which would connect the south end of the new EHW to the existing EHW access road.
Under the Deep-Water Trestle alternative, parallel entry and exit trestles would be constructed to transport ordnance to and from the wharf. The exit trestle would be constructed over deep water to the extent possible, crossing the intertidal zone and returning to land at the existing EHW access road. The Deep-Water Trestle alternative would require approximately 1,000 feet of additional in-water construction but would avoid construction of a road on the steep embankment adjacent to the proposed site for the EHW.
For the Onshore Trestle alternative, the exit trestle would be constructed to take the shortest distance to shore from the south end of the new EHW. This alternative would require extension of the exit trestle approximately 1,400 feet along the edge of the steep embankment on the shore, away from the intertidal zone, to connect to the existing access road.
No decision will be made to implement any alternative until the EIS process is completed and a Record of Decision is signed by the Assistant Secretary of the Navy. Phased construction of the project would be completed in four years.
The impacts to be evaluated include, but will not be limited to, impacts on fish and marine mammals, essential fish habitat, effects on endangered and threatened species, impacts relating to underwater noise, loss of underwater habitat, decreased opportunities for migratory and transient movement within the waterfront, impacts on cultural resources, reduction in water quality, impacts on wetlands, terrestrial impacts, effects on tribal resources, and consistency with the Coastal Zone Management Act.
The analysis will include an evaluation of direct, indirect, short term, and long term impacts and will account for cumulative impacts from other Navy and non-Navy activities in the project area.
The Navy is initiating the scoping process to identify community concerns and local issues to be addressed in the EIS. Federal agencies, state agencies, local agencies, and interested persons are encouraged to provide written comments in addition to, or in lieu of, oral comments at scheduled public scoping meetings.
Written comments must be postmarked by midnight July 14, 2008 and should be submitted to: Mr. Jack Spiller, Public Affairs Officer, Department of the Navy, Strategic Systems Programs, 2521 South Clark Street, Suite 1000, Arlington, VA 22202-3930, telephone: 703-601-9009, e-mail at:
Department of the Navy, DoD.
Notice.
The CNO Executive Panel will report on the findings and recommendations of the Environmental Stewardship Subcommittee to the Chief of Naval Operations. The meeting will consist of discussions of current and future Navy strategy, plans, and policies to both increase the Navy's energy efficiency and reduce the Navy's environmental footprint while maintaining combat readiness.
The meeting will be held on July 10, 2008 from 10 a.m. to 12 p.m.
The meeting will be held in CNA Corporation Building, 4825 Mark Center Drive, Alexandria, VA 22311, Boardroom.
Mr. Sid MacArthur, CNO Executive Panel, 4825 Mark Center Drive, Alexandria, VA 22311, telephone: 703-681-4907.
Pursuant to the provisions of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), these matters constitute classified information that is specifically authorized by Executive Order to be kept secret in the interest of national defense and are, in fact, properly classified pursuant to such Executive Order.
Accordingly, the Secretary of the Navy has determined in writing that the public interest requires that all sessions of this meeting be closed to the public because they will be concerned with matters listed in section 552b(c)(1) of title 5, United States Code.
Individuals or interested groups interested may submit written statements for consideration by the Chief of Naval Operations Executive Panel at any time or in response to the agenda of a scheduled meeting. All requests must be submitted to the Designated Federal Officer at the address detailed below.
If the written statement is in response to the agenda mentioned in this meeting notice then the statement, if it is to considered by the Panel for this meeting, must be received at least five days prior to the meeting in question.
The Designated Federal Officer will review all timely submissions with the Chief of Naval Operations Executive Panel Chairperson, and ensure they are provided to members of the Chief of Naval Operations Executive Panel before the meeting that is the subject of this notice.
To contact the Designated Federal Officer, write to Executive Director, CNO Executive Panel (N00K), 4825 Mark Center Drive, 2nd Floor, Alexandria, VA 22311-1846.
Department of Education.
The IC Clearance Official, Regulatory Information Management Services, Office of Management, invites comments on the proposed information collection requests as required by the Paperwork Reduction Act of 1995.
Interested persons are invited to submit comments on or before August 11, 2008.
Section 3506 of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) requires that the Office of Management and Budget (OMB) provide interested Federal agencies and the public an early opportunity to comment on information collection requests. OMB may amend or waive the requirement for public consultation to the extent that public participation in the approval process would defeat the purpose of the information collection, violate State or Federal law, or substantially interfere with any agency's ability to perform its statutory obligations. The IC Clearance Official, Regulatory Information Management Services, Office of Management, publishes that notice containing proposed information collection requests prior to submission of these requests to OMB. Each proposed information collection, grouped by office, contains the following: (1) Type of review requested, e.g. new, revision, extension, existing or reinstatement; (2) Title; (3) Summary of the collection; (4) Description of the need for, and proposed use of, the information; (5) Respondents and frequency of collection; and (6) Reporting and/or Recordkeeping burden. OMB invites public comment. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology.
Requests for copies of the proposed information collection request may be accessed from
Comments regarding burden and/or the collection activity requirements should be electronically mailed to
Department of Education.
The IC Clearance Official, Regulatory Information Management Services, Office of Management invites comments on the submission for OMB review as required by the Paperwork Reduction Act of 1995.
Interested persons are invited to submit comments on or before July 10, 2008.
Written comments should be addressed to the Office of Information and Regulatory Affairs, Attention: Education Desk Officer, Office of Management and Budget, 725 17th Street, NW., Room 10222, Washington, DC 20503. Commenters are encouraged to submit responses electronically by e-mail to
Section 3506 of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) requires that the Office of Management and Budget (OMB) provide interested Federal agencies and the public an early opportunity to comment on information collection requests. OMB may amend or waive the requirement for public consultation to the extent that public participation in the approval process would defeat the purpose of the information collection, violate State or Federal law, or substantially interfere with any agency's ability to perform its statutory obligations. The IC Clearance Official, Regulatory Information Management Services, Office of Management, publishes that notice containing proposed information collection requests prior to submission of these requests to OMB. Each proposed information collection, grouped by office, contains the following: (1) Type of review requested, e.g., new, revision, extension, existing or reinstatement; (2) Title; (3) Summary of the collection; (4) Description of the need for, and proposed use of, the information; (5) Respondents and frequency of collection; and (6) Reporting and/or Recordkeeping burden. OMB invites public comment.
This information collection is being submitted under the Streamlined Clearance Process for Discretionary Grant Information Collections (1894-0001). Therefore, the 30-day public comment period notice will be the only public comment notice published for this information collection.
Requests for copies of the information collection submission for OMB review may be accessed from
Comments regarding burden and/or the collection activity requirements should be electronically mailed to
Department of Education.
The IC Clearance Official, Regulatory Information Management Services, Office of Management invites comments on the submission for OMB review as required by the Paperwork Reduction Act of 1995.
Interested persons are invited to submit comments on or before July 10, 2008.
Written comments should be addressed to the Office of Information and Regulatory Affairs, Attention: Education Desk Officer, Office of Management and Budget, 725 17th Street, NW., Room 10222, Washington, DC 20503. Commenters are encouraged to submit responses electronically by e-mail to
Section 3506 of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) requires that the Office of Management and Budget (OMB) provide interested Federal agencies and the public an early opportunity to comment on information collection requests. OMB may amend or waive the requirement for public consultation to the extent that public participation in the approval process would defeat the purpose of the information collection, violate State or Federal law, or substantially interfere with any agency's ability to perform its statutory obligations. The IC Clearance Official, Regulatory Information Management Services, Office of Management, publishes that notice containing proposed information collection requests prior to submission of these requests to OMB. Each proposed information collection, grouped by office, contains the following: (1) Type of review requested, e.g. new, revision, extension, existing or reinstatement; (2) Title; (3) Summary of the collection; (4) Description of the need for, and proposed use of, the information; (5) Respondents and frequency of collection; and (6) Reporting and/or Recordkeeping burden. OMB invites public comment.
Requests for copies of the information collection submission for OMB review may be accessed from
Comments regarding burden and/or the collection activity requirements should be electronically mailed to
Department of Energy.
Notice of Open Meeting.
This notice announces a meeting of the Environmental
Wednesday, July 9, 2008, 5 p.m.
Atomic Testing Museum, 755 East Flamingo Road, Las Vegas, Nevada 89119.
Rosemary Rehfeldt, Board Administrator, 232 Energy Way, M/S 505, North Las Vegas, Nevada 89030. Phone: (702) 657-9088; Fax (702) 295-5300 or E-mail:
Bonneville Power Administration and the Office of Electricity Delivery and Energy Reliability, U.S. Department of Energy.
Record of Decision (ROD).
The Department of Energy (DOE) announces its decision to implement its Proposed Action and Preferred Alternative as identified in the Port Angeles-Juan de Fuca Transmission Project Final Environmental Impact Statement (DOE/EIS-0378, October 2007). Sea Breeze Olympic Converter LP (Sea Breeze) applied to DOE for authorizations and approvals necessary to construct the United States (U.S.) portion of an international electric power transmission cable from the greater Victoria area, British Columbia, Canada, across the Strait of Juan de Fuca to Port Angeles, Washington, United States. Under the Proposed Action, the Bonneville Power Administration (BPA), an organizational element within DOE, will offer contract terms to Sea Breeze for interconnection of the cable with the Federal Columbia River Transmission System, which is owned and operated by BPA. Additionally, the Office of Electricity Delivery and Energy Reliability (OE), another organizational element within DOE, will issue a Presidential permit to Sea Breeze to construct, operate, maintain, and connect the ±150,000-volt (150-kV) direct current (DC) submarine cable that crosses the U.S.-Canadian border.
BPA's Proposed Action includes the expansion of BPA's Port Angeles Substation to accommodate the interconnection. The interconnection will allow power flow over BPA's transmission system to the extent that capacity on the system is available. The Proposed Action does not include transmission service over BPA's system, which must be requested separately. The Proposed Action included two short routing options (A and B) for the transmission cable as it enters BPA's substation property; BPA has chosen the Option A route.
In reaching this decision, DOE considered the low potential for environmental impacts in the United States from constructing, operating, maintaining, and connecting the project, the lack of adverse impacts to the reliability of the U.S. electric power supply system, and the lack of major issues of concern to the public.
This ROD will be sent to interested parties and affected persons and agencies who requested a copy. Project documents, including the Draft and Final EIS, are available on the DOE National Environmental Policy Act (NEPA) Web site at
For further information about the EIS, contact Ms. Stacy Mason, Environmental Coordinator, Bonneville Power Administration—KEC, P.O. Box 3621, Portland, Oregon 97208-3621, by telephone at 503-230-5455, by facsimile at 503-230-5699, or by electronic mail at
For general information on the DOE NEPA process, contact Carol Borgstrom, Director, Office of NEPA Policy and Compliance, GC-20, U.S. Department of Energy, 1000 Independence Avenue, SW., Washington, DC 20585, by telephone at 202-586-4600, or leave a message at 800-472-2756.
BPA is an organizational unit within DOE that owns and operates most of the high-voltage electric transmission system in the Pacific Northwest. BPA has adopted an Open Access Transmission Tariff that is consistent with the Federal Energy Regulatory Commission's (FERC)
OE is the organizational unit within DOE that administers the Presidential permit process pursuant to Executive Order (E.O.) 10485 (September 9, 1953), as amended by E.O. 12038 (February 7, 1978). The E.O. requires that a Presidential permit be issued by DOE before electric transmission facilities may be constructed, operated, maintained, or connected at the U.S. international border. DOE may issue or amend a permit if it determines that the permit is in the public interest and after obtaining favorable recommendations from the U.S. Departments of State and Defense. In determining whether issuance of a permit for a proposed action is in the public interest, DOE considers the environmental impacts of the proposed project pursuant to NEPA, the project's impact on electric reliability by ascertaining whether the proposed project would adversely affect the operation of the U.S. electric power supply system under normal and contingency conditions, and any other factors that DOE may consider relevant to the public interest.
Sea Breeze, a private company, is proposing to construct 32 miles (52 kilometers [km]) of DC transmission cable from the greater Victoria area (View Royal), British Columbia, Canada, across the Strait of Juan de Fuca, to Port Angeles, Clallam County, Washington, United States. The cable would cross both land and sea under Canadian and U.S. jurisdictions, would be converted to alternating current (AC) at a new converter station in Port Angeles, and would interconnect with the Federal Columbia River Transmission System at BPA's Port Angeles Substation.
In December 2004, Sea Breeze applied to OE for a Presidential permit for the international border crossing of the cable. In April 2005, Sea Breeze submitted a request to BPA to connect the cable into the Federal transmission system. DOE prepared an EIS to evaluate the environmental effects of the proposed cable and interconnection, issuing the Final EIS (DOE/EIS-0378) in October 2007.
The project, as defined in this ROD and evaluated in the EIS, is a ±150 kV DC transmission cable that would extend from a point at the U.S.-Canadian border to Port Angeles, Washington. The cable would be capable of carrying up to 550 megawatts of power. BPA's Proposed Action is to allow Sea Breeze's transmission cable to connect into the Federal transmission system at BPA's Port Angeles Substation. OE's Proposed Action is to grant Sea Breeze a Presidential permit for the project. With the interconnection, the Presidential permit, and other Federal and state approvals granted, Sea Breeze can construct and operate its proposed cable project. There are six main components of the U.S. portion of Sea Breeze's project as described below.
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Sea Breeze or its successors will be responsible for operating and maintaining all aspects of the project except for the Port Angeles Substation equipment, which will be operated and maintained by BPA.
DOE considered the Proposed Action with two short AC cable routing options (A and B), and the No Action Alternative.
Cable routing Options A and B for entering the BPA substation property would have differed little in the environmental impacts created. Option A will be about 250 feet (76.2 m) longer than Option B, but the amount of tree clearing, soil disturbance, and visual impacts will be similar to what would have occurred under Option B. Option A will have less impact on BPA property, allowing potential future use of the area that Option B would have encumbered.
Under the No Action Alternative, BPA would have denied Sea Breeze's request
Early in the development of the EIS, DOE solicited input from the public (Federal, state and local agencies, Indian tribes with interest in the area, individuals along the project route, and interest groups) to help determine what issues should be studied in the EIS. DOE requested comments by publishing a Notice of Intent to prepare an EIS in the
The Draft EIS was made available for a 45-day period of public review and comment via mailings and the Web site; a Notice of Availability of the Draft EIS was published by the U.S. Environmental Protection Agency (EPA) in the
The Final EIS addressed comments received on the Draft EIS. DOE made the Final EIS available to the public, and sent it to interested parties of record; a Notice of Availability of the Final EIS was published by the EPA in the
DOE received three written comments on the Final EIS. One letter, from the Skokomish Indian Tribe, informed DOE that the Tribe is unaware of the presence of any sites of cultural or religious significance to the Skokomish Tribe within the proposed project area. The tribe requested that DOE contact the Lower Elwha Tribe. DOE has been in contact with the Lower Elwha Tribe throughout this project's environmental process. The Lower Elwha Tribe commented on the Draft EIS; those comments, which primarily requested additional protection for tribal resources and cultural resources, were addressed in the Final EIS. Under the Mitigation Action Plan that is incorporated into this Record of Decision, the Tribe will continue to be involved in the project for geoduck clam mitigation and cultural resource monitoring.
The EPA submitted written comments on the Final EIS that included acknowledgment of BPA's responses to EPA's comments on the Draft EIS. EPA also recommended that accountability measures be incorporated into the Clean Water Act 401 certification and 404 permit. The Washington State Department of Ecology and the U.S. Army Corps of Engineers are reviewing Sea Breeze's application under these sections of the Clean Water Act and will impose appropriate measures to ensure implementation. EPA also recommended that the ROD include information to assure that environmental measures would be adjusted to meet Washington State water quality standards. In response, DOE is requiring Sea Breeze to follow the city, state, and Federal requirements regarding water quality standards, as described in Chapter 4 of the EIS, reiterated in the required mitigation measures identified in the EIS, and included in the Mitigation Action Plan that is incorporated into this Record of Decision.
EPA also restated concerns regarding the public need for the project. In response, DOE notes that this project is proposed by a private entity and, therefore, public need is outside DOE's purview. In deciding whether BPA will allow an interconnection and whether OE will grant a Presidential permit for a project proposed by a private entity, neither BPA nor OE has a criterion that requires a demonstration of need for the project. As addressed in the EIS, BPA's need for action is to respond to Sea Breeze's request for interconnection, and OE's need for action is to respond to Sea Breeze's application for a Presidential permit. In addition, the Purpose and Need section of the EIS contains a statement of Sea Breeze's reasons for developing the project and provides links to various Web sites that present Sea Breeze's identified needs.
Written comments were received also from the Olympic Environmental Council Coalition working on the Rayonier Hazardous Waste Cleanup Project, which expressed concern that the proposed cable route would go through a hazardous waste site undergoing cleanup, through potential shoreline and salt marsh restoration areas, and in a recommended protected area for orca whales. As described in the EIS, the former Rayonier pulp mill site and shoreline (which would include any potential salt marsh restoration areas) will be avoided because the cable will be routed through a HDD hole in bedrock well below these areas. The EIS addresses contaminated sediment concerns, and identifies required mitigation measures, including specifically the requirement for Sea Breeze to implement any actions identified by the Washington State Department of Ecology for sediment control. The EIS also analyzes potential impacts to whales and identifies mitigation measures required to lessen possible impacts. DOE considers these mitigation measures, as incorporated into this ROD and enforceable upon Sea Breeze, to be adequate to address the expressed concerns.
Under BPA's adopted Open Access Transmission Tariff, BPA offers new interconnections to the transmission system to all eligible customers, consistent with all BPA requirements and subject to environmental review. BPA has completed this environmental review and has considered and understands the environmental implications of its Proposed Action and alternatives. BPA analyzed the environmental impacts of the Proposed Action, the short routing options for the AC cable entering BPA property, and the No Action Alternative, and considered public comments received on the Draft EIS, as documented in the Final EIS, and comments on the Final EIS. BPA also considered that implementation of the Proposed Action is more consistent with the interconnection provisions of BPA's open access tariff than implementation of the No Action Alternative. Accordingly, by deciding to take actions that allow for interconnection of Sea Breeze's project, BPA is acting consistently with its tariff.
In addition, BPA considered how well the various alternatives would meet the following purposes (
• Maintenance of transmission system reliability;
• Consistency with BPA's environmental and social responsibilities; and
• Cost efficiencies.
BPA believes that implementation of the Proposed Action will meet these objectives.
The Proposed Action will maintain transmission system reliability by ensuring that the interconnection design will meet applicable reliability criteria and standards. Also, because Sea Breeze proposed that its project be connected to BPA's transmission system without improvements to increase capacity of the system, any transmission service provided to Sea Breeze across the transmission system will be limited in order to maintain reliability. These restrictions will include limiting power flow to or from the new interconnection through the BPA transmission system on the Olympic Peninsula at certain times of the day and year. If BPA receives transmission service requests from cable users that exceed system capacity, appropriate environmental review will be conducted and separate decisions made on the system improvements that will be necessary to accommodate those requests.
The Proposed Action is consistent with BPA's environmental and social responsibilities. Sea Breeze worked to lessen potential environmental and social impacts through the design of the project and the development of mitigation measures. The use of the HDD hole to transition the cable from the Port Angeles Harbor to land will avoid impacts to the shoreline, including impacts to potential cultural resources in the vicinity, beach and shoreline habitats, and areas prone to erosion on the bluff. It will also help avoid contaminated sediments known in the area.
With the erosion control measures proposed by Sea Breeze and incorporated in this ROD, construction impacts to water and soil resources will be short term, and low-to-moderate. In addition, Sea Breeze will ensure that turbidity levels during seabed trenching and disturbance will remain within state standards of no greater than 5 nephelometric turbidity units. Sea Breeze is working with the Washington Department of Ecology and with the Department of Natural Resources to address disturbance of contaminants in the Harbor.
Vegetation impacts will be limited to about a mile-long strip along the sea bottom, at the converter station site, and at the area affected by interconnection at BPA's Port Angeles Substation. NOAA's recommendation to decrease potential impacts to macroalgae habitat has been adopted by Sea Breeze by moving the proposed HDD hole exit point about 165 feet (50 m) seaward. The new location avoids an area of algae density cover of 50 percent to an area where the algae density cover lessens to 25 percent. The overall impacts to vegetation will be low, except at BPA's substation where impacts to vegetation will be low-to-moderate. No wetlands were identified in the affected area, so wetlands will not be affected.
Impacts to marine habitat and wildlife will be low-to-moderate. Most impacts will occur during construction and will be temporary. Measures to protect marine species include implementing work windows to avoid species during migrations (Endangered Species Act [ESA]-listed salmonids), monitoring for unexpectedly high concentrations of priority species (crabs, urchins, and geoduck clams), and using trained marine mammal observers during cable-laying operations to determine the presence of species (sea otters, porpoises, sea lions, seals, gray whales and ESA-listed humpback whales and Southern Resident killer whales) and if work should be slowed or stopped to protect those species. Habitat changes due to the warming of sediments along the seabed cable route will create localized moderate impacts, but only a small portion of the overall seabed will be affected.
Because the cable route will run along existing city streets, there will be no-to-low impacts to terrestrial wildlife and freshwater fish. In addition, at the converter station no high-quality terrestrial habitat will be removed. Because the expansion of BPA's substation will be located next to a forested area, tree removal for the interconnection work will have low-to-moderate effects on habitat. However, this type of forest habitat is abundant and common in the area.
Project construction will disturb residents and businesses in the vicinity and create short-term high impacts. The cable will be located in city streets and, after construction, will not encumber existing uses and will not create any long-term land use impacts. Although the new converter station and the expansion of BPA's Port Angeles Substation yard for the interconnection will limit existing casual recreational uses of the existing open space and incrementally increase utility-related uses in the area, these additional electrical facilities will not be out of place next to the existing Port Angeles Substation.
Because the cable will be placed underground through city streets, the cable will not be visible and will not create the visual impacts typical of overhead transmission lines (towers, wires, cleared right-of-way, and access roads). Although the converter station and the substation yard expansion will produce moderate-to-high visual impacts to residents in the immediate vicinity, Sea Breeze will soften the visual impacts of the converter station by installing decorative walls, fencing, and landscaping, and by seeking and incorporating input from local residents and planning officials about the exterior design of the converter station's building.
The route of the cable on the seabed has been designed to avoid potential cultural resources. To ensure resources potentially uncovered on land are protected, archaeological monitors will be on site during soil disturbance activities in areas where there is a moderate-to-high potential to encounter resources.
HDD hole construction will create short-term high noise impacts to local residents near the construction site during the 23 days of continuous (night and day) drilling operations. Sea Breeze will use sound dampening techniques at the HDD construction site to reduce noise levels as close to the source as possible. The operation of the cable will not generate noise, and noise from the converter station will be mitigated with design features, equipment layout, and insulation. Health and safety impacts associated with potential shocks or fire will be avoided with mitigation measures. Magnetic field exposure concerns are limited to the short (1,250 feet [380 m]) AC cable; DC lines do not induce currents into surrounding objects. Field levels of the AC cable will be lessened, as appropriate, by the configuration of the conductors of the cable.
Socioeconomics impacts will be low, and Sea Breeze will ensure that the location of the marine cable is recorded on navigational charts. Sea Breeze will continue to work with the Washington State Department of Ecology to minimize the risk that the cable could be snagged or hit by ship anchors.
Costs associated with the cable and converter station will be the responsibility of Sea Breeze. Sea Breeze will also be responsible for costs associated with the interconnection work; however, if the interconnection work were to be considered a network
In arriving at its decision, OE has considered the lack of adverse impacts to the reliability of the U.S. electric power supply system, the low potential for environmental impacts in the United States, the nature of potential impacts of the alternatives, and the lack of major issues of concern to the public.
OE has determined, and agrees with BPA, that the potential environmental impacts from the Proposed Action are expected to be small, as discussed above. OE also has determined that, based on BPA's interconnection standards and its restrictions on any requested transmission service to and from the proposed interconnection, the proposed project would not have an adverse impact on the reliability of the U.S. electric power supply system. Finally, the Departments of State and Defense have concurred in the issuance of a Presidential permit to Sea Breeze for the proposed project. OE did not select the No Action Alternative because the Proposed Action has been determined to be consistent with the public interest based on the consideration of environmental impacts, the impacts on electric reliability, and the favorable recommendations of the Departments of State and Defense.
For the foregoing reasons, OE has decided to issue Presidential Permit PP-299 to authorize Sea Breeze to construct, operate, maintain, and connect the Port Angeles-Juan de Fuca transmission line as defined by the Proposed Action in the EIS.
All the mitigation measures described in the Draft EIS, updated in the Final EIS, and further refined through consultations with the National Marine Fisheries Service of NOAA have been incorporated into the Mitigation Action Plan. A complete list of these measures is in the Mitigation Action Plan incorporated herein. Sea Breeze will be responsible for executing most of the mitigation measures, while BPA will be responsible for executing the mitigation measures associated with work at the Port Angeles Substation. Additional measures may be required through permitting processes with Federal, state, and local agencies.
The following decisions are based on the project description as detailed in the EIS and the Supplement Analysis, and implementation of the mitigation measures listed in the Mitigation Action Plan.
BPA has decided to interconnect the Port Angeles-Juan de Fuca cable to the Federal Columbia River Transmission System. BPA will, therefore, offer Sea Breeze contract terms for interconnection. BPA also will expand the Port Angeles Substation yard and construct necessary interconnection facilities to allow for interconnection of the project as described in this ROD and the Port Angeles-Juan de Fuca Transmission Project EIS.
OE will issue Presidential Permit PP-299 to Sea Breeze, allowing the Port Angeles-Juan de Fuca electric transmission facilities to be constructed, operated, maintained, and connected at the U.S. international border with Canada.
Federal Energy Regulatory Commission, DOE.
Notice.
In compliance with the requirements of section 3506(c)(2)(a) of the Paperwork Reduction Act of 1995 (Pub. L. No. 104-13), the Federal Energy Regulatory Commission (Commission) is soliciting public comment on the specific aspects of the information collection described below.
Comments on the collection of information are due by July 11, 2008.
Address comments on the collection of information to the Office of Management and Budget, Office of Information and Regulatory Affairs, Attention: Federal Energy Regulatory Commission Desk Officer. Comments to OMB should be filed electronically, c/o
All comments may be viewed, printed or downloaded remotely via the Internet through FERC's homepage using the “eLibrary” link. For user assistance, contact
Michael Miller may be reached by telephone at (202) 502-8415, by fax at (202) 273-0873, and by e-mail at
The information collected under the
The Commission amended its regulations in 2005 with Order No. 2006 to require public utilities that own, control, or operate facilities used for the transmission of electric energy in interstate commerce to amend their Open Access Transmission Tariffs (OATTs) to include a Commission-approved
Prior to Order No. 2006, the Commission's policy had been to address interconnection issues on a case-by-case basis. Although a number of transmission providers had filed interconnection procedures as part of their OATTs, many industry participants remained dissatisfied with existing interconnection policies and procedures. With an increasing number of interconnection-related disputes, it became apparent that the case-by-case approach was an inadequate and inefficient means to address interconnection issues. This prompted the Commission to adopt, in Order No. 2006, a single set of procedures for jurisdictional transmission providers and a single uniformly applicable interconnection agreement for transmission providers to use in interconnecting with Small Generators.
With the incorporation of these documents in their OATTs, there is no longer a need for transmitting utilities to file case-by-case interconnection agreements and procedures with the Commission. However, on occasion, circumstances warrant non-conforming agreements or a situation-specific set of procedures. These non-conforming documents must be filed in their entirety with the Commission for review and action.
The information collected is in response to a mandatory requirement. The Commission implements these filing requirements in the Code of Federal Regulations (CFR) under 18 CFR Part 35, § 35.28(f).
The Commission is requesting a three-year extension of the current expiration date, with no changes to the existing collection of data.
There was a one-time start-up cost to comply with Order No. 2006 requirements that was included when the Commission first sought authorization for this information in 2005. The estimated burden of the continued requirement to maintain the procedures and agreement documents in transmission providers' OATTs is reflected herein as is the filing of non-conforming interconnection procedures and agreements that occur on occasion.
The estimated total cost to respondents is $75,222.78. [1,238 hours divided by 2080 hours
The reporting burden includes the total time, effort, or financial resources expended to generate, maintain, retain, disclose, or provide the information including: (1) Reviewing instructions; (2) developing, acquiring, installing, and utilizing technology and systems for the purposes of collecting, validating, verifying, processing, maintaining, disclosing and providing information; (3) adjusting the existing ways to comply with any previously applicable instructions and requirements; (4) training personnel to respond to a collection of information; (5) searching data sources; (6) completing and reviewing the collection of information; and (7) transmitting, or otherwise disclosing the information.
The estimate of cost for respondents is based upon salaries for professional and clerical support, as well as direct and indirect overhead costs. Direct costs include all costs directly attributable to providing this information, such as administrative costs and the cost for information technology. Indirect or overhead costs are costs incurred by an organization in support of its mission. These costs apply to activities which benefit the whole organization rather than any one particular function or activity.
Comments are invited on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology
Take notice that on April 28, 2008, Midland Cogeneration Venture Limited Partnership (MCV), 100 Progress Place, Midland, Michigan 48640, filed an application of recertification of a facility as a qualifying cogeneration facility pursuant to 18 CFR 292.207(b) of the Commission's regulations.
MCV operates a natural gas-fired, topping cycle cogeneration facility located in Midland, Michigan, with a net electric power production capacity of 1566.2 MW.
This facility is interconnected with the Michigan Electric Transmission Company, LLC transmission system, and sells most of its capacity to Consumers Energy Company and The Dow Chemical Company pursuant to long-term purchase agreements. MCV sells the remaining unused capacity of the facility into the energy markets operated by the Midwest Independent Transmission system Operator, Inc. at market-based rates. Consumers Energy provides the facility with supplementary, back-up and maintenance power.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
In accordance with the National Environmental Policy Act of 1969, as amended, and the Federal Energy Regulatory Commission's (Commission) regulations (18 CFR Part 380), the Office of Energy Projects has prepared an environmental assessment (EA) regarding Upper Peninsula Power Company's request to rebuild the Silver Lake Development of the Dead River Hydroelectric Project (FERC No. 10855) located on the Dead River in Marquette County, Michigan. This EA concludes that the proposed reconstruction, with staff's recommended mitigation measures, would not constitute a major Federal action significantly affecting the quality of the human environment.
Copies of the EA are available for review in the Public Reference Room of the Commission's offices at 888 First Street, NE., Washington, DC. The EA also may be viewed on the Commission's Internet Web site (
For further information regarding this notice, please contact B. Peter Yarrington at (202) 502-6129 or by e-mail at
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to intervene or to protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214) on or before 5 p.m. Eastern time on the specified comment date. It is not necessary to separately intervene again in a subdocket related to a compliance filing if you have previously intervened in the same docket. Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant. In reference to filings initiating a new proceeding, interventions or protests submitted on or before the comment deadline need not be served on persons other than the Applicant.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 14 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First St. NE., Washington, DC 20426.
The filings in the above proceedings are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive e-mail notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please e-mail
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to intervene or to protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214) on or before 5 p.m. Eastern time on the specified comment date. It is not necessary to separately intervene again in a subdocket related to a compliance filing if you have previously intervened in the same docket. Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant. In reference to filings initiating a new proceeding, interventions or protests submitted on or before the comment deadline need not be served on persons other than the Applicant.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 14 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First St. NE., Washington, DC 20426.
The filings in the above proceedings are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive e-mail notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please e-mail
Take notice that on April 30, 2008, Allegheny Energy Supply Company, LLC, Green Valley Hydro, LLC and Buchanan Generation, LLC filed revised market-based rate tariffs to their triennial market power analysis filed with the Commission on January 14, 2008 and supplemented on April 21, 2008.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant and all the parties in this proceeding.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on April 23, 2008, Duke Energy Ohio, Inc., Cinergy Corp., Cinergy Power Investments, Inc. and Generating Facility LLCs also filed, along with its filing in Docket No. EC08-78-000, a petition for declaratory, in Docket No. EL08-61-000, requesting Commission action, pursuant to section 305(a) of the Federal Power Act.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on May 30, 2008, PJM Interconnection, L.L.C. filed revision to its Open Access Transmission Tariff to comply with the Commission's April 10, 2008, order,
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant and all the parties in this proceeding.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on May 30, 2008, Powerex Corp. filed an application for an order directing the provision of transmission service from Nevada Power Company, pursuant to section 211 of the Federal Power Act and section 5.2 of Nevada Power's Company's Open Access Transmission Tariff.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on May 29, 2008, The Toledo Edison Company (Toledo Edison) filed a petition for declaratory order affirming its right to increase rates for supply of capacity and energy under the interconnection and service agreement between Toledo Edison and American Municipal Power-Ohio, Inc., pursuant to Rule 207 of the Commission's Rules of Practice and Procedure, 18 CFR 385.207.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Environmental Protection Agency (EPA).
Notice.
In compliance with the Paperwork Reduction Act (PRA) (44 U.S.C. 3501
Comments must be submitted on or before August 11, 2008.
Submit your comments, identified by Docket ID No. EPA-HQ-RCRA-2008-0463, by one of the following methods:
•
•
•
•
•
Norma Abdul-Malik, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone number: 703-308-8753; fax number: 703-308-8617; e-mail address:
EPA has established a public docket for this ICR under Docket ID No. EPA-HQ-RCRA-2008-0463, which is available for online viewing at
Use
Pursuant to section 3506(c)(2)(A) of the PRA, EPA specifically solicits comments and information to enable it to:
(i) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility;
(ii) evaluate the accuracy of the Agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(iii) enhance the quality, utility, and clarity of the information to be collected; and
(iv) minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses. In particular, EPA is requesting comments from very small businesses (those that employ less than 25) on examples of specific additional efforts that EPA could make to reduce the paperwork burden for very small businesses affected by this collection.
You may find the following suggestions helpful for preparing your comments:
1. Explain your views as clearly as possible and provide specific examples.
2. Describe any assumptions that you used.
3. Provide copies of any technical information and/or data you used that support your views.
4. If you estimate potential burden or costs, explain how you arrived at the estimate that you provide.
5. Offer alternative ways to improve the collection activity.
6. Make sure to submit your comments by the deadline identified under DATES.
7. To ensure proper receipt by EPA, be sure to identify the docket ID number assigned to this action in the subject line on the first page of your response. You may also provide the name, date, and
In 1995, EPA expanded the public participation requirements under the RCRA program by promulgating the RCRA Expanded Public Participation Rule (60 FR 63417; December 11, 1995). The rule responded to calls by the Administration and stakeholders (e.g., States and private citizens) to provide earlier and better public participation in EPA's permitting programs, including procedures for more timely information sharing. In particular, the rule requires earlier public involvement in the permitting process (e.g., pre-application meetings), expanded public notice for significant events (e.g., notices of upcoming trial burns), and more opportunities for the exchange of permitting information (e.g., information repository).
The required activities and information are needed to help assure timely and effective public participation in the permitting process. The requirements are intended to provide equal access to information to all stakeholders in the permitting process: the permitting agency, the permit applicant, and the community where a facility is located. Some facilities may be required to develop information repositories to allow for expanded public participation and access to detailed facility information as part of the permitting process.
EPA sought to reduce the reporting frequency to the minimum that is necessary to ensure compliance with the rule. It would not be possible to collect this information less frequently and still assure that the requirements of permit and public involvement regulations are met by owners or operators. The reporting frequency is essential to assure that any changes in the trial burn plans or in the anticipated permit application contents are made known to EPA and to the public.
The ICR provides a detailed explanation of the Agency's estimate, which is only briefly summarized here:
EPA will consider the comments received and amend the ICR as appropriate. The final ICR package will then be submitted to OMB for review and approval pursuant to 5 CFR 1320.12. At that time, EPA will issue another
Environmental Protection Agency (EPA).
Notice.
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before July 10, 2008.
Submit your comments, referencing docket ID number EPA-HQ-OECA-2007-0064, to (1) EPA online using
Learia Williams, Compliance Assessment and Media Programs Division, Office of Compliance, Mail Code 2223A, Environmental Protection Agency, 1200 Pennsylvania Avenue, NW., Washington, DC 20460; telephone number: (202) 564-4113; fax number: (202) 564-0050; e-mail address:
EPA has submitted the following ICR to OMB for review and approval according to the procedures prescribed in 5 CFR 1320.12. On March 9, 2007 (72 FR 10735), EPA sought comments on this ICR pursuant to 5 CFR 1320.8(d). EPA received no comments. Any additional comments on this ICR should be submitted to EPA and OMB within 30 days of this notice.
EPA has established a public docket for this ICR under docket ID number EPA-HQ-OECA-2007-0064, which is available for public viewing online at
Use EPA's electronic docket and comment system at
Owners and operators must submit notification reports upon the construction or reconstruction of any leather finishing operation. Any leather finishing operation that starts up after proposal but before promulgation must submit an initial notification similar to the one submitted by existing sources. Each new or reconstructed source that starts up after promulgation must submit a series of notifications in addition to the initial notification that include notification of intent to construct or reconstruct and notification of startup. Upon the collection of twelve months of data after the date of initial notification, owners or operators of leather finishing operations must submit an annual compliance status certification report and annually thereafter. Owners or operators of a leather finishing operation subject to the rule must maintain a file of these measurements, and retain the file for at least five years following the date of such measurements, maintenance reports, and records.
Notifications are to inform the Agency or delegated authority when a source becomes subject to the standard. The reviewing authority may then inspect the source to ensure that the pollution control devices are properly installed and operating and that the standards are being met. Performance test reports are required as these are the Agency's records of a source's initial capability to comply with the emission standards and to serve as a record of the operating conditions under which compliance was achieved. The information generated by monitoring, recordkeeping and reporting requirements described in this ICR are used by the Agency to ensure that facilities that are affected by the standard continue to operate the control equipment and achieve continuous compliance with the regulation.
All reports are sent to the delegated state or local authority. In the event that there is no such delegated authority, the reports are sent directly to the EPA regional office. This information is being collected to assure compliance with 40 CFR part 63, subpart TTTT, as authorized in sections 112 and 114(a) of the Clean Air Act. The required information consists of emissions data and other information that have been determined to be private.
An Agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB Control Number. The OMB Control Number for EPA's regulations listed in 40 CFR part 9 and 48 CFR chapter 15 are identified on the form and/or instrument, if applicable.
Since there are no changes in the regulatory requirements and there is no significant industry growth, the labor hours and cost figures in the previous ICR are used in this ICR, and there is no change in burden to industry.
Environmental Protection Agency.
Notice of listening session; correction.
The Environmental Protection Agency published notices in the
In the
In the
Farm Credit Administration.
Notice is hereby given, pursuant to the Government in the Sunshine Act (5 U.S.C. 552b(e)(3)), of the regular meeting of the Farm Credit Administration Board (Board).
Roland E. Smith, Secretary to the Farm Credit Administration Board, (703) 883-4009, TTY (703) 883-4056.
Farm Credit Administration, 1501 Farm Credit Drive, McLean, Virginia 22102-5090.
Parts of this meeting of the Board will be open to the public (limited space available), and parts will be closed to the public. In order to increase the accessibility to Board meetings, persons requiring assistance should make arrangements in advance. The matters to be considered at the meeting are:
A.
• May 8, 2008.
B.
• Regulatory Burden—Notice with Request for Comment.
C.
• FCS's Young, Beginning, and Small Farmer Mission
• Performance—2007 Results.
• FCS Building Association Quarterly Report.
*Session Closed—Exempt pursuant to 5 U.S.C. 552b(c)(8) and (9).
• OSMO Supervisory and Oversight Activities.
The Federal Communications Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and other Federal agencies to take this opportunity to comment on the following information collection, as required by the Paperwork Reduction Act (PRA) of 1995, Public Law No. 104-13. An agency may not conduct or sponsor a collection of information unless it displays a currently valid control number. Pursuant to the PRA, no person shall be subject to any penalty for failing to comply with a collection of information that does not display a valid control number. Comments are requested concerning (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimate; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents,
Written Paperwork Reduction Act (PRA) comments should be submitted on or before July 10, 2008. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to Nicholas A. Fraser, Office of Management and Budget, via Internet at
For additional information or copies of the information collection, contact Cathy Williams at 202-418-2918, via the Internet at C
The Federal Communications Commission will hold a Public Hearing on Early Termination Fees, WT Docket No. 05-194 and related issues, on Thursday, June 12, 2008 at 10 a.m. in Room TW-C305, at 445 12th Street, SW., Washington, DC. The Sunshine period will not apply to this matter since the Commission is not considering an item. The Public Hearing will be immediately followed by an Open Meeting, subject to our Sunshine rules, 47 CFR 1.1203, on the subjects listed below.
The meeting site is fully accessible to people using wheelchairs or other mobility aids. Sign language interpreters, open captioning, and assistive listening devices will be provided on site. Other reasonable accommodations for people with disabilities are available upon request. Include a description of the accommodation you will need. Also include a way we can contact you if we need more information. Last minute requests will be accepted, but may be impossible to fill. Send an e-mail to:
Additional information concerning this meeting may be obtained from Audrey Spivack or David Fiske, Office of Media Relations, (202) 418-0500; TTY 1-888-835-5322. Audio/Video coverage of the meeting will be broadcast live with open captioning over the Internet from the FCC's Audio/Video Events Web page at
For a fee this meeting can be viewed live over George Mason University's Capitol Connection. The Capitol Connection also will carry the meeting live via the Internet. To purchase these services call (703) 993-3100 or go to
Copies of materials adopted at this meeting can be purchased from the FCC's duplicating contractor, Best Copy and Printing, Inc. (202) 488-5300; Fax (202) 488-5563; TTY (202) 488-5562. These copies are available in paper format and alternative media, including large print/type; digital disk; and audio and video tape. Best Copy and Printing, Inc. may be reached by e-mail at
Federal Communications Commission.
Federal Communications Commission.
Notice.
The following applicants filed AM or FM proposals to change the community of license: CALVARY CHAPEL OF TWIN FALLS, INC., Station KJCF, Facility ID 106475, BMPED-20080507ABB, From CLARKSTON, WA, To ASOTIN, WA; CAPSTAR TX LIMITED PARTNERSHIP, Station WIBA-FM, Facility ID 17385, BPH-20080508ABO, From MADISON, WI, To SAUK CITY, WI; CAPSTAR TX LIMITED PARTNERSHIP, Station WMAD, Facility ID 50055, BPH-20080508ABQ, From SAUK CITY, WI, To CROSS PLAINS, WI; GAP BROADCASTING POCATELLO LICENSE, LLC, Station KLLP, Facility ID 8413, BPH-20080429AAD, From CHUBBUCK, ID, To FILER, ID; HORIZON CHRISTIAN FELLOWSHIP, Station KWDU, Facility ID 166061, BMPH-20080506AAP, From UPTON, WY, To ANTELOPE VALLEY-CRES, WY; KZLZ, LLC, Station KZLZ, Facility ID 36022, BPH-20080423AES, From KEARNY, AZ, To CASAS ADOBES, AZ; MAGNUS, EDWARD F, Station NEW, Facility ID 165991, BMPH-20080519ABU, From WISHEK, ND, To LINTON, ND; PROVIDENCE EDUCATIONAL FOUNDATION, INC., Station NEW, Facility ID 171892, BMPED-20080428AAI, From AMITE, LA, To KENTWOOD, LA; SKYWEST MEDIA L.L.C., Station KXML, Facility ID 164259, BMPH-20080411AHN, From SALMON, ID, To BELLEVUE, ID; TALLGRASS BROADCASTING, LLC, Station NEW, Facility ID 171002, BMPH-20080409ACF, From PAWHUSKA, OK, To ELK CITY, KS; THE CROMWELL GROUP, INC. OF ILLINOIS, Station WEJT, Facility ID 65570, BPH-20080425AAU, From SHELBYVILLE, IL, To DALTON CITY, IL.
Comments may be filed through August 11, 2008.
Federal Communications Commission, 445 Twelfth Street, SW., Washington, DC 20554.
Tung Bui, 202-418-2700.
The full text of these applications is available for inspection and copying during normal business hours in the Commission's Reference Center, 445 12th Street, SW., Washington, DC 20554 or electronically via the Media Bureau's Consolidated Data Base System,
The notificants listed below have applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board’s Regulation Y (12 CFR 225.41) to acquire a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices
Board of Governors of the Federal Reserve System, June 5, 2008.
The notificants listed below have applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board’s Regulation Y (12 CFR 225.41) to acquire a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices also will be available for inspection at the office of the Board of Governors. Interested persons may express their views in writing to the Reserve Bank indicated for that notice or to the offices of the Board of Governors. Comments must be received not later than June 24, 2008.
Board of Governors of the Federal Reserve System, June 4, 2008.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States. Additional information on all bank holding companies may be obtained from the National Information Center website at
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than July 3, 2008.
Board of Governors of the Federal Reserve System, June 4, 2008.
General Services Administration
Notice
This bulletin cancels GSA Bulletin FPMR D-248, POW/MIA Flag Display, published in the
June 10, 2008.
For further clarification of content, contact Stanley C. Langfeld, Director, Regulations Management Division (MPR), General Services Administration, Washington, DC 20405; or
TO: Heads of Federal Agencies
SUBJECT: POW/MIA Flag Display
1.
2.
3.
a) The Capitol;
b) The White House;
c) The World War II Memorial, the Korean War Veterans Memorial and the Vietnam Veterans Memorial;
d) Each national cemetery;
e) The buildings containing the official offices of:
1) the Secretary of State;
2) the Secretary of Defense;
3) the Secretary of Veterans Affairs; and
4) the Director of Selective Service System;
f) Each major military installation, as designated by the Secretary of Defense;
g) Each medical center of the Department of Veterans Affairs; and
h) Each United States Postal Service post office.
4.
a)
1) Armed Forces Day, the third Saturday in May;
2) Memorial Day, the last Monday in May;
3) Flag Day, June 14;
4) Independence Day, July 4;
5) National POW/MIA Recognition Day (designated by Presidential Proclamation; historically, the third Friday of September); and
6) Veterans Day, November 11.
b)
1) In the case of display at medical centers of the Department of Veterans Affairs, any day on which the flag of the United States is displayed;
2) In the case of display at United States Postal Service post offices that are not open for business on any of the six days listed in the previous paragraph, the last business day before any day specified in the immediately preceding paragraph; and
3) In the case of display at the World War II Memorial, the Korean War Veterans Memorial and the Vietnam Veterans Memorial, any day on which the flag of the United States is displayed.
c)
d)
e)
f)
5.
Agency for Healthcare Research and Quality, HHS.
Notice.
This notice announces the intention of the Agency for Healthcare Research and Quality (AHRQ) to request the Office of Management and Budget (OMB) to allow the proposed information collection project: “Overcoming Barriers to Expanded Health Information Exchange (HIE) Participation in Indiana.” In accordance with the Paperwork Reduction Act of 1995, 44 U.S.C. 3506(c)(2)(A), AHRQ invites the public to comment on this proposed information collection.
Comments on this notice must be received by August 11, 2008.
Written comments should be submitted to: Doris Leflcowitz, Reports Clearance Officer, AHRQ, by e-mail at
Copies of the proposed collection plans, data collection instruments, and specific details on the estimated burden can be obtained from the AHRQ Reports Clearance Officer.
Doris Lefkowitz, AHRQ Reports Clearance Officer, (301) 427-1477, or by e-mail at
AHRQ, through its contractor, the Regenstrief Institute at Indiana University, proposes to assess the barriers to participation in health information exchange (HIE) in Indiana. The Regenstrief Institute will use its experience to date working with a variety of organizations to establish specific barriers to engagement in HIE cited by stakeholders, defme the barriers and evaluate them.
The Regenstrief Institute will develop and implement a questionnaire and survey process to identify barriers that may exist throughout the State of Indiana to participation in the Indiana Network of Patient Care (INPC). The INPC is a local health information infrastructure that includes information from five major hospital systems (fifteen separate hospitals), the county and State public health departments, and Indiana Medicaid and RxHub. The INPC began operation seven years ago and is one of the first examples of a local health information infrastructure.
This research will elicit and aggregate feedback from large and small physician groups, as well as hospitals, throughout the State of Indiana. The goal is to identify the gaps in understanding, barriers and disconnects that may exist with providers' adoption of, and membership in, the INPC. The relationship between the stakeholders involved in the Indiana HIE is governed by a contract between the participants. The Regenstrief Institute, acting on behalf of the participants, created and operates the exchange, including serving as the custodian of the data.
The Regenstrief Institute will survey three key stakeholder groups in the State of Indiana: small hospitals, small physician practices (less than 5 providers) and large physician practices (greater than 20 providers) to identify barriers for each of these groups to participate in a HIE in general, and specifically the INPC. It is difficult to predict the barriers that will be identified, but based on their experience to date, anecdotal evidence suggests that the cost of interfaces and the management attention needed to participate will be the two major barriers. The findings will be used to create approaches to engage specific entities to participate in their statewide HIE.
This project is being conducted pursuant to AHRQ's statutory mandates to conduct and support research, evaluations and initiatives to advance information systems for health care improvement (42 U.S.C. 299b-3) and to promote innovations in evidence-based health care practices and technologies by conducting and supporting research on the development, diffusion, and use of health care technology (42 U.S.C. 299b-5(a)(1)). This project is also being conducted pursuant to a modification to an earlier AHRQ request for proposals entitled “State and Regional Demonstrations in Health Information Technology” (issued under Contract 290-04-0015).
To ease the burden on the participating health care providers a Web-based questionnaire will be used. An initial screener interview will be conducted by telephone to describe the purpose of the survey and the survey process and to request the hospital's or physician practice's participation in the survey. After a hospital or practice agrees to participate, a communication packet will be sent by email to the contact person identified during the telephone screening. The communication packet includes: (a) A HIE description and definition; (b) description of the INPC, its organization mission, overall direction, and other relevant background information; and (c) purpose for the contact, estimated time required to complete the Web-based questionnaire and a link to the questionnaire.
Responses to the survey are expected from about 20 hospitals and 40 physician practices of each size. Two to three individuals from each hospital will be asked to respond to the questionnaire. For physician practices, one person from each practice will be asked to respond: a practice manager, director of technology, or person occupying a similar role.
Following the completion of the Web-based questionnaire, respondents will be re-contacted by telephone for a follow-up interview. The purpose of the follow-up interview is to determine the steps necessary to overcome the barriers to HIE identified in the Web-based questionnaire. A structured interview guide has been developed with standard questions for the telephone follow-up.
The data will be aggregated, analyzed and a final report will be prepared that focuses on the following major topic areas:
a. General perceptions on electronic sharing of health information;
b. The extent to which electronic health information sharing exists in the contact's current environment;
c. Barriers to the adoption and implementation of electronic health information sharing and, specifically, INPC; and
d. Recommendations for addressing and resolving issues preventing the adoption of HIE (general as well as entity-specific recommendations).
This information will assist AHRQ's mission to advance “the creation of effective linkages between various sources of health information, including the development of information networks.” 42 U.S.C. 299b-3(a)(3). A seventy percent (70%) response rate is anticipated.
Exhibit 1 shows the estimated annualized burden hours for the respondents' time to participate in this research. A screener interview will be completed once by each of the 20 hospitals and 80 physician practices and is expected to require about 5 minutes to complete. The Web-based questionnaire will be completed by an
Exhibit 2 shows the estimated annualized cost burden to the responding health care providers based on their time to participate in this research. The total cost burden is estimated to be $3,074.
This project will last for one year and is estimated to cost the government $120,000. The scope of work includes the development of the survey instruments and data collection ($90,000), and data analysis ($10,000) to establish specific barriers to HIE participation cited by stakeholders and to define and evaluate them ($20,000).
In accordance with the above cited Paperwork Reduction Act legislation, comments on AHRQ's information collection are requested with regard to any of the following: (a) Whether the proposed collection of information is necessary for the proper performance of functions of AHRQ health care research and health care information dissemination functions, including whether the information will have practical utility; (b) the accuracy of AHRQ's estimate of burden (including hours and costs) of the proposed collection(s) of information; (c) ways to enhance the quality, utility, and clarity on the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and included in the Agency's subsequent request for OMB approval of the proposed information collection. All comments will become a matter of public record.
Agency for Healthcare Research and Quality, Department of Health and Human Services.
Notice.
This notice announces the intention of the Agency for Healthcare Research and Quality (AHRQ) to request that the Office of Management and Budget (OMB) allow the proposed information collection project, “Reducing Healthcare Associated Infections (HAI): Improving patient safety through implementing multidisciplinary training.” In accordance with the Paperwork Reduction Act of 1995, 44 U.S.C. 3506(c)(2)(A), AHRQ invites the public to comment on this proposed information collection.
This proposed information collection was previously published in the
Comments on this notice must be received by July 10, 2008.
Written comments should be submitted to: AHRQ's OMB Desk Officer by fax at (202) 395-6974 (attention: AHRQ's desk officer) or by e-mail at
Copies of the proposed collection plans, data collection instruments, and specific details on the estimated burden can be obtained from AHRQ's Reports Clearance Officer.
Doris Lefkowitz, AHRQ Reports Clearance Officer, (301) 427-1477, or by e-mail at
The goal of the HAI project is to identify factors associated with the implementation of training that can assist hospitals in successfully reducing and sustaining the reduction of infections associated with the process of care. The project is being carried out pursuant to AHRQ's statutory mandates under 42 U.S.C. 299b(b) and 299(b)(1)(G) to disseminate research findings to community settings for practice improvement and to support research on determinants of practitioner use and development of best practices. The findings from the HAI project will be shared publicly to assist other healthcare organizations in their efforts to improve infection safety.
For the HAI project, AHRQ will use the Accelerating Change and Transformation in Organizations and Networks (ACTION) which is a program of task order contracts to support field-based partnerships for conducting applied research. In order to understand the challenges of infection prevention and patient safety at the point of care, AHRQ has funded five ACTION partnerships, each of which has experience with implementing interventions and tools to improve the processes of care and the safety and quality of healthcare delivery. These ACTION partnerships will be working collaboratively with 34 hospitals, ranging from large academic teaching hospitals to community hospitals, in 11 states. At each of these hospitals, multi-disciplinary teams will implement clinician training that uses AHRQ-supported evidence-based tools to improve infection safety. Through the HAI project, these hospitals will focus on barriers and challenges to implementing infection prevention training and how to sustain lessons learned in order to help other hospitals achieve success.
The project involves six activities: (1) Implement training focused on mitigating infections, particularly with respect to blood stream infections (BSI), central line insertions, ventilator associated pneumonia (VAP) and chest tube insertions; (2) catalogue infection rates before and after the training; (3) analyze the opinions of hospital staff about their hospital's infection prevention and patient safety activities; (4) analyze the trainees' evaluation of the infection prevention and patient safety training and materials; (5) determine the impact of the implementation of infection prevention training and the hospitals' participation in the HAI project on their ability to mitigate and sustain infection safety improvements; and, (6) make publicly available case studies focusing on the hospitals' experiences of the training and their success with infection reduction and sustainability.
In order to support the healthcare organizations and hospitals, AHRQ will be issuing a contract to coordinate the assessment aspects of the HAI program. The objective of the HAI assessment contract is to facilitate the collection of infection information across the HAI project hospitals including providing technical assistance and support for the administration of the common data collection instruments. In addition, the assessment contractor will assist AHRQ in sharing the lessons learned about the successes, barriers, and challenges in implementing and sustaining infection safety interventions and tools. Each of the 34 participating hospitals will be responsible for securing clearance from their own Institutional Review Boards for their activities as part of the HAI project, including administration of the proposed data collection instruments. The data collection will be conducted in accordance with the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule, 45 CFR Parts 160 and 164, and with the Protection of Human Subjects regulations, 45 CFR Part 46. Identifiable data for provider organizations and individuals will only be used for the above-stated purposes and will be kept confidential.
The infection prevention training will be implemented at 34 hospitals over a 6 month period at the end of 2008 through 2009. The data collection instruments will be administered at each hospital before, during and after the training. Respondents include both medical and administrative personnel. These instruments will be a key input to AHRQ understanding the challenges and barriers to implementing training and improving infection safety. The proposed paper-based data collection instruments are:
In addition to the 34 hospitals which will implement the training and fully participate in the HAI project, there will be a control group consisting of 102 rural hospitals. At each of the control group hospitals, an infection prevention staff member will complete the Post-Training Infection Prevention and Safety Assessment, Follow-up Infection Rate Summary, and the Infection Prevention and Patient Safety Activities Catalogue. In addition to providing a baseline measure, the control group hospitals will provide additional insights on the challenges of and barriers to infection prevention and patient safety at rural hospitals.
Exhibit 1 shows the estimated burden hours to the respondents for providing all of the data needed to meet the study's objectives. For both the Pre-Training and Post-Training Infection Prevention and Safety Assessment instruments, the number of respondents is based on an estimate of 20 respondents at each of the 34 implementation hospitals. In addition, one respondent at each of the 102 hospitals in the control group will complete the Post-Training instrument. For both the Baseline and Follow-up Infection Rate Summary instrument, the number of respondents is based on an estimate of one respondent at each of the 34 implementation hospitals. In addition, one respondent at each of the 102 control group hospitals will complete the Follow-Up instrument. For the Infection Prevention and Patient Safety Activity Catalogue, the number of respondents is based on an estimate of 1 respondent at each of the 34 implementation hospitals and the 102 control group hospitals. Finally, the number of respondents for the Training Evaluation instrument is based on an estimate of 25 respondents at each of the 34 implementation hospitals.
Exhibit 2 shows the estimated annualized cost burden for the respondents' time to participate in this project. There will be no cost burden to the respondent other than that associated with their time to provide the required data. There will be no additional costs for capital equipment, software, computer services, etc.
This data collection effort is one aspect of a larger effort focused on reducing healthcare associated infections, The cost of developing the data collection instruments by a one-time statistical support task order is $25,000. The costs of implementing the data collection instruments and analyzing and publishing the results are $108,650 annually. Finally, the estimated costs for federal staff time for supporting the common data collection efforts are $24,000 annually. Thus, the estimated annual cost to the federal government is $145,150.
In accordance with the above-cited Paperwork Reduction Act legislation, comments on AHRQ's information collection are requested with regard to any of the following: (a) Whether the proposed collection of information is necessary for the proper performance of AHRQ health care research, quality improvement and information dissemination functions, including whether the information will have practical utility; (b) the accuracy of AHRQ's estimate of burden (including hours and costs) of the proposed collection(s) of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and, (d) ways to minimize the burden of the collection of information upon the respondents, including the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and included in the Agency's subsequent request for OMB approval of the proposed information collection. All comments will become a matter of public record.
The Director, Management Analysis and Services Office, has been delegated the authority to sign
In accordance with section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92-463), CDC, announces the
Agenda items are subject to change as priorities dictate.
The Director, Management Analysis and Services Office, has been delegated the authority to sign
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing the availability of conference grant funding for meetings of State Food Protection Task Forces. The original announcement of availability of funding for State Food Safety Task Force Meetings, published in the
Announcement Type: New limited competition Request for Applications (RFA) (R13)
Request for Application Number: RFA-FD-08-06
Catalog of Federal Domestic Assistance Number(s): 93.103
Dates: The application receipt date is July 15, 2008.
Paper Applications will not be accepted. Applications may be submitted on or after the opening date and must be successfully received by
The required application, SF 424 (5161) can be completed and submitted online. The package should be labeled, “Response to RFA FD-08-006.” If you experience technical difficulties with your online submission you should contact Gladys M. Bohler by telephone at 301-827-7168 or by e-mail at
Please visit
The FDA's Office of Regulatory Affairs (ORA) is the inspection component of the FDA and has 1,000 investigators and inspectors who cover the approximately 95,000 FDA regulated businesses in the United States and inspect more than 15,000 facilities a year. In addition to the standard inspection program, FDA's investigators and inspectors conduct special investigations, food inspection recall audits, and perform consumer complaint inspections and sample collections.
In the past, FDA has relied on the States in assisting with the previous duties through formal contracts, partnership agreements, and other informal arrangements. The inspection demands on both the Agency and the States are expected to increase. Accordingly, procedures need to be reviewed and innovative changes made that will increase effectiveness, efficiency, and conserve resources. Examples of support include providing effective and efficient compliance of regulated products and, providing high quality, science based work that maximizes consumer protection.
FDA views State based Food Protection Task Forces as an important mechanism for providing food safety and food defense program coordination, and information exchange within each State (“Food” includes human food and animal feed and is defined in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321 (f))). This grant announcement is intended to encourage the development of a Task Force within each State and to provide funding for Task Force meetings. Conference grant funding is available to States that have an existing Food Safety and Food Defense Task Force, as well as to States that are in the process of developing a new Food Protection Task Force. State Food Protection Task Force meetings should foster communication and cooperation among State, local, and
Before submission of an application, the State shall designate one public health or food safety agency to lead, coordinate, and host the Food Protection and Food Security Task Force and its meetings. The formation of Food Protection and Food Security Task Force meetings shall not interfere with existing Federal-state advisory mechanisms.
The purpose of the Food Protection Task Force meetings is to foster communication and cooperation and collaboration within the States among State local and tribal food protection public health, agriculture and regulatory agencies. (For the purposes of this document and to be consistent with the FDA Food Protection Plan: Food means human food and animal feeds as defined in 21 U.S.C. 321(f). The meetings should: (1) Provide a forum for all the stakeholders of the food protection system—regulatory agencies, academia, industry, consumers, State legislators, Boards of Health and Agriculture and other interested parties; (2) assist in adopting or implementing the Food Code and other food protection regulations; and (3) promote the integration of an efficient statewide food protection/defense system that maximizes the protection of the public health through prevention, intervention and response including the early detection and containment of foodborne illness. Each Task Force shall develop its own guidelines for work, consensus decision making, size and format, at its initial meeting. FDA's Division of Federal State Relations (DFSR) will provide meeting guidelines and organization documents as requested.
Conference grant funds will be awarded only for the direct costs. Each Task Force shall develop its own guidelines for work, consensus decision making, size, and format at its initial meeting. Federal agency representatives may be invited to be nonmember liaisons or advisors to the task force and its meetings. Conference grant funds may not be used for Federal employees to travel to or participate in these meetings.
The following are the allowable and unallowable costs:
Allowable costs include but are not limited to: (1) Salary (in proportion to the time or effort spent directly on the conference/meeting); (2) facility and necessary equipment rental; (3) in-state travel and per diem or subsistence allowances; (4) supplies needed for conduct of the meeting (only if received for use during the budget period); (5) conference services; (6) publication costs; (7) registration fees; and (8) speakers' fees.
Non-allowable costs include but are not limited to: (1) Travel or expenses other than local mileage for local participants; (2) organization dues; (3) travel or per diem costs for Federal employees; (4) purchase of equipment; (5) transportation costs exceeding U.S. carrier coach class fares; (6) visas; (7) passports; (8) entertainment; (9) tips; (10) bar charges; (11) personal telephone calls; (12) laundry charges; (13) honoraria or other payments for the purpose of conferring distinction or communicating respect, esteem or admiration; (14) patient care; (15) alterations or renovations; and (16) facilities and administrative costs/indirect costs.
Please also refer to the DHHS Grants Policy Statement for additional information regarding costs
A Financial Status Report (FSR) and Mid-Year Progress Reports are required no later than 90 days after the end of a budget period. The Mid-Year Progress Report should contain a description of a specific plan for the next meeting, as well as all criteria listed in the previous paragraph.
Program monitoring of recipients will be conducted on an ongoing basis and written reports will be reviewed and evaluated at least semi-annually by the project officer. Project monitoring may also be in the form of telephone conversations between the project officer/grants management specialist and the principal investigator.
When multiple years are awarded, awardees will be required to submit the PHS Non-Competing Grant Progress Report (PHS 2590) annually (
The PHS 2590 must be submitted at least 2 months prior to the next budget period start date and should include a report of the previous meeting supported by the current grant, as well as a full description of the next planned meeting.
A final Progress Report of the meeting(s) (or Conference Proceedings), and FSR SF-269 are required within 90 days of the expiration date of the project period. An original and two copies of each report shall be submitted to FDA's Grants Management staff contact. The report of the meeting should include: (1) The grant number; (2) the title, date and place of time of the meeting; (3) the name of the person shown on the application as the conference director, principal investigator, or program director; (4) the name of the organization that conducted the meeting; (5) a list of individuals and their institutional affiliations who participated as speakers or facilitators in the formally planed sessions of the meeting; and, (6) a summary of topics discussed, next steps and conclusions.
This funding opportunity will use the Conference/Scientific Meeting (R13) grant award mechanism. Under the R13 mechanism, the applicant will be solely responsible for planning, directing, and executing the proposed project. Multiple year awards may be awarded to one permanently sponsoring organization for conferences held annually or biennially on a recurring topic. The total project period for an application requesting support may not exceed 5 years.
This funding opportunity uses just-in-time budget concepts. It also uses the non-modular budget format. Applicants must complete and submit a detailed categorical budget in the SF424 application.
Meetings covered by this notice will be supported under section 1701-1706 of the Public Service (PHS) Act (42 U.S.C. 300u-300u-5). FDA's Task Force Conference Grant program is described in the Catalog of Federal Domestic Assistance No. 93-103. These grants will be subject to all policies and requirements that govern the Conference Grant Programs of the PHS, including the provisions of 42 CFR part 52 and 45 CFR parts 74 and 92. The regulations issued under Executive Order 12372 also apply to this program and are implemented through the Department of Health and Human Service's regulations at 45 CFR part 100. Executive Order 12372 sets up a system for State and local government review of applications for Federal financial assistance.
These grants are available to State public health, agriculture and food protection agencies that have an existing Food Safety and Food Defense Task Force, as well as to States that are in the process of developing a new Food Protection Task Force. Only one grant will be awarded per State per year. States are urged to collaborate between agencies to submit a single application.
It is anticipated that FDA will fund these grants at a level requested but not
Continued funding for future year, noncompetitive segments, will be contingent upon satisfactory progress as determined annually by the FDA, the receipt of a PHS 2590 application, the approval of yearly task force reports, and the availability of Federal funds. An estimated amount of $160,000 is available in FY 2008. The number of grants funded will depend on the quality of the applications received, their relevance to FDA's mission, priorities, and the availability of funds.
All applications submitted in response to this request for applications (RFA) will first be reviewed for responsiveness by grants management and program staff. Responsiveness is defined as submission of a complete on or before the required submission date as listed in the previous paragraphs. If applications are found to be nonresponsive, they will be returned to the applicant without further consideration.
Responsive applications will be reviewed and evaluated for scientific and technical merit by an ad hoc panel of experts. The following will be considered in making funding decisions: (1) Scientific merit of the proposed conference/scientific meeting as determined by the evaluation process; (2) availability of funds; and (3) relevance of program priorities. Final funding decisions will be made by the Commissioner of Food and Drugs or his or her designee.
Applicants are strongly encouraged to contact FDA Program staff to resolve any questions regarding criteria before the submission of their application.
FDA is accepting new applications for this program electronically via
Your organization will need to obtain a Data Universal Number System (DUNS) number as part of the Grants.gov registration process. The DUNS number is a 9-digit identification number, which uniquely identifies business entities. Obtaining a DUNS number is easy and there is no charge. The D&B number can be obtained by calling 866-705-5711 or through the Web site at
The applicant must also register in the Central Contractor Registration (CCR) database in order to be able to submit the application. Information about the CCR is available at
The SF424 (5161) application has several components. Some components are required, others are optional. The forms package associated with this FOA in Grants.gov/APPLY includes all applicable components, required, and optional.
A completed application in response to this FOA includes the data in the following components:
The face page of the application should indicate “Response to Food Protection Task Force Conference Grant Program RFA FD 08-006”.
Applications should include the following: (1) A title which has the term “state food protection task force meetings”, “conference”, “council”, “workshop”, “alliance” or other similar description to assist in the identification of the request; (2) location of the conference; (3) expected number of registrants and type of audience expected with their credentials; (4) dates of conference(s); (5) conference format and projected agenda(s), including list of principal areas or topics to be addressed; (6) physical facilities required for the conduct of the meeting; (7) justification of the conference(s), including the problems it intends to clarify and any developments it may stimulate; (8) brief biographical sketches of individuals responsible for planning the conference(s) and details concerning adequate support staff; (9) information about all related conferences held on this subject during the last 3 years (if available); (10) details of proposed per diem/subsistence rates, transportation, printing, supplies and facility rental costs; and (11) the necessary checklist and assurances pages provided in each application package.
Data included in the application which have been specifically identified by the applicant as containing restricted and/or proprietary information may be entitled to confidential treatment as trade secret or confidential commercial information within the meaning of the Freedom of Information Act, (5 U.S.C. 552(b)(4), and FDA's implementing regulations (21 CFR 20.61).
In compliance with the requirement of Section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995, for opportunity for public comment on proposed data collection projects, the National Cancer Institute (NCI), the National Institutes of Health (NIH) will publish periodic summaries of proposed projects to be submitted to the Office of Management and Budget (OMB) for review and approval.
To request more information on the proposed project or to obtain a copy of the data collection plans and instruments, contact Arthur Schatzkin, M.D., Dr.P.H, Chief, Nutritional Epidemiology Branch, Division of Cancer Epidemiology and Genetics, National Cancer Institute, NIH, DHHS, Executive Plaza South, Room 3040, 6120 Executive Blvd., EPS-MSC 7242, Bethesda, MD 20892-7335 or call non-toll-free number 301-594-2931 or e-mail your request, including your address to:
National Institutes of Health, Public Health Service, HHS.
Notice.
This is notice, in accordance with 35 U.S.C. 209(c)(1) and 37 CFR part 404.7(a)(1)(i), that the National Institutes of Health, Department of Health and Human Services, is contemplating the grant of an exclusive patent license to practice the inventions embodied in the following U.S. Patent Applications to Systems Medicine, Inc., which is located in Tucson, Arizona.
1. PCT Patent Application No. PCT/US2006/031814 entitled “Human Monoclonal Antibodies that Specifically Bind IGF-II” [HHS Ref. Nos. E-217-2005/0, 1, and 2]; and
2. PCT Application Serial No. PCT/US2007/66180 entitled “Human IGF-I-Specific and IGF-I and IGF-II Cross-Reactive Human Monoclonal Antibodies” [HHS Ref. No. E-336-2005/0].
The prospective exclusive license territory may be worldwide and the field of use may be limited to the use of the antibodies and their method of use in the Licensed Patent Rights for the treatment of human cancers
Only written comments and/or applications for a license which are received by the NIH Office of Technology Transfer on or before August 11, 2008 will be considered.
Requests for copies of the patent application, inquiries, comments, and other materials relating to the contemplated exclusive license should be directed to: Whitney Hastings, PhD, Technology Licensing Specialist, Office of Technology Transfer, National Institutes of Health, 6011 Executive Boulevard, Suite 325, Rockville, MD 20852-3804; Telephone: (301) 451-7337; Facsimile: (301) 402-0220; E-mail:
The type 1 insulin-like growth factor (IGF) receptor (IGF1R) is over-expressed by many tumors and mediates proliferation, motility, and protection from apoptosis. Agents that inhibit IGF1R expression or function can potentially block tumor growth and metastasis. Its major ligand, IGF-II, is over-expressed by multiple tumor types. Previous studies indicate that inhibition of IGF-II binding to its cognizant receptor negatively modulates signal transduction through the IGF pathway and concomitant cell growth. Therefore, use of humanized or fully human antibodies against IGFs represents a valid approach to inhibit tumor growth.
The above identified patent applications relate to the identification of multiple, novel fully human monoclonal antibodies that are specific for IGF-II and do not cross-react with IGF-1 or insulin and identification and characterization of three (3) novel fully human monoclonal antibodies designated m705, m706, and m708, which are specific for insulin-like growth factor (IGF)-I. Two (2) of the three (3) antibodies, m705 and m706 are specific for IGF-I and do not cross react with IGF-II and insulin while, m708 cross reacts with IGF-II.
These antibodies can be used to prevent binding of IGF-I to its concomitant receptor IGFIR, consequently, modulating diseases such as cancer. Additional embodiments describe methods for treating various human diseases associated with aberrant cell growth and motility including breast, prostate, and leukemia carcinomas. Thus, these novel antibodies may provide a therapeutic intervention for multiple carcinomas without the negative side effects associated with insulin inhibition.
The prospective exclusive license will be royalty bearing and will comply with the terms and conditions of 35 U.S.C. 209 and 37 CFR part 404.7. The prospective exclusive license may be granted unless within sixty (60) days from the date of this published notice, the NIH receives written evidence and argument that establishes that the grant of the license would not be consistent with the requirements of 35 U.S.C. 209 and 37 CFR 404.7.
Applications for a license in the field of use filed in response to this notice will be treated as objections to the grant of the contemplated exclusive license. Comments and objections submitted to this notice will not be made available for public inspection and, to the extent permitted by law, will not be released under the Freedom of Information Act, 5 U.S.C. 552.
National Institutes of Health (NIH), DHHS.
Notice of a final action under the NIH Guidelines and notice of additions to Appendix D of the NIH Guidelines.
Proposal to conduct research involving the deliberate transfer of a drug resistance trait to a microorganism that causes disease in humans has been reviewed by the Recombinant DNA Advisory Committee (RAC) and approved by the NIH Director.
The final action is effective April 7, 2008.
Background documentation and additional information can be obtained from the Office of Biotechnology Activities (OBA), National Institutes of Health, 6705 Rockledge Drive, Suite 750, MSC 7985, Bethesda, Maryland 20892-7985; e-mail at
This final action allows Dr. David Walker, University of Texas Medical Branch at Galveston to deliberately introduce a gene encoding chloramphenicol resistance into
(1) Perform all research involving the introduction of chloramphenicol resistance into
(2) Maintain at least one back-up power source to insure computer based security remains in place at all times.
(3) Include a signature nucleic acid sequence (“bar-code”) to allow identification of laboratory-created (chloramphenicol resistant) strains.
(4) Incorporate the following elements into a health surveillance program for individuals working with chloramphenicol resistant
(a) Exclude those with a known allergy or sensitivity to tetracycline, and in particular doxycycline, from working with chloramphenicol resistant
(b) Obtain and store a baseline blood sample from laboratory workers;
(c) Do not permit pregnant individuals to work in any laboratory in which chloramphenicol resistant rickettsia is being handled;
(d) Provide workers education on the possible clinical manifestations of a rickettsial laboratory acquired infection;
(e) Develop a medical card that would be carried by all laboratory workers that includes at a minimum the following:
(i) Identification of the organism to which the labworker has been exposed;
(ii) Identification of key personnel responsible for providing diagnosis and treatment;
(iii) A CDC telephone number for reporting the infection and obtaining treatment recommendations; and
(iv) A twenty-four hour contact number for the principal investigators.
(5) Have a detailed standard operating procedures outlining the specific steps to be taken in the case of a laboratory exposure or infection containing at a minimum:
(a) Identification of key personnel who would provide diagnostic testing and treatment; and
(b) Instructions on managing exposures or infections discovered during off hours (after close of business, holidays, weekends, etc.).
Privacy Office; Office of the Secretary; DHS.
Notice of Privacy Act system of records.
To provide notice and transparency to the public, the Department of Homeland Security, U.S. Customs and Border Protection announces a new Privacy Act system of records, the Electronic System for Travel Authorization, to collect and maintain a record of nonimmigrant aliens who want to travel to the United States under the Visa Waiver Program (VWP). This new system will determine whether the applicant is eligible to travel to the United States under the VWP by checking their information against various security and law enforcement databases. CBP is publishing a new system of records notice to permit the traveling public greater access to individual information and to provide a more complete understanding of how and where information pertaining to them is collected and maintained.
In accordance with 5 U.S.C. 552a(e)(4) and (11), the public is given a 30-day period in which to comment on this notice; and the Office of Management and Budget (OMB), which has oversight responsibility under the Act, requires a 40-day period in which to conclude its review of the system. Therefore, the public, OMB, and Congress are invited to submit comments by July 21, 2008.
You may submit comments, identified by DHS-2008-0052 by one of the following methods:
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For general questions please contact: Laurence E. Castelli (202-572-8790), Chief, Privacy Act Policy and Procedures Branch, U.S. Customs and Border Protection, Office of International Trade, Regulations & Rulings, Mint Annex, 1300 Pennsylvania Ave., NW., Washington, DC 20229. For privacy issues contact: Hugo Teufel III (703-235-0780), Chief Privacy Officer, Privacy Office, U.S. Department of Homeland Security, Washington, DC 20528.
The priority mission of U.S. Customs and Border Protection (CBP) is to prevent terrorists and terrorist weapons from entering the country while facilitating legitimate travel and trade. Upon arrival in the United States, all individuals crossing the border are required to clear CBP. As part of this clearance process, CBP reserves the right to verify the identity, nationality, and determine admissibility of persons traveling to the United States and to create records to assist in this process. Similarly, CBP has authority to keep records of departures from the United States.
CBP does not require that qualifying nationals of countries participating in the VWP present a visa upon their application for admission at a United States port of entry as a nonimmigrant visitor for a period of 90 days or less. As required by Section 711 of the Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Act), DHS/CBP will be implementing an Electronic System for Travel Authorization (ESTA) in order to determine, in advance of departure, whether a traveler is eligible to travel to the United States under the VWP and whether such travel poses a law enforcement or security risk.
Applicants under this program will electronically provide information via an online application prior to traveling to the United States by air or sea. ESTA will store that information in an account. The individual will have the opportunity to verify the accuracy of the information entered in ESTA during the application process and before the application is submitted through ESTA. Applicants will be given a tracking number which, combined with some personal information already provided to the system, will allow the applicant to submit updates to data elements that do not affect their admissibility, or apply for a new ESTA.
Once an applicant has submitted the required information to ESTA, the information supplied by the applicant will be used to automatically query terrorist and law enforcement databases to determine whether the applicant is eligible to travel to the United States under the VWP. When possible matches to derogatory information are found, applications will be vetted through normal CBP procedures. During this time, the applicant will receive a “pending” status. If the applicant is cleared to travel under the VWP, he or she will receive an “authorized to travel” status via the ESTA Web site. If the applicant is not cleared for travel, the applicant will receive a “not authorized to travel” status and be directed to the State Department Web site to obtain information on how to apply for a visa at a U.S. consulate or embassy. The Department of State will have access to the information supplied by the applicant and the ESTA results to assist in determining whether to issue a visa.
Carriers, when querying the applicant through the Advance Passenger Information System/APIS Quick Query (APIS/AQQ) system to determine whether a boarding pass should be issued, will be notified whether the applicant traveler has been authorized to travel, not authorized to travel, pending, or has not applied for an ESTA. VWP travelers must have an authorized ESTA or a visa to be issued a boarding pass.
In conjunction with CBP's final rule “Advance Electronic Transmission of Passenger and Crew Member Manifests for Commercial Aircraft and Vessels,” which was published in the
The development and implementation of the ESTA program will eventually allow DHS to eliminate the requirement that VWP travelers complete an I-94W prior to being admitted to the United States. Upon ESTA becoming mandatory, a VWP traveler with valid ESTA will not be required to complete the paper Form I-94W when arriving on a carrier that is capable of receiving and validating messages pertaining to the traveler's ESTA status as part of the traveler's boarding status.
Consistent with DHS's information sharing mission, information stored in the ESTA may be shared with other DHS components, as well as appropriate Federal, State, local, tribal, foreign, or international government agencies. This sharing will only take place after DHS determines that the receiving component or agency has a need to know the information to carry out national security, law enforcement, immigration, intelligence, or other functions consistent with the routine uses set forth in this system of records notice.
The Privacy Act embodies fair information principles in a statutory framework governing the means by which the United States Government collects, maintains, uses, and disseminates individuals' records. The Privacy Act applies to information that is maintained in a “system of records.” A “system of records” is a group of any records under the control of an agency for which information is retrieved by the name of an individual or by some identifying number, symbol, or other identifying particular assigned to the individual. In the Privacy Act, an individual is defined to encompass United States citizens and legal permanent residents. As a matter of policy, DHS extends administrative Privacy Act protections to all individuals where systems of records maintain information on U.S. citizens, lawful permanent residents, and visitors. Individuals may request access to their own records that are maintained in a system of records in the possession or under the control of DHS by complying with DHS Privacy Act regulations, 6 CFR Part 5.
The Privacy Act requires each agency to publish in the
In accordance with 5 U.S.C. 552a(r), DHS has provided a report of this new system/system change to the Office of Management and Budget and to Congress.
DHS/CBP-009.
Electronic System for Travel Authorization (ESTA).
Unclassified.
This computer database is located at the U.S. Customs and Border Protection (CBP) National Data Center. Computer terminals are located at customhouses, border ports of entry, airport inspection facilities under the jurisdiction of the Department of Homeland Security and other locations at which DHS authorized personnel may be posted to facilitate DHS's mission. Terminals may also be located at appropriate facilities for other participating government agencies, which have obtained system access pursuant to a Memorandum of Understanding.
Individuals covered by ESTA consist of foreign nationals from VWP countries who are seeking to enter the United States by air or sea under the VWP. Under the Immigration and Nationality Act (INA), title 8 of the United States Code, these persons are required to report their arrival and departure to and from the United States. This system only collects information pertaining to persons in non-immigrant status, that is, persons who are not covered by the protections of the Privacy Act at the time they provide their information. However, given the importance of providing privacy protections to international travelers, DHS has decided to apply the privacy protections and safeguards outlined in this notice to all international travelers subject to ESTA.
• Full Name (First, Middle, and Last)
• Date of birth
• Gender
• E-mail address
• Phone Number
• Travel document type (
• Country of Citizenship
• Date of crossing
• Airline and Flight Number
• City of Embarkation
• Address while visiting the United States (Number, Street, City, State)
• Whether the individual has a communicable disease, physical or mental disorder, or is a drug abuser or addict
• Whether the individual has been arrested or convicted for a moral turpitude crime, drugs, or has been sentenced for a period longer than five years
• Whether the individual has engaged in espionage, sabotage, terrorism or Nazi activity between 1933 and 1945
• Whether the individual is seeking work in the U.S.
• Whether the individual has been excluded or deported, or attempted to obtain a visa or enter U.S. by fraud or misrepresentation
• Whether the individual has ever detained, retained, or withheld custody of a child from a U.S. citizen granted custody of the child
• Whether the individual has ever been denied a U.S. visa or entry into the U.S., or had a visa cancelled. (If yes, when and where)
• Whether the individual has ever asserted immunity from prosecution
• Any change of address while in the U.S.
• ESTA Tracking Number
The Homeland Security Act of 2002, Public Law 107-296; 5 U.S.C. 301 and Section 711 of the Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Act), (Pub. L. 110-53).
(1) To create a system where foreign nationals of VWP countries may apply for and secure advance authorization to travel to the United States under the VWP;
(2) to afford DHS the opportunity to fully screen (vet) the applicant before granting the authorization to travel to the United States under the VWP.
In addition to those disclosures generally permitted under 5 U.S.C. 552a(b) of the Privacy Act, all or a portion of the records or information contained in this system may be disclosed to authorized entities, as is determined to be relevant and necessary, outside DHS as a routine use pursuant to 5 U.S.C. 552a(b)(3) as follows:
A. To an agency, organization, or individual for the purpose of performing audit or oversight operations as authorized by law, but only such information as is necessary and relevant to such audit or oversight function;
B. To appropriate agencies, entities, and persons when (1) DHS suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised; (2) the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) or to the individual that rely upon the compromised information; and (3) the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm;
C. To a Congressional office from the record of an individual in response to an inquiry from that Congressional office made at the request of the individual to whom the record pertains.
D. To contractors, grantees, experts, consultants, and the agents thereof, and others performing or working on a contract, service, grant, cooperative agreement, or other assignment for DHS, when necessary to accomplish an agency function related to this system of records. Individuals provided information under this routine use are subject to the same Privacy Act requirements and limitations on disclosure as are applicable to DHS officers and employees;
E. To appropriate Federal, State, local, tribal, or foreign governmental agencies or multilateral governmental organizations for the purpose of protecting the vital health interests of a data subject or other persons (
F. To third parties during the course of a law enforcement investigation to the extent necessary to obtain information pertinent to the investigation, provided disclosure is
G. To appropriate Federal, State, local, tribal, or foreign governmental agencies or multilateral governmental organizations responsible for investigating or prosecuting the violations of, or for enforcing or implementing, a statute, rule, regulation, order, license, or treaty where DHS determines that the information would assist in the enforcement of civil or criminal laws;
H. To an appropriate Federal, State, tribal, local, international, or foreign law enforcement agency or other appropriate authority charged with investigating or prosecuting a violation or enforcing or implementing a law, rule, regulation, or order, where a record, either on its face or in conjunction with other information, indicates a violation or potential violation of law, which includes criminal, civil, or regulatory violations and such disclosure is proper and consistent with the official duties of the person making the disclosure;
I. To the Department of Justice (including U.S. Attorney offices) or other Federal agencies conducting litigation or in proceedings before any court, adjudicative or administrative body, when it is necessary to the litigation and one of the following is a party to the litigation or has an interest in such litigation : (a) DHS or any component thereof, or (b) any employee of DHS in his/her official capacity, or (c) any employee of DHS in his/her individual capacity where DOJ or DHS has agreed to represent the employee, or (d) the United States or any agency thereof, is a party to the litigation or has an interest in such litigation, and DHS determines that the records are both relevant and necessary to the litigation and the use of such records is compatible with the purpose for which DHS collected the records.
J. To the National Archives and Records Administration or other Federal government agencies pursuant to records management inspections being conducted under the authority of 44 U.S.C. 2904 and 2906;
K. To a Federal, State, tribal, local, international, or foreign government agency or entity for the purpose of consulting with that agency or entity: (1) To assist in making a determination regarding redress for an individual in connection with the operations of a DHS component or program; (2) for the purpose of verifying the identity of an individual seeking redress in connection with the operations of a DHS component or program; or (3) for the purpose of verifying the accuracy of information submitted by an individual who has requested such redress on behalf of another individual;
L. To Federal and foreign government intelligence or counterterrorism agencies when DHS reasonably believes there to be a threat or potential threat to national or international security for which the information may be useful in countering the threat or potential threat, when DHS reasonably believes such use is to assist in anti-terrorism efforts, and disclosure is appropriate to the proper performance of the official duties of the person making the disclosure;
M. To the Department of State in the processing of petitions or applications for benefits under the Immigration and Nationality Act, and all other immigration and nationality laws including treaties and reciprocal agreements;
N. To an organization or individual in either the public or private sector, either foreign or domestic, where there is a reason to believe that the recipient is or could become the target of a particular terrorist activity or conspiracy, to the extent the information is relevant to the protection of life or property and disclosure is appropriate to the proper performance of the official duties of the person making the disclosure;
O. To the carrier transporting an individual to the United States, but only to the extent that CBP provides information that the individual is authorized to travel, not authorized to travel, pending, has not applied.
None.
The data is stored electronically at the CBP Data Center for current data and offsite at an alternative data storage facility for historical logs and system backups. Applicants who submit their information online through ESTA will have their information stored in online accounts.
These records may be searched by any of the data elements supplied by the applicant. An admission number, issued at each entry to the United States to track the particular admission, may also be used to identify a database record.
ESTA will not allow applicants to retrieve directly any information from the system, except for their ESTA determination (authorized to travel, not authorized to travel, pending), but will allow the applicant to submit limited updates to data elements that do not affect their admissibility.
All ESTA records are protected from unauthorized access through appropriate administrative, physical, and technical safeguards. These safeguards include all of the following: restricting access to those with a “need to know”; using locks, alarm devices, and passwords; compartmentalizing databases; auditing software; and encrypting data communications.
ESTA information is secured in full compliance with the requirements of the DHS IT Security Program Handbook. This handbook establishes a comprehensive program, consistent with federal law and policy, to provide complete information security, including directives on roles and responsibilities, management policies, operational policies, and application rules, which will be applied to component systems, communications between component systems, and at interfaces between component systems and external systems.
One aspect of the DHS comprehensive program to provide information security involves the establishment of rules of behavior for each major application, including ESTA. These rules of behavior require users to be adequately trained regarding the security of their systems. These rules also require a periodic assessment of technical, administrative and managerial controls to enhance data integrity and accountability. System users must sign statements acknowledging that they have been trained and understand the security aspects of their systems. System users must also complete annual privacy awareness training to maintain current access.
ESTA transactions are tracked and can be monitored. This allows for oversight and audit capabilities to ensure that the data is being handled consistent with all applicable federal laws and regulations regarding privacy and data integrity. Data exchange, which will take place over an encrypted network between the applicant or a third party submitter on behalf of the applicant, CBP, the carrier industry, Department of State, and other DHS components that have access to the ESTA data, is limited and confined only to those entities that have a need for the data in the performance of official duties. These encrypted networks comply with standards set forth in the Interconnection Security Agreements required to be executed prior to external access to a CBP computer system.
For applicants submitting information to ESTA, access is limited to the online application and the applicant's ESTA determination (authorized to travel, not authorized to travel, pending). Applicants under ESTA do not have access to any other portions of ESTA.
Information submitted to ESTA generally expires and is deemed “inactive” two years after the last submission or change in information by the applicant. In the event that a traveler's passport remains valid for less than two years from the date of the ESTA approval, the ESTA will expire concurrently with the passport. Information in ESTA will be retained for one year after the ESTA expires. After this period, the inactive account information will be purged from online access and archived for 12 years. Data linked, at any time during the 15 year retention period (3 years active, 12 years archived), to active law enforcement lookout records, CBP matches to enforcement activities, and/or investigations or cases, including applications for ESTA that are denied, will remain accessible for the life of the law enforcement activities to which they may become related. NARA guidelines for retention and archiving of data will apply to ESTA and CBP is in negotiation with NARA for approval of the ESTA data retention and archiving plan.
The ESTA will over time replace the paper I-94W form. In those instances where an ESTA is then used in lieu of a paper I-94W, the ESTA will be maintained in accordance with the retention schedule for I-94W, which is 75 years. I-94W and I-94 data are maintained for this period of time in order to ensure that the information related to a particular admission to the United States is available for providing any applicable benefits related to immigration or other enforcement purposes.
Director, Office of Automated Systems, U.S. Customs and Border Protection Headquarters, 1300 Pennsylvania Avenue, NW., Washington, DC 20229.
DHS allows persons (including foreign nationals) to seek administrative access under the Privacy Act to information maintained in ESTA. To determine whether ESTA contains records relating to you, write to the CBP Customer Service Center (Rosslyn VA), 1300 Pennsylvania Avenue, NW., Washington, DC 20229; Telephone (877) 227-5511; or through the “Questions” tab at
Requests for notification or access must be in writing and should be addressed to the Customer Service Center, OPA—CSC—Rosslyn, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue, NW., Washington, DC 20229. Requests should conform to the requirements of 6 CFR Part 5, Subpart B, which provides the rules for requesting access to Privacy Act records maintained by DHS and can be found at
Individuals may seek redress through the DHS Traveler Redress Program (“TRIP”) (See 72 FR 2294, dated January 18, 2007). Individuals who, for example, believe they have been improperly denied entry, refused boarding for transportation, or identified for additional screening by a DHS component may submit a redress request through the TRIP. TRIP is a single point of contact for individuals who have inquiries or seek resolution regarding difficulties they experienced during their travel screening at transportation hubs such as airports and train stations or when crossing U.S. borders. Through TRIP, a traveler can correct erroneous information stored in DHS databases through one application. Redress requests should be sent to: DHS Traveler Redress Inquiry Program (TRIP), 601 South 12th Street, TSA-901, Arlington, VA 22202-4220 or online at
See the “Record Access Procedures” above.
The system obtains information from the online ESTA application submitted by the applicant. This information is processed by the Automated Targeting System (ATS) (to screen for terrorists or threats to aviation and border security) and the Treasury Enforcement Communications System (TECS) (for matches to persons identified to be of law enforcement interest), and result of “authorized to travel”, “not authorized to travel”, or “pending” is maintained in ESTA. “Pending” will be resolved to “authorized to travel” or “not authorized to travel” based on further research by the CBP.
No exemption shall be asserted with respect to information maintained in the system as it relates to data submitted by or on behalf of a person who travels to visit the United States and crosses the border, nor shall an exemption be asserted with respect to the resulting determination (authorized to travel, pending, or not authorized to travel).
Information in the system may be shared with law enforcement and/or intelligence agencies pursuant to the above routine uses. The Privacy Act requires DHS to maintain an accounting of the disclosures made pursuant to all routines uses. Disclosing the fact that a law enforcement or intelligence agencies has sought particular records may affect ongoing law enforcement or intelligence activity. As such pursuant to 5 U.S.C. 552 a (j)(2) and (k)(2), DHS will claim exemption from (c)(3), (e)(8), and (g) of the Privacy Act of 1974, as amended, as is necessary and appropriate to protect this information.
U.S. Customs and Border Protection, Department of Homeland Security.
30-Day Notice and request for comments; Extension of an existing information collection: 1651-0025; proposed collection; comments requested.
U.S. Customs and Border Protection (CBP) of the Department of Homeland Security has submitted the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act: Report of Diversion. This is a proposed extension of an information collection that was previously approved. CBP is proposing that this information collection be extended with no change to the burden
Written comments should be received on or before July 10, 2008.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to Nathan Lesser, Desk Officer, Department of Homeland Security/Customs and Border Protection, and sent via electronic mail to
U.S. Customs and Border Protection (CBP) encourages the general public and affected Federal agencies to submit written comments and suggestions on proposed and/or continuing information collection requests pursuant to the Paperwork Reduction Act (Pub. L. 104-13). Your comments should address one of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency/component, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agencies/components estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collections of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.
If additional information is required contact: Tracey Denning, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue, NW., Room 3.2.C, Washington, DC 20229, at 202-344-1429.
U.S. Customs and Border Protection, Department of Homeland Security.
30-Day Notice and request for comments; Extension of an existing information collection: 1651-0067. Proposed collection; comments requested.
U.S. Customs and Border Protection (CBP) of the Department of Homeland Security has submitted the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act: Documentation Requirements for Articles Entered Under Special Tariff Treatment Provisions. This is a proposed extension of an information collection that was previously approved. CBP is proposing that this information collection be extended with no change to the burden hours. This document is published to obtain comments from the public and affected agencies. This proposed information collection was previously published in the
Written comments should be received on or before July 10, 2008.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to Nathan Lesser, Desk Officer, Department of Homeland Security/Customs and Border Protection, and sent via electronic mail to
U.S. Customs and Border Protection (CBP) encourages the general public and affected Federal agencies to submit written comments and suggestions on proposed and/or continuing information collection requests pursuant to the Paperwork Reduction Act (Pub. L. 104-13). Your comments should address one of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency/component, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agencies/components' estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collections of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.
If additional information is required contact: Tracey Denning, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue, NW., Room 3.2.C, Washington, DC 20229, at 202-344-1429.
U.S. Customs and Border Protection, Department of Homeland Security.
30-Day Notice and request for comments; Extension of an existing information collection: 1651-0049. Proposed collection; comments requested.
U.S. Customs and Border Protection (CBP) of the Department of Homeland Security has submitted the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act: Permit to Transfer Containers to a Container Station. This is a proposed extension of an information collection that was previously approved. CBP is proposing that this information collection be extended with no change to the burden hours. This document is published to obtain comments from the public and affected agencies. This proposed information collection was previously published in the
Written comments should be received on or before July 10, 2008.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to Nathan Lesser, Desk Officer, Department of Homeland Security/Customs and Border Protection, and sent via electronic mail to
U.S. Customs and Border Protection (CBP) encourages the general public and affected Federal agencies to submit written comments and suggestions on proposed and/or continuing information collection requests pursuant to the Paperwork Reduction Act (Pub. L. 104-13). Your comments should address one of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency/component, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agencies/components estimate of the burden of The proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collections of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.
If additional information is required contact: Tracey Denning, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue NW., Room 3.2.C, Washington, DC 20229, at 202-344-1429.
U.S. Customs and Border Protection, Department of Homeland Security.
30-Day Notice and request for comments; Extension of an existing information collection: 1651-0078. Proposed collection; comments requested.
U.S. Customs and Border Protection (CBP) of the Department of Homeland Security has submitted the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act: Automated Clearinghouse Credit. This is a proposed extension of an information collection that was previously approved. CBP is proposing that this information collection be extended with no change to the burden hours. This document is published to obtain comments from the public and affected agencies. This proposed information collection was previously published in the
Written comments should be received on or before July 10, 2008.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to Nathan Lesser, Desk Officer,
U.S. Customs and Border Protection (CBP) encourages the general public and affected Federal agencies to submit written comments and suggestions on proposed and/or continuing information collection requests pursuant to the Paperwork Reduction Act (Pub. L. 104-13). Your comments should address one of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency/component, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agencies/components estimate of the burden of The proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collections of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.
If additional information is required contact: Tracey Denning, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue, NW., Room 3.2.C, Washington, DC 20229, at 202-344-1429.
U.S. Customs and Border Protection, Department of Homeland Security.
30-Day Notice and request for comments; Extension of an existing information collection: 1651-0114; Proposed collection; comments requested.
U.S. Customs and Border Protection (CBP) of the Department of Homeland Security has submitted the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act: Alien Crewman Landing Permit (Form I-95). This is a proposed extension of an information collection that was previously approved. CBP is proposing that this information collection be extended with no change to the burden hours. This document is published to obtain comments from the public and affected agencies. This proposed information collection was previously published in the
Written comments should be received on or before July 10, 2008.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to Nathan Lesser, Desk Officer, Department of Homeland Security/Customs and Border Protection, and sent via electronic mail to
U.S. Customs and Border Protection (CBP) encourages the general public and affected Federal agencies to submit written comments and suggestions on proposed and/or continuing information collection requests pursuant to the Paperwork Reduction Act (Pub. L. 104-13). Your comments should address one of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency/component, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agencies/components estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collections of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
If additional information is required contact: Tracey Denning, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue, NW., Room 3.2.C, Washington, DC 20229, at 202-344-1429.
U.S. Customs and Border Protection, Department of Homeland Security.
30-Day Notice and request for comments; Extension of an existing information collection: 1651-0107; Proposed collection; comments requested.
U.S. Customs and Border Protection (CBP) of the Department of Homeland Security has submitted the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act: Application for Waiver of Passport or Visa (Form I-193). This is a proposed extension of an information collection that was previously approved. CBP is proposing that this information collection be extended with no change to the burden hours. This document is published to obtain comments from the public and affected agencies. This proposed information collection was previously published in the
Written comments should be received on or before July 10, 2008.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to Nathan Lesser, Desk Officer, Department of Homeland Security/Customs and Border Protection, and sent via electronic mail to
U.S. Customs and Border Protection (CBP) encourages the general public and affected Federal agencies to submit written comments and suggestions on proposed and/or continuing information collection requests pursuant to the Paperwork Reduction Act (Pub. L. 104-13). Your comments should address one of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency/component, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agencies/components estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collections of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.
If additional information is required contact: Tracey Denning, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue, NW., Room 3.2.C, Washington, DC 20229, at 202-344-1429.
The use of facsimile signatures and seals on U. S. Customs and Border Protection bonds by the following corporate surety has been approved effective this date.
The Guarantee Company of North America USA Authorized facsimile signatures on file for: Jennifer E. Rome, Attorney-in-fact; Maya Mackey, Attorney-in-fact; Paul D. Amstutz, Attorney-in-fact; Janet M. Ciesko, Attorney-in-fact.
The corporate surety has provided U.S. Customs and Border Protection with a copy of the signatures to be used, a copy of the corporate seal, and a copy of the corporate resolution agreeing to be bound by the facsimile signatures and seal. This approval is without prejudice to the surety's right to affix signatures and seals manually.
Office of the Chief Information Officer, HUD.
Notice.
The proposed information collection requirement described below has been submitted to the Office of Management and Budget (OMB) for review, as required by the Paperwork Reduction Act. The Department is soliciting public comments on the subject proposal.
Owners of project-based section 8 contracts that utilize the AAF as the method of rent adjustment provide this information which is necessary to determine whether or not the subject properties' rents are to be adjusted and, if so, the amount of the adjustment.
Interested persons are invited to submit comments regarding
Lillian Deitzer, Reports Management Officer, QDAM, Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 20410; e-mail Lillian Deitzer at
This notice informs the public that the Department of Housing and Urban Development has submitted to OMB a request for approval of the Information collection described below. This notice is soliciting comments from members of the public and affecting agencies concerning the proposed collection of information to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information; (3) Enhance the quality, utility, and clarity of the information to be collected; and (4) Minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.
Owners of project-based section 8 contracts that utilize the AAF as the method of rent adjustment provide this information which is necessary to determine whether or not the subject properties' rents are to be adjusted and, if so, the amount of the adjustment.
Section 3507 of the Paperwork Reduction Act of 1995, 44 U.S.C. 35, as amended.
Fish and Wildlife Service, Interior.
Notice of intent to prepare an Environmental Impact Statement/Environmental Impact Report (EIS/EIR) and notice of public scoping meetings.
Pursuant to the National Environmental Policy Act (NEPA) we, the Fish and Wildlife Service (Service), advise the public that we intend to gather information necessary to prepare, in coordination with the County of Sacramento (the County), a joint Environmental Impact Statement/Environmental Impact Report (EIS/EIR). The EIS/EIR will analyze the environmental effects of the Service's proposed issuance of an incidental take permit under section 10(a)(1)(B) of the Federal Endangered Species Act of 1973 as amended (ESA), for a habitat conservation plan (HCP) within a portion of south Sacramento County, California. The County, along with their local partners (the cities of Elk Grove, Rancho Cordova, Galt, the Sacramento Regional County Sanitation District, and the Sacramento County Water Agency), is facilitating the preparation of the South Sacramento HCP (SSHCP) in compliance with section 10(a)(2) of the ESA. The County and their local partners intend to apply to the Service for a 30-year permit that would authorized the incidental take of 40 species due to ground-disturbing private activities implemented under the SSHCP. The County, in accordance with the California Environmental Quality Act (CEQA) and with 40 CFR 1506.6(b)(3), has published a similar notice of preparation for this EIS/EIR with the State Clearinghouse.
We provide this notice to (1) Describe the proposed action and possible alternatives; (2) announce the initiation of a public scoping period, including when and where scoping meetings will be held; (3) advise other interested Federal, State, and local agencies, affected Tribes, and the public of our intent to prepare an EIS/EIR and invite their participation in the scoping process and; (4) obtain suggestions, comments, and useful information from interested parties and other agencies on the range of actions, the significant issues, range of alternatives, and impacts to be considered in the EIS/EIR document. We invite written comments on this notice from any interested party.
Submit written comments on or before July 30, 2008. Four public scoping meeting will be held on:
1. Tuesday, July 8, 2008, from 6:30 p.m. to 8:30 p.m., Galt, CA.
2. Friday, July 11, 2008, from 10 a.m. to 12:00 p.m., Sacramento, CA.
3. Tuesday, July 15, 2008, from 6:30 p.m. to 8:30 p.m., Rancho Cordova, CA.
4. Wednesday, July 16, 2008, from 6:30 p.m. to 8:30 p.m., Elk Grove, CA.
The public meetings will be held at the following locations:
1. Tuesday, July 8, 2008, at the Anthony Pescetti Community Room, Galt Police Facility, 455 Industrial Drive, Galt, CA 95632.
2. Friday, July 11, 2008, at the Sixth Floor Meeting Room, Sacramento County Administration Building, 700 H Street, Sacramento, CA 95814.
3. Tuesday, July 15, 2008, at the American River Room, Rancho Cordova City Hall, 2729 Prospect Park Drive, Rancho Cordova, CA 95670.
4. Wednesday, July 16, 2008, at the City Council Chambers, Elk Grove City Hall, 8400 Laguna Palms Way, Elk Grove, CA 95758.
Submit written comments to Nina Bicknese, Conservation Planning Branch, Sacramento Fish and Wildlife Office, Fish and Wildlife Service, 2800 Cottage Way, Room W-2605,
Nina Bicknese, Senior Fish and Wildlife Biologist, Sacramento Fish and Wildlife Office at (916) 414-6600. Additional details of the County's proposed South Sacramento Habitat Conservation Plan are available at
Persons needing reasonable accommodations in order to attend and participate in a public meeting should contact Nina Bicknese at (916) 414-6600 as soon as possible. In order to allow sufficient time to process requests, please call no later than one week before the public meeting. Information regarding this proposed action is available in alternative formats upon request.
The County and their local partners anticipate that landowners and individuals will continue to request their discretionary or ministerial approval of ground-disturbing land development projects in portions of south Sacramento County where species listed as threatened or endangered under the ESA are present. The County and their local partners intend to apply for a permit from the Service for the incidental take of listed species resulting from their approval of otherwise lawful land-use changes within portions of south Sacramento County over the next 30 years. Pursuant to the ESA and federal regulations governing incidental take permits (ITPs), the County and their local partners are in the process of preparing a habitat conservation plan titled South Sacramento HCP (SSHCP). Development of the SSHCP involved a public process that has included open meetings of a stakeholder Steering Committee.
Section 9 of the ESA (16 U.S.C. 1538) and Federal regulations (50 CFR 17.21 and 17.31) prohibit the “take” of wildlife species listed as endangered or threatened. The term “take” means to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect listed species, or to attempt to engage in such conduct (16 U.S.C. 1532). “Harm” in the definition of “take” includes significant habitat modifications or degradations (50 CFR 17.3). Pursuant to section 10(a)(1)(B) of the ESA, the Service may permit authorized take of species other wise prohibited by Section 9 of the ESA if such taking is incidental to, and not the purpose of, carrying out an otherwise lawful activity (16 U.S.C. 1539). Federal regulations governing ITPs for threatened and endangered wildlife species, respectively, are promulgated in 50 CFR 17.32 and 50 CFR 17.22 and in Section 10(a)(2) of the ESA. Pursuant to these regulations, no permit authorizing incidental take may be issued unless the applicant prepares a Habitat Conservation Plan (HCP). An HCP must include: a description of the activities sought to be authorized; the names of the species sought to be covered by the ITP; the impacts that will likely result from the proposed taking; steps the applicant will take to minimize and mitigate such taking to the maximum extent practicable; the funding that will be available to implement such steps; biological goals and objectives; a monitoring plan; an adaptive management plan; alternatives to the proposed taking the applicant considered and reasons why such alternatives are not proposed for implementation; other measures that may be necessary or appropriate for the purposes of the HCP; and the procedures the applicant will use to deal with unforeseen circumstances over the term of the ITP.
The SSHCP Planning Area—the area in which all impacts would be evaluated and all conservation actions will be implemented—is approximately 341,000-acres within south Sacramento County. The approximate geographical boundary of the SSHCP Planning Area is the area bound by U.S. Highway 50 in the north, the county line dividing Sacramento County with San Joaquin County on the south, the county line dividing Sacramento County with Amador and El Dorado counties in the east, and Interstate 5 on the west. The SSHCP's 341,000-acre Planning Area includes a 123,000-acre Urban Development Area (UDA) where most ground-disturbing development and infrastructure projects would be approved by the County and its local partners over the next 30 years. The 123,000-acre UDA includes lands within Sacramento County's Urban Service Boundary, lands within the city limits of Rancho Cordova, Elk Grove, and Galt, and lands within Galt's adopted sphere of influence area. The County and its partners propose that approximately 43,500 acres within the 123,000-acre UDA would be developed or otherwise disturbed, while approximately 8,000 acres of the UDA would be permanently preserved or restored. The County and its partners also propose that approximately 40,500 acres of the Planning Area outside the UDA would be permanently preserved or restored, and only approximately 2,000 acres of the Planning Area outside the UDA would be developed or otherwise disturbed.
The species proposed for coverage in the SSHCP are those that occur within the SSHCP Planning Area and are currently listed as federally threatened or endangered, or that may become federally listed during the term of the proposed permit. The County intends to request an ESA section 10(a)(1)(B) permit to authorize the incidental take of 40 species (7 federally listed and 33 unlisted). The proposed SSHCP would provide for the long-term conservation and management of these 40 covered-species and their habitats within the SSHCP Planning Area. Species may be added or deleted during the course of the SSHCP development based on public comment, new information, further analysis, and agency consultation. Listed animal species proposed to be covered under the SSHCP permit are the federally-endangered vernal pool tadpole shrimp (
The 33 unlisted species (27 animal and 6 plant species) proposed to be covered under the SSHCP permit are the mid-valley fairy shrimp (
The activities proposed for coverage in the SSHCP are wide-ranging, but are generally related to urban-suburban development on city and unincorporated lands. Proposed covered-activities presently include the construction, installation, extension, or removal of: (1) Private and commercial developments, (2) transportation facilities, (3) surface water and groundwater supply and delivery facilities, (4) water treatment facilities, (5) flood control facilities, (6) sanitation facilities (landfills, transfer stations, recycling stations), (7) public facilities (fire stations, police stations, hospitals, schools, community centers, cemeteries, and administration centers), (8) outdoor and indoor recreation facilities, (9) utility facilities, (10) aggregate mining activities, and (11) conservation activities (habitat restoration, creation, and enhancement; preserve management and monitoring). These covered activities are expected to impact 18 existing habitat and agricultural land-cover types within the 341,000-acre Planning Area. Approximately 43,500 acres of the existing natural habitat and agricultural land-cover in the Planning Area would be converted to a developed condition under the proposed SSHCP.
The proposed SSHCP Conservation Strategy would provide a regional approach for the conservation of the 40 covered-species and their 18 habitat types so as to aid recovery of the species and to minimize and mitigate impacts of the covered activities on the species and their habitats within the Planning Area. The 18 species habitat types include vernal pools and associated uplands, valley grasslands, other wetlands, woodlands, riparian habitats, and several agricultural land-cover types. The proposed SSHCP Conservation Strategy would protect a total of approximately 47,000 acres and restore or create a total of approximately 1,500 acres within the 341,000-acre Planning Area. The SSHCP Planning Area would be divided into a system of 12 conservation zones with an explicit amount of species habitat preservation directed to specific zones. The County and its partners anticipate that large landscape preserves and linkage corridors would be established outside of the UDA, and that these habitat preserves would be established within a matrix of open space and agricultural land uses. The proposed Conservation Strategy also includes approximately 8,000 acres of habitat preserves within the UDA, but these UDA habitat preserves would be much smaller and would eventually be surrounded by urban or suburban development. Components of the proposed SSHCP conservation program are now under consideration by the Service and the County. These components may include monitoring, adaptive management, species avoidance measures, and species mitigation measures including the preservation, restoration, and enhancement of suitable habitat. It is anticipated the SSHCP would be implemented through a section 10(a)(1)(B) incidental take permit and an Implementation Agreement.
The proposed EIS/EIR will consider (1) The proposed action (i.e. the Service issues an ITP for the SSHCP proposed by the County and its partners), (2) a no-action alternative (i.e. the Service does not issue an ITP and a SSHCP is not implemented) and, (3) reasonable alternatives to the proposed action (i.e. the Service considers alternative versions of the SSHCP, and then permits alternative). We anticipate that several alternatives will be developed for analysis in the EIS/EIR. These alternatives might vary by the number of covered species; the covered activities, different strategies for avoiding, minimizing, and mitigating the impacts of incidental take; the amount of land preserved or restored, the type of future conservation efforts; or a combination of these factors. A detailed description of all reasonable alternatives, including the proposed action, will be included in the EIS/EIR.
The EIS/EIR will analyze in depth all significant environmental issues identified through this scoping process. These issues may include biological resources, agricultural resources, land use, housing, hydrology and water resources, cultural resources, aesthetics, transportation and circulation, mineral resources, recreation, air quality, noise and vibration, or other components of the human environment that could be directly, indirectly, or cumulatively impacted by the proposed action or by the alternatives.
We anticipate that a draft EIS/EIR and the draft SSHCP will be available in late 2009 and will have a 60-day public review period. The environmental review of the EIS/EIR will be conducted in accordance with the requirements of NEPA (42 U.S.C. 4321 et seq.), its implementing regulations (40 CFR 1500-1508), other applicable regulations, and Service policy and guidance on compliance with those regulations. We expect to complete the final EIS/EIR in the middle of 2010 and to make the decision on issuing a section 10(a)(1)(B) permit for a SSHCP in late 2010.
The U.S. Army Corps of Engineers (Corps) will be a NEPA Cooperating Agency on the proposed EIS/EIR pursuant to 40 CFR 1501.6, 1506.3(c), and 1508.5. The County and their partners expect to apply to the Corps for a Programmatic General Permit (PGP) under Section 404 of the Clean Water Act (CWA). Section 404 of the CWA regulates and requires Corps authorizations for discharges of dredged or fill material into waters of the United States. A PGP is among the types of general permits which can be issued for any category of activities involving discharges of dredged or fill material if the Corps makes certain determinations (33 U.S.C. 1344(e)). Corps regulations promulgated under the CWA define dredged or fill material in detail at 33 CFR 323.2 and regulations concerning processing of Corps permits are at 33 CFR part 325. The Corps may use the
The California Department of Fish and Game (CDFG) will be a NEPA Cooperating Agency on the proposed EIS/EIR pursuant to 40 CFR 1501.6 and 1508.5. The County and their partners expect to apply to CDFG for an incidental take permit under Section 2081 of the California Fish and Game code and to apply for a Lake or Streambed Alteration Agreement under Section 1600 of the California Fish and Game code. CDFG intends to use the EIS/EIR in conducting its review of the SSHCP as a CEQA Trustee Agency. CDFG will also use the EIS/EIR in makings its CEQA findings in their decision to issue an incidental take permit under Section 2081 of the California Fish and Game Code. As a CEQA Responsible Agency, CDFG may also use the EIS/EIR during their consideration to approve a Lake or Streambed Alteration Agreement under Section 1600 of the California Fish and Game Code. The SSHCP will incorporate best management practices that have been developed in cooperation with, and approved by, CDFG.
This notice of intent is being furnished in accordance with 40 CFR Sections 1501.2, 1501.7, 1506.6, and 1508.22 to obtain suggestions, comments, and useful information from other agencies and the public on the scope of the proposed EIS/EIR, including the significant environmental issues deserving of study, the range of actions, the range of alternatives, and the range of impacts to be considered. Written comments from interested parties are invited to ensure that all issues related to the proposed section 10(a)(1)(B) incidental-take permit application are identified. Comments will only be accepted in written form. You may submit written comments by mail, facsimile transmission, or in person (see
Fish and Wildlife Service, Interior.
Notice of availability of draft revised marine mammal stock assessment report for the southern sea otter in California; request for comments.
In accordance with the Marine Mammal Protection Act (MMPA), the Fish and Wildlife Service (Service) has developed a draft revised marine mammal stock assessment report for the southern sea otter (
Comments must be received by September 8, 2008.
Copies of the draft revised stock assessment report for the southern sea otter in California are available from the Field Supervisor, U.S. Fish and Wildlife Service, Ventura Fish and Wildlife Office, 2493 Portola Road, Suite B, Ventura, CA 93003; (805) 644-1766. It can also be viewed in Adobe Acrobat by navigating to the species information page for the southern sea otter at
If you wish to submit comments on the draft revised stock assessment report for the southern sea otter in California, you may do so by any of the following methods:
1. You may mail or hand-deliver (during normal business hours) written comments to the Field Supervisor, U.S. Fish and Wildlife Service, Ventura Fish and Wildlife Office, 2493 Portola Road, Suite B, Ventura, CA 93003.
2. You may fax your comments to (805) 644-3958.
3. You may send comments by electronic mail (e-mail) to
One of the goals of the MMPA is to ensure that stocks of marine mammals occurring in waters under the jurisdiction of the United States do not experience a level of human-caused mortality and serious injury that is likely to cause the stock to be reduced below its optimum sustainable population level (OSP). OSP is defined as “the number of animals which will result in the maximum productivity of the population or the species, keeping in mind the carrying capacity of the habitat and the health of the ecosystem of which they form a constituent element.”
To help accomplish the goal of maintaining marine mammal stocks at their OSPs, section 117 of the MMPA (16 U.S.C. 1361-1407) requires the Service and the National Marine Fisheries Service (NMFS) to prepare stock assessment reports for each marine mammal stock that occurs in waters under the jurisdiction of the United States. These stock assessments are to be based on the best scientific information available and are, therefore, prepared in consultation with established regional scientific review groups. Each stock assessment must include: (1) A description of the stock and its geographic range; (2) a minimum population estimate, maximum net productivity rate, and current population trend; (3) an estimate of human-caused mortality and serious injury; (4) a description of commercial fishery interactions; (5) the status of the stock; and (6) the potential biological removal level (PBR). The PBR is defined as “the maximum number of animals, not including natural mortalities, that may be removed from a marine mammal stock while allowing that stock to reach or maintain its OSP.” The PBR is the product of the minimum population estimate of the stock (N
Section 117 of the MMPA also requires the Service and the NMFS to review the stock assessment reports: (A) At least annually for stocks that are specified as strategic stocks; (B) at least annually for stocks for which significant new information is available; and (C) at least once every 3 years for all other stocks.
A strategic stock is defined in the MMPA as a marine mammal stock: (A) For which the level of direct human-caused mortality exceeds the potential biological removal level; (B) which, based on the best available scientific information, is declining and is likely to be listed as a threatened species under the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
A summary of the draft revised stock assessment report for southern sea otters
In accordance with the MMPA, a list of the sources of information or public reports upon which the assessment is based is included in this notice.
Kooyman, G.L., and D.P. Costa. 1979. Effects of oiling on temperature regulation in sea otters. Yearly progress report, Outer Continental Shelf Energy Assessment Program.
Kreuder, C., M.A. Miller, D.A. Jessup, L.J. Lowenstein, M.D. Harris, J.A. Ames, T.E. Carpenter, P.A. Conrad, and J.A.K. Mazet. 2003. Patterns of mortality in southern sea otters (
Kreuder, C., M.A. Miller, L.J. Lowenstine, P.A. Conrad, T.E. Carpenter, D.A. Jessup, and J.A.K. Mazet. 2005. Evaluation of cardiac lesions and risk factors associated with myocarditis and dilated cardiomyopathy in southern sea otters (
Laidre, K.L., R.J. Jameson, and D.P. DeMaster. 2001. An estimation of carrying capacity for sea otters along the California coast. Marine Mammal Science 17(2):294-309.
Larson, S., R. Jameson, J. Bodkin, M. Staedler, and P. Bentzen. 2002. Microsatellite DNA and mitochondrial DNA variation in remnant and translocated sea otter (
Mayer, K.A., M.D. Dailey, and M.A. Miller. 2003. Helminth parasites of the southern sea otter
Nakata, H., K. Kannan, L. Jing, N. Thomas, S. Tanabe, and J.P. Giesy. 1998. Accumulation pattern of organochlorine pesticides and polychlorinated biphenyls in southern sea otters (
Ralls, K., T.C. Eagle, and D.B. Siniff. 1996. Movement and spatial use patterns of California sea otters. Canadian Journal of Zoology 74:1841-1849.
Riedman, M.L., and J.A. Estes. 1990. The sea otter (
Riedman, M.L., J.A. Estes, M.M. Staedler, A.A. Giles, and D.R. Carlson. 1994. Breeding patterns and reproductive success of California sea otters. J. Wildl. Manage. 58:391-399.
Sanchez, M.S. 1992. Differentiation and variability of mitochondrial DNA in three sea otter,
Siniff, D.B., and K. Ralls. 1991. Reproduction, survival, and tag loss in
Siniff, D.B., T.D. Williams, A.M. Johnson, and D.L. Garshelis. 1982. Experiments on the response of sea otters,
Taylor, B.L., M. Scott, J. Heyning, and J. Barlow. 2002. Suggested guidelines for recovery factors for endangered marine mammals. Unpublished report submitted to the Pacific Scientific Review Group. 7 pp.
Tinker, M.T., G. Bentall, and J.A. Estes. 2008. Food limitation leads to behavioral diversification and dietary specialization in sea otters. PNAS 105:560-565.
Tinker, M.T., J.A. Estes, K. Ralls, T.M. Williams, D. Jessup, and D.P. Costa. 2006. Population Dynamics and Biology of the California Sea Otter (
U.S. Fish and Wildlife Service. 2003. Final Revised Recovery Plan for the Southern Sea Otter (
Wendell, F.E., R.A. Hardy, and J.A. Ames. 1986. An assessment of the accidental take of sea otters,
Wilson, D.E., M.A. Bogan, R.L. Brownell, Jr., A.M. Burdin, and M.K. Maminov. 1991. Geographic variation in sea otters,
Bureau of Land Management, Interior.
Notice of decision approving lands for conveyance.
As required by 43 CFR 2650.7(d), notice is hereby given that an appealable decision approving the subsurface estate in certain lands for conveyance pursuant to the Alaska Native Claims Settlement Act will be issued to The Aleut Corporation. The lands are in the vicinity of the Alaska Peninsula, and are located in:
Containing approximately 14,026 acres.
Containing approximately 12,052 acres.
Containing 3,833.64 acres.
Containing 640 acres.
Containing 2,501.16 acres.
Containing 4,480 acres.
Containing 53.24 acres.
Containing approximately 10,207 acres.
Containing 22,902.48 acres.
Containing approximately 6,110 acres.
Containing approximately 226 acres.
Containing approximately 17,075 acres.
Containing 2,560 acres.
Aggregating approximately 96,667 acres.
Notice of the decision will also be published four times in the Dutch Harbor Fisherman.
The time limits for filing an appeal are:
1. Any party claiming a property interest which is adversely affected by the decision shall have until July 10, 2008 to file an appeal.
2. Parties receiving service of the decision by certified mail shall have 30 days from the date of receipt to file an appeal.
Parties who do not file an appeal in accordance with the requirements of 43 CFR Part 4, Subpart E, shall be deemed to have waived their rights.
A copy of the decision may be obtained from: Bureau of Land Management, Alaska State Office, 222 West Seventh Avenue, #13, Anchorage, Alaska 99513-7504.
The Bureau of Land Management by phone at 907-271-5960, or by e-mail at
Bureau of Land Management, Interior.
Notice of filing of plat of survey; Rhode Island.
The Bureau of Land Management (BLM) will file the plat of survey of the lands described below in the BLM-Eastern States, Springfield, Virginia, 30 calendar days from the date of publication in the
The survey was requested by the Bureau of Indian Affairs and the Narragansett Indian Tribe.
The lands we surveyed are:
The plat of survey represents the survey of the Niles Land, designated Tract No. 8, a portion of the lands held in trust for the Narragansett Indian Tribe in Washington County, Rhode Island, and was accepted September 23, 2003.
We will place a copy of the plat we described in the open files. It will be available to the public as a matter of information. If BLM receives a protest against this survey, as shown on the plat, prior to the date of the official filing, we will stay the filing pending our consideration of the protest. We will not officially file the plat until the day after we have accepted or dismissed all protests and they have become final, including decisions on appeals. Copies of the plat will be made available upon request and prepayment of the reproduction fees.
Bureau of Land Management, Interior.
Notice.
Members of the public are hereby invited to participate with Spring Creek Coal Company in a program for the exploration of coal deposits owned by the United States of America in lands located in Big Horn County, Montana, encompassing 4,589.36 acres.
Robert Giovanini, Mining Engineer, or Connie Schaff, Land Law Examiner, Branch of Solid Minerals (MT-921), Bureau of Land Management (BLM), Montana State Office, Billings, Montana 59101-4669, telephone (406) 896-5084 or (406) 896-5060, respectively.
The lands to be explored for coal deposits are described as follows:
Any party electing to participate in this exploration program shall notify, in writing, both the State Director, BLM, 5001 Southgate Drive, Billings, Montana 59101-4669, and Spring Creek Coal Company, P.O. Box 67, Decker, Montana 59025. Such written notice must refer to serial number MTM 98207 and be received no later than 30 calendar days after publication of this Notice in the
The proposed exploration program is fully described, and will be conducted pursuant to an exploration plan to be approved by the Bureau of Land Management. The exploration plan, as submitted by Spring Creek Coal Company, is available for public inspection at the BLM, 5001 Southgate Drive, Billings, Montana, during regular business hours (9 a.m. to 4 p.m.), Monday through Friday.
National Park Service, Department of the Interior.
Notice of Intent to prepare a Supplemental Oil and Gas Management Plan, Environmental Impact Statement, for Padre Island National Seashore, Texas.
Pursuant to the National Environmental Policy Act of 1969, 42 U.S.C. 4332(2)(C), the National Park Service is preparing a Supplemental Oil and Gas Management Plan, Environmental Impact Statement, for Padre Island National Seashore, Texas. This will supplement the Oil and Gas Management Plan, Final Environmental Impact Statement completed on October 12, 2000.
The major change in the Supplemental Oil and Gas Management Plan, Environmental Impact Statement, will be a revised reasonably foreseeable development scenario. Minor revisions will include new information on some resources in Padre Island National Seashore.
A scoping brochure has been prepared that detail the proposed revisions identified to date. Copies of the scoping brochure may be obtained from Linda Dansby, SEIS Manager, Office of Minerals/Oil and Gas Support, Intermountain Region-Santa Fe, National Park Service, P.O. Box 728, Santa Fe, NM 87504-0728, telephone 505-988-6095.
The Park Service will accept comments from the public through July 10, 2008.
The scoping brochure will be available for public review and comment online at the Planning, Environment and Public Comment (PEPC) Web site at
Linda Dansby, SEIS Manager, Office of Minerals/Oil and Gas Support, Intermountain Region-Santa Fe, National Park Service, P.O. Box 728, Santa Fe, New Mexico 87504-0728, Telephone 505-988-6095, e-mail at
If you wish to comment on the scoping brochure or on any other issues associated with the supplemental oil and gas management plan, environmental impact statement, you may submit your comments by any one of several methods. You may mail comments to SEIS Manager Linda Dansby, at the mailing address provided above. You may also post comments online at
Pursuant to 21 U.S.C. 958(i), the Attorney General shall, prior to issuing a registration under this Section to a bulk manufacturer of a controlled substance in schedule I or II, and prior to issuing a regulation under 21 U.S.C. 952(a)(2)(B) authorizing the importation of such a substance, provide manufacturers holding registrations for the bulk manufacture of the substance an opportunity for a hearing.
Therefore, in accordance with Title 21 Code of Federal Regulations (CFR), 1301.34(a), this is notice that on May 7, 2008, Cambrex Charles City, Inc., 1205 11th Street, Charles City, Iowa 50616, made application by renewal to the Drug Enforcement Administration (DEA) to be registered as an importer of Phenylacetone (8501), a basic class of controlled substance listed in schedule II.
The company plans to import Phenylacetone for use as a precursor in the manufacture of amphetamine only.
Any bulk manufacturer who is presently, or is applying to be, registered with DEA to manufacture such basic class of controlled substance may file comments or objections to the issuance of the proposed registration and may, at the same time, file a written request for a hearing on such application pursuant to 21 CFR 1301.43 and in such form as prescribed by 21 CFR 1316.47.
Any such written comments or objections being sent via regular mail should be addressed, in quintuplicate, to the Drug Enforcement Administration, Office of Diversion Control, Federal Register Representative (ODL), Washington, DC 20537, or any being sent via express mail should be sent to Drug Enforcement Administration, Office of Diversion Control, Federal Register Representative (ODL), 8701 Morrissette Drive, Springfield, Virginia 22152; and must be filed no later than July 10, 2008.
This procedure is to be conducted simultaneously with and independent of the procedures described in 21 CFR 1301.34(b), (c), (d), (e) and (f). As noted in a previous notice published in the
In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on March 21, 2006, applicable to workers of Panasonic Shikoku Electronics Corporation of America (PSECA), Vancouver, Washington. The notice was published in the
At the request of the State agency, the Department reviewed the certification for workers of the subject firm. The workers assemble combination and rear projection televisions (includes DVD/VCR) and act in a support capacity for sales and purchasing.
New information shows that leased workers from Express Personnel Services were employed on-site at the Vancouver, Washington location of Panasonic Shikoku Electronics Corporation of America (PSECA). The Department has determined that these workers were sufficiently under the control of the subject firm.
Based on these findings, the Department is amending this certification to include leased workers from Express Personnel Services working on-site at the Vancouver, Washington location of the subject firm.
The intent of the Department's certification is to include all workers employed at Panasonic Shikoku Electronics Corporation of America (PSECA) who were adversely affected by increased imports.
The amended notice applicable to TA-W-58,807 is hereby issued as follows:
All workers of Panasonic Shikoku Electronic Corporation of America (PSECA), including on-site leased workers from Express Personnel Services, Vancouver, Washington, who became totally or partially separated from employment on or after February 7, 2005, through March 21, 2008, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974.
In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on November 30, 2006, applicable to workers of Delphi Corporation, Automotive Holdings Group, Needmore Road/Dayton Plant 3, Dayton, Ohio. The notice was published in the
At the request of a petitioner, the Department reviewed the certification for workers of the subject firm. The
New information shows that leased workers from Aerotek Automotive, PDSI Technical Services, Acro Service Corp., G-Tech Professional Staffing, TAC Automotive, Bartech, Manpower Professional Services, Manpower of Vandalia, Setech and Mays Chemical were employed on-site at the Needmore Road/Dayton Plant 3, Dayton, Ohio, location of Delphi Corporation, Automotive Holdings Group. The Department has determined that these workers were sufficiently under the control of the subject firm to be considered leased workers.
Based on these findings, the Department is amending this certification to include leased workers from the above mentioned firms working on-site at the Needmore Road/Dayton Plant 3, Dayton, Ohio, location of the subject firm.
The intent of the Department's certification is to include all workers employed at Delphi Corporation, Automotive Holdings Group, Needmore Road/Dayton Plant 3 who were adversely affected by increased imports of automotive brake parts.
The amended notice applicable to TA-W-60,041 is hereby issued as follows:
“All workers of Delphi Corporation, Automotive Holdings Group, Needmore Road/Dayton Plant 3, including on-site leased workers from Aerotek Automotive, PDSI Technical Services, Acro Service Corp., G-Tech Professional Staffing, TAC Automotive, Bartech, Manpower Professional Services, Manpower of Vandalia, Setech and Mays Chemicals, Dayton, Ohio, who became totally or partially separated from employment on or after August 24, 2005, through November 30, 2008, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974.”
In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Certification Regarding Eligibility to Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on March 28, 2008, applicable to workers of Powermate Corporation, Springfield, Minnesota. The notice was published in the
At the request of the State agency, the Department reviewed the certification for workers of the subject firm. The workers are engaged in the production of air compressors and pressure washers. New information provided to the Department shows that beginning in June 2007, some workers at the subject firm were temporary workers from Manpower Temp Agency and were subsequently hired by Powermate Corporation.
Consequently, some of the workers at the subject firm had their wages reported under the Unemployment Insurance (UI) tax account for Manpower.
Accordingly, the Department is amending this certification to properly reflect this matter.
The intent of the Department's certification is to include all workers of Powermate Corporation who were adversely affected by increased company imports.
The amended notice applicable to TA-W-63,027 is hereby issued as follows:
All workers of Powermate Corporation, including temporary workers from Manpower Temp Agency, Springfield, Minnesota, who became totally or partially separated from employment on or after March 18, 2007, through March 28, 2010, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974.
Notice; correction.
The Department of Labor, Employment and Training Administration published a document in the
This is to correct the “text” caption in the
TA-W-41,377E; Levi Strauss & Co., San Antonio Finishing Plant, San Antonio, Texas, TA-W-41,377F; Levi Strauss & Co., San Benito Manufacturing Plant, San Benito, Texas.
Petitions have been filed with the Secretary of Labor under Section 221(a) of the Trade Act of 1974 (“the Act”) and are identified in the Appendix to this notice. Upon receipt of these petitions, the Director of the Division of Trade Adjustment Assistance, Employment and Training Administration, has instituted investigations pursuant to Section 221(a) of the Act.
The purpose of each of the investigations is to determine whether the workers are eligible to apply for adjustment assistance under Title II, Chapter 2, of the Act. The investigations will further relate, as appropriate, to the determination of the date on which total or partial separations began or threatened to begin and the subdivision of the firm involved.
The petitioners or any other persons showing a substantial interest in the subject matter of the investigations may request a public hearing, provided such request is filed in writing with the Director, Division of Trade Adjustment Assistance, at the address shown below, not later than June 20, 2008.
Interested persons are invited to submit written comments regarding the subject matter of the investigations to the Director, Division of Trade Adjustment Assistance, at the address shown below, not later than June 20, 2008.
The petitions filed in this case are available for inspection at the Office of the Director, Division of Trade Adjustment Assistance, Employment and Training Administration, U.S. Department of Labor, Room C-5311, 200 Constitution Avenue, NW., Washington, DC 20210.
On March 27, 2008, the U.S. Court of International Trade (USCIT) granted the Department of Labor's motion for a second voluntary remand in
On December 15, 2006, an official of Invista, S.A.R.L., Nylon Apparel Filament Fibers Group, A Subsidiary of Koch Industries, Inc., Chattanooga, Tennessee (the subject firm) filed a petition for Trade Adjustment Assistance (TAA) and Alternative Trade Adjustment Assistance (ATAA) on behalf of workers and former workers at the subject firm engaged in activity related to the production of nylon fiber. AR 1. The company official stated that the “petition is a continuation of the shift of production to Mexico as described in TA-W-55,055 that expired August 20, 2006. After the shift in production to another country * * * . all orders continued to be processed from the United States until now. The Customer Service Representatives (CSRs) losing their jobs are being replaced by CSRs located in South America who will handle orders for companies located in the United States.” AR 2.
The TAA/ATAA certification applicable TA-W-55,055 (issued August 20, 2004) was based on the Department's findings that the subject firm shifted production of three types of nylon filament to Mexico. AR 5-6.
The Department of Labor (Department) issued a negative determination regarding workers' eligibility to apply for TAA/ATAA on February 7, 2007. The determination was based on the Department's findings that, during the relevant period, the subject workers did not produce an article or support an appropriate subdivision that produced an article domestically, and, as such, cannot be adversely impacted or affected by a shift in production. AR 30-32. The Department's Notice of determination was published in the
In the request for administrative reconsideration, dated February 18, 2007, a worker at the subject firm stated that after TA-W-55,055 was filed, the subject firm ceased to produce apparel textile and began producing Performance Materials. The worker also stated that “after the petition (TA-W-55,055) expired, (the subject firm) let go the last of the apparel fibers personnel. Since I sold 100% apparel fiber, there was no reason to keep me.” AR 35. The worker further stated that “I was downsized, yet there were people in Brazil hired to do my work.” AR 36.
In a subsequent letter, the worker who filed the request for reconsideration stated that “I was informed by management on 11/14/06, that my job was being split up; part of it going to Brazil and part going to Wilmington, Delaware.” AR 37. The worker also stated that “All the apparel people were let go. This is a direct result of the textile industry going to developing countries and the loss of textile manufacturing in the U.S.” AR 38.
In a letter dated March 15, 2007, the Department stated that the request for reconsideration was being dismissed because insufficient evidence was furnished to warrant reconsideration pursuant to 29 CFR 90.18(c) and reiterated that, because the subject workers did not produce an article or support domestic production of an article during the one year period prior to the petition, the subject workers are not eligible to apply for worker adjustment assistance under the Trade Act of 1974, as amended. AR 45. The Dismissal of Application for Reconsideration was issued on March 21, 2007. AR 47. The Department's Notice of dismissal was published in the
By application dated May 11, 2007, Plaintiffs sought review by the USCIT. The complaint stated that the certification of TA-W-55,055 was based on a shift of textile machines to Mexico and that the negative determination of TA-W-60,808 was “due to the machines having been shipped to Mexico more than a year earlier. Yet my job did not officially terminate till the reorganization to rid the Chattanooga plant of ALL textile employees.”
Under the Trade Act of 1974, as amended, certification of group eligibility to apply for TAA will be issued provided that (1) a significant number or proportion of the workers of such workers' firm, or an appropriate subdivision, have been totally or partially separated or are threatened to become totally or partially separated; and (2) there has been a shift in production from the workers' firm or subdivision to an eligible foreign country of articles like or directly competitive with those produced by the subject firm or subdivision under section 222(a)(2)(B)(i); and, either the foreign country is a party to a free trade agreement with the United States under section 222(a)(2)(B)(ii)(I), is a beneficiary country under section 222(a)(2)(B)(ii)(II), or there has been or is likely to be an increase in imports of like or directly competitive articles. The Department interprets this standard for certification as requiring that the shift of production of an article to a foreign country must be a cause of the separations of workers of the firm that were engaged in or supported the production of that article.
After the shift of nylon filament production to Mexico in 2004, the subject firm continued to employ the subject workers to market nylon apparel filament produced in Mexico and to process orders of nylon apparel filament produced in Mexico. AR 2, 26-27, 29, 35-38, SAR 8.
Information provided by the subject firm during the remand investigation revealed that the workers' separations are not related to the shift of production of apparel nylon filament to Mexico in 2004. During the relevant period, customer service functions were performed at Invista facilities in Canada, South America, Chattanooga, Tennessee, and Wilmington Delaware. The customer service functions were consolidated to Paulinia, Brazil, and Wilmington, Delaware due to a business decision to improve the efficiency of the customer service organization. At the time of plaintiff separations the subject firm terminated other workers whose functions were unrelated to the production of apparel nylon filaments. SAR 11, 18. The separated workers were “two (2) Apparel Nylon Customer Service Representatives located at Chattanooga, one (1) Performance Materials Customer Service Representative located at Chattanooga, and one (1) Performance Materials Product Coordinator located at Chattanooga.” SAR 8. The fact that two of the four separated workers worked on a product line (Performance Materials) whose production was not shifted to Mexico confirms the company's statements that the layoffs were part of a business decision to increase efficiency in the customer service operation. This bolsters the conclusion that the plaintiff separations were not caused by the shift of production of
That the subject workers were not threatened with separation until November 14, 2006 (more than two years after the subject firm's shift of production of nylon apparel filament to Mexico) and that the customer service representatives have been replaced by workers in Brazil and Delaware, SAR 3, 8, 11, 18, and not by workers in Mexico, support the Department's findings that the subject workers' employment with the subject firm was not dependent upon domestic production and that the subject firm's shift of nylon apparel filament production to Mexico was not a factor in the subject workers' separations.
Based on previously-submitted material and information provided during the remand investigation, the Department finds that, while the subject firm shifted its production of nylon apparel filament to Mexico, that event was not a cause of the subject workers' separations. Therefore, the Department determines that the group eligibility to apply for benefits under the Trade Act of 1974, as amended, has not been met.
Because the administrative record clearly demonstrates that the shift of production to a foreign country was not a cause to the workers' separations, the Department has not addressed the impact of the fact that no production took place at the subject firm during the twelve month period prior to filing of the petition.
In addition, in accordance with Section 246 of the Trade Act of 1974, as amended, the Department herein presents the results of its investigation regarding certification of eligibility to apply for ATAA.
In order to apply for ATAA, the subject worker group must be certified eligible to apply for TAA. Since the workers are denied eligibility to apply for TAA, they cannot be certified eligible to apply for ATAA.
After careful review of the findings of the remand investigation, I affirm the notice of negative determination of eligibility to apply for worker adjustment assistance for workers and former workers of Invista, S.A.R.L, Nylon Apparel Filament Fibers Group, A Subsidiary of Koch Industries, Inc., Chattanooga, Tennessee.
Signed at Washington, DC this 2nd day of June 2008.
By letter dated May 2, 2008, a company official of Saint-Gobain Vetrotex America requested administrative reconsideration regarding Alternative Trade Adjustment Assistance (ATAA) applicable to workers of the subject firm. The negative determination was signed on April 25, 2008. The notice of affirmative determination for ATAA was erroneously published in the
The workers of Saint-Gobain Vetrotex America, Wichita Falls, Texas were certified eligible to apply for Trade Adjustment Assistance (TAA) on April 25, 2008. The decision was amended to include on-site leased workers from Industrial Outsourcing on May 21, 2008. The amended version of the determination was published in the
The initial ATAA investigation determined that workers in the workers' firm possess skills that are easily transferrable.
In the request for reconsideration, the company official stated that the information provided by the subject firm in the initial investigation was inaccurate and that skills of the workers employed at the subject firm are not easily transferrable to other businesses within the local commuting area. The company official provided sufficient information confirming this statement.
Additional investigation has determined that the workers possess skills that are not easily transferable and that the conditions within the industry are adverse. A significant number or proportion of the worker group is age fifty years or over.
After careful review of the additional facts obtained on reconsideration, I conclude that the requirements of Section 246 of the Trade Act of 1974, as amended, have been met for workers at the subject firm.
In accordance with the provisions of the Act, I make the following revised determination:
All workers of Saint-Gobain Vetrotex America, including on-site leased workers from Industrial Outsourcing, Wichita Falls, Texas, who became totally or partially separated from employment on or after March 19, 2007 through April 25, 2010, are eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974.
Pursuant to Section 221 of the Trade Act of 1974, as amended, an investigation was initiated on June 2, 2008 in response to a petition filed by company officials on behalf of the workers at MTD Southwest, Inc., Tempe, Arizona.
The petitioner has requested that the petition be withdrawn. Consequently, the investigation has been terminated.
Employment and Training Administration, Labor.
Notice; correction.
The Employment and Training Administration published a document in the
Please contact Mr. Evan Rosenberg, telephone 202-693-3593; fax 202-693-3532 (these are not toll-free numbers).
In the
National Aeronautics and Space Administration.
Notice of meeting.
The National Aeronautics and Space Administration (NASA) announces a meeting of the Astrophysics Subcommittee of the NASA Advisory Council (NAC). This Subcommittee reports to the Science Committee of the NAC. The Meeting will be held for the purpose of soliciting from the scientific community and other persons scientific and technical information relevant to program planning.
Wednesday, July 2, 2008, 8 a.m. to 5 p.m. and Thursday, July 3, 2008, 8 a.m. to 1 p.m. Eastern Daylight Time.
NASA Headquarters, 300 E Street, SW., Room 5H45, Washington, DC 20546.
Ms. Marian Norris, Science Mission Directorate, NASA Headquarters, Washington, DC 20546, (202) 358-4452, fax (202) 358-4118, or
The meeting will be open to the public up to the capacity of the room. The agenda for the meeting includes the following topics:
Pursuant to section 189a. (2) of the Atomic Energy Act of 1954, as amended (the Act), the U.S. Nuclear Regulatory Commission (the Commission or NRC staff) is publishing this notice. The Act requires the Commission publish notice of any amendments issued, or proposed to be issued and grants the Commission the authority to issue and make immediately effective any amendment to an operating license upon a determination by the Commission that such amendment involves no significant hazards consideration, notwithstanding the pendency before the Commission of a request for a hearing from any person.
This notice includes notices of amendments containing sensitive unclassified non-safeguards information (SUNSI) or safeguards information (SGI).
The Commission has made a proposed determination that the following amendment requests involve no significant hazards consideration. Under the Commission's regulations in 10 CFR 50.92, this means that operation of the facility in accordance with the proposed amendment would not (1) Involve a significant increase in the probability or consequences of an accident previously evaluated; or (2) create the possibility of a new or different kind of accident from any accident previously evaluated; or (3) involve a significant reduction in a margin of safety. The basis for this proposed determination for each amendment request is shown below.
The Commission is seeking public comments on this proposed determination. Any comments received within 30 days after the date of publication of this notice will be considered in making any final determination.
Normally, the Commission will not issue the amendment until the expiration of 60 days after the date of publication of this notice. The Commission may issue the license
Written comments may be submitted by mail to the Chief, Rulemaking, Directives and Editing Branch, Division of Administrative Services, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and should cite the publication date and page number of this
Within 60 days after the date of publication of this notice, person(s) may file a request for a hearing with respect to issuance of the amendment to the subject facility operating license and any person whose interest may be affected by this proceeding and who wishes to participate as a party in the proceeding must file a written request via electronic submission through the NRC E-Filing system for a hearing and a petition for leave to intervene. Requests for a hearing and a petition for leave to intervene shall be filed in accordance with the Commission's “Rules of Practice for Domestic Licensing Proceedings” in 10 CFR Part 2. Interested person(s) should consult a current copy of 10 CFR 2.309, which is available at the Commission's PDR, located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland, or at
As required by 10 CFR 2.309, a petition for leave to intervene shall set forth with particularity the interest of the petitioner in the proceeding, and how that interest may be affected by the results of the proceeding. The petition should specifically explain the reasons why intervention should be permitted with particular reference to the following general requirements: (1) The name, address, and telephone number of the requestor or petitioner; (2) the nature of the requestor's/petitioner's right under the Act to be made a party to the proceeding; (3) the nature and extent of the requestor's/petitioner's property, financial, or other interest in the proceeding; and (4) the possible effect of any decision or order which may be entered in the proceeding on the requestor's/petitioner's interest. The petition must also set forth the specific contentions which the petitioner/requestor seeks to have litigated at the proceeding.
Each contention must consist of a specific statement of the issue of law or fact to be raised or controverted. In addition, the petitioner/requestor shall provide a brief explanation of the bases for the contention and a concise statement of the alleged facts or expert opinion which support the contention and on which the petitioner/requestor intends to rely in proving the contention at the hearing. The petitioner/requestor must also provide references to those specific sources and documents of which the petitioner is aware and on which the petitioner/requestor intends to rely to establish those facts or expert opinion. The petition must include sufficient information to show that a genuine dispute exists with the applicant on a material issue of law or fact. Contentions shall be limited to matters within the scope of the amendment under consideration. The contention must be one which, if proven, would entitle the petitioner/requestor to relief. A petitioner/requestor who fails to satisfy these requirements with respect to at least one contention will not be permitted to participate as a party.
Those permitted to intervene become parties to the proceeding, subject to any limitations in the order granting leave to intervene, and have the opportunity to participate fully in the conduct of the hearing.
If a hearing is requested, and the Commission has not made a final determination on the issue of no significant hazards consideration, the Commission will make a final determination on the issue of no significant hazards consideration. The final determination will serve to decide when the hearing is held. If the final determination is that the amendment request involves no significant hazards consideration, the Commission may issue the amendment and make it immediately effective, notwithstanding the request for a hearing. Any hearing held would take place after issuance of the amendment. If the final determination is that the amendment request involves a significant hazards consideration, any hearing held would take place before the issuance of any amendment.
A request for hearing or a petition for leave to intervene must be filed in accordance with the NRC E-Filing rule, which the NRC promulgated in August 28, 2007 (72 FR 49139). The E-Filing process requires participants to submit and serve documents over the internet or in some cases to mail copies on electronic storage media. Participants may not submit paper copies of their filings unless they seek a waiver in accordance with the procedures described below.
To comply with the procedural requirements of E-Filing, at least ten (10) days prior to the filing deadline, the petitioner/requestor must contact the Office of the Secretary by e-mail at
Once a petitioner/requestor has obtained a digital ID certificate, had a docket created, and downloaded the EIE viewer, it can then submit a request for hearing or petition for leave to intervene. Submissions should be in Portable Document Format (PDF) in accordance with NRC guidance available on the NRC public Web site at
A person filing electronically may seek assistance through the “Contact Us” link located on the NRC Web site at
Participants who believe that they have a good cause for not submitting documents electronically must file a motion, in accordance with 10 CFR 2.302(g), with their initial paper filing requesting authorization to continue to submit documents in paper format. Such filings must be submitted by: (1) First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemaking and Adjudications Staff; or (2) courier, express mail, or expedited delivery service to the Office of the Secretary, Sixteenth Floor, One White Flint North, 11555 Rockville, Pike, Rockville, Maryland, 20852, Attention: Rulemaking and Adjudications Staff. Participants filing a document in this manner are responsible for serving the document on all other participants. Filing is considered complete by first-class mail as of the time of deposit in the mail, or by courier, express mail, or expedited delivery service upon depositing the document with the provider of the service.
Non-timely requests and/or petitions and contentions will not be entertained absent a determination by the Commission, the presiding officer, or the Atomic Safety and Licensing Board that the petition and/or request should be granted and/or the contentions should be admitted, based on a balancing of the factors specified in 10 CFR 2.309(c)(1)(i)-(viii). To be timely, filings must be submitted no later than 11:59 p.m. Eastern Time on the due date.
Documents submitted in adjudicatory proceedings will appear in NRC's electronic hearing docket which is available to the public at
For further details with respect to this amendment action, see the application for amendment which is available for public inspection at the Commission's PDR, located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the ADAMS Public Electronic Reading Room on the Internet at the NRC Web site,
1. Does the proposed amendment involve a significant increase in the probability or consequences of an accident previously evaluated?
Response: No.
The license amendment only revises the SFP C configuration and provides an optional poison material Metamic for the spent fuel pool racks. These changes do not modify the design of Structures, Systems and Components (SSCs) that could initiate an accident. This system has been evaluated for the conditions that would exist with the new configuration and new poison materials. It was found that the rack configuration has been previously evaluated for all enveloping accidents. Also, the Metamic poison material has been evaluated for all enveloping accidents and it can be concluded that there would be no increase in dose from a fuel handling accident in the FHB [Fuel Handling Building].
Therefore, the proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated.
2. Does the proposed amendment create the possibility of a new or different kind of accident from any accident previously evaluated?
Response: No.
The license amendment only revises the SFP C configuration and allows the optional poison material Metamic for the spent fuel pool racks. License Amendment 103 Safety Evaluation addressed applicable design basis accidents for the addition of the SFP racks. Since no structural properties are attributed to the Boral or Metamic, this is an acceptable substitution. The properties of Metamic are
Therefore, the proposed changes do not create the possibility of a new or different kind of accident from any accident previously evaluated.
3. Does the proposed amendment involve a significant reduction in the margin of safety?
Response: No.
In accordance with License Amendment 103 and the submitted Holtec report in Attachment 7, the change in the Spent Fuel Pool Rack configuration and poison substitution is bounded by previous evaluations of the safety-related systems to design basis accidents. The fixed neutron absorber (Metamic) has been demonstrated as acceptable for dry and wet storage applications on a generic basis. Additionally, the NRC has approved the use of Metamic in both wet storage and dry storage nuclear plant applications.
The margin of safety for sub criticality is maintained by having k
The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration.
1. Do the proposed changes involve a significant increase in the probability or consequences of an accident previously evaluated?
Response: No.
The overall protection system performance will remain within the bounds of the previously performed accident analyses since no hardware changes are proposed. The same reactor trip system (RTS), engineered safety feature actuation system (ESFAS), and loss of power (LOP) diesel generator start and bus separation instrumentation will continue to be used. The protection systems will continue to function in a manner consistent with the plant design basis. The changes to the TSs do not result in a condition where the design, material, and construction standards that were applicable prior to the change are altered. The proposed changes will not modify any system interface. The proposed changes will not affect the probability of any event initiators. There will be no degradation in the performance of or an increase in the number of challenges imposed on safety-related equipment assumed to function during an accident situation. There will be no change to normal plant operating parameters or accident mitigation performance. The proposed changes will not alter any assumptions or change any mitigation actions in the radiological consequence evaluations in the Updated Final Safety Analysis Report (UFSAR).
The determination that the results of the proposed changes are acceptable was established in the NRC Safety Evaluations prepared for WCAP-14333-P-A (issued by letter dated July 15, 1998) and for WCAP-1 5376-P-A (issued by letter dated December 20, 2002). Implementation of the proposed changes will result in an insignificant risk impact. Applicability of these conclusions has been verified through plant-specific reviews and implementation of the generic analysis results in accordance with the respective NRC Safety Evaluation conditions.
The proposed changes to the Completion Times, bypass test times, and Surveillance Frequencies reduce the potential for inadvertent reactor trips and spurious engineered safety feature (ESF) actuations, and therefore do not increase the probability of any accident previously evaluated. The proposed changes do not change the response of the plant to any accidents and have an insignificant impact on the reliability of the RTS, ESFAS and LOP diesel generator start and bus separation signals. The RTS, ESFAS and LOP diesel generator start and bus separation instrumentation will remain highly reliable and the proposed changes will not result in a significant increase in the risk of plant operation. This is demonstrated by showing that the impact on plant safety as measured by the increase in core damage frequency (CDF) is less than 1.0E-06 per year and the increase in large early release frequency (LERF) is less than 1.0E-07 per year. In addition, for the Completion Time changes, the incremental conditional core damage probabilities (ICCDP) and incremental conditional large early release probabilities (ICLERP) are less than 5.0E-07 and 5.0E-08, respectively. These changes meet the acceptance criteria in Regulatory Guides 1.174 and 1.177. Therefore, since the RTS, ESFAS and LOP diesel generator start and bus separation instrumentation will continue to perform their functions with high reliability as originally assumed, and the risk impact as measured by the △CDF, △LERF, ICCDP, and ICLERP risk metrics is within the acceptance criteria of existing regulatory guidance, there will not be a significant increase in the consequences of any accidents.
The proposed changes do not adversely affect accident initiators or precursors nor alter the design assumptions, conditions, or configuration of the facility or the manner in which the plant is operated and maintained. The proposed changes do not alter or prevent the ability of structures, systems, and component from performing their intended function to mitigate the consequences of an initiating event within the assumed acceptance limits.
The proposed changes do not affect the source term, containment isolation, or radiological release assumptions used in evaluating the radiological consequences of an accident previously evaluated. The proposed changes are consistent with safety analysis assumptions and resultant consequences.
Therefore, the proposed changes do not involve a significant increase in the probability or consequences of an accident previously evaluated.
2. Do the proposed changes create the possibility of a new or different kind of accident from any accident previously evaluated?
Response: No.
There are no hardware changes nor are there any changes in the method by which any safety-related plant system performs its safety function. The proposed changes will not affect the normal method of plant operation. No performance requirements will be affected or eliminated. The proposed changes will not result in physical alteration to any plant system nor will there be any change in the method by which any safety-related plant system performs its safety function. There will be no setpoint changes or changes to accident analysis assumptions.
No new accident scenarios, transient precursors, failure mechanisms, or limiting single failures are introduced as a result of these changes. There will be no adverse effect or challenges imposed on any safety-related system as a result of these changes.
Therefore, the proposed changes do not create the possibility of a new or different kind of accident from any previously evaluated.
3. Do the proposed changes involve a significant reduction in a margin of safety?
Response: No.
The proposed changes do not affect the acceptance criteria for any analyzed event
The redundancy of RTS and ESFAS trains and the LOP diesel generator start and bus separation instrumentation is maintained, and diversity with regard to the signals that provide reactor trip and ESF actuation is also maintained. All signals credited as primary or secondary, and all operator actions credited in the accident analyses will remain the same. The proposed changes will not result in plant operation in a configuration outside the design basis. The calculated impact on risk is insignificant and meets the acceptance criteria contained in Regulatory Guides 1.174 and 1.177. Although there was no attempt to quantify any positive human factors benefit due to increased Completion Times and bypass test times, it is expected that there would be a net benefit due to a reduced potential for spurious reactor trips and actuations associated with testing.
Implementation of the proposed changes is expected to result in an overall improvement in safety, as follows:
(a) Reduced testing should result in fewer inadvertent reactor trips, less frequent actuation of ESFAS components, less frequent distraction of operations personnel without significantly affecting RTS and ESFAS reliability.
(b) Improvements in the effectiveness of the operating staff in monitoring and controlling plant operation should be realized. This is due to less frequent distraction of the operators and shift supervisor to attend to instrumentation Required Actions with short Completion Times.
(c) The time provided by the proposed increase in Completion Times and bypass test times should reduce the potential for human errors by the personnel performing Required Actions, corrective maintenance, and Surveillance Testing.
(d) The Completion Time extensions for the reactor trip breakers should provide additional time to complete test and maintenance activities while at power, potentially reducing the number of forced outages related to compliance with reactor trip breaker Completion Times, and provide consistency with the Completion Times for the logic trains.
Therefore, the proposed changes do not involve a significant reduction in a margin of safety.
The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration.
1. Does the proposed amendment involve a significant increase in the probability or consequences of an accident previously evaluated?
Response: No.
The proposed change adds an approved analytical method for evaluating a large break (LB) loss of coolant accident (LOCA). The proposed change will not affect previously evaluated accidents because they continue to be analyzed by NRC approved methodologies to ensure required safety limits are maintained. The acceptance criteria of the SQN Final Safety Analysis Report analyzed accidents and anticipated operational occurrences are not affected by the proposed addition of the realistic LB LOCA methodology. As the evaluations for accidents and operation occurrences are not adversely affected, the proposed change will not increase the consequences of a postulated event.
The proposed change does not result in any modification of the plant equipment or operating practices and therefore, does not alter plant conditions or plant response prior to or after postulated events.
Therefore, the proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated.
2. Does the proposed amendment create the possibility of a new or different kind of accident from any accident previously evaluated?
Response: No.
As previously noted, the proposed change does not result in any modification of the plant equipment or operating practices and therefore, does not alter plant conditions or plant response prior to or after postulated events.
Therefore, the proposed change does not create the possibility of a new or different kind of accident from any previously evaluated.
3. Does the proposed amendment involve a significant reduction in a margin of safety?
Response: No.
The proposed change does not alter plant equipment including the automatic accident mitigation setpoints designed to mitigate the affects of a postulated accident. The accident analyses and plant safety limits continue to be acceptable as evaluated by NRC approved methodologies. The proposed application of the realistic LB LOCA methodology ensures acceptable margins and limits for fuel core designs.
Therefore, the proposed change does not involve a significant reduction in a margin of safety.
The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration.
1. This order contains instructions regarding how potential parties to the proceedings listed above may request access to documents containing sensitive unclassified information (SUNSI and SGI).
2. Within ten (10) days after publication of this notice of opportunity for hearing, any potential party as defined in 10 CFR 2.4 who believes access to SUNSI or SGI is necessary for a response to the notice may request access to SUNSI or SGI. A “potential party” is any person who intends or may intend to participate as a party by demonstrating standing and the filing of an admissible contention under 10 CFR
3. The requester shall submit a letter requesting permission to access SUNSI and/or SGI to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemakings and Adjudications Staff, and provide a copy to the Associate General Counsel for Hearings, Enforcement and Administration, Office of the General Counsel, Washington, DC 20555-0001. The expedited delivery or courier mail address for both offices is U.S. Nuclear Regulatory Commission, 11555 Rockville Pike, Rockville, MD 20852. The e-mail address for the Office of the Secretary and the Office of the General Counsel are
a. A description of the licensing action with a citation to this
b. The name and address of the potential party and a description of the potential party's particularized interest that could be harmed by the action identified in (a);
c. If the request is for SUNSI, the identity of the individual requesting access to SUNSI and the requester's need for the information in order to meaningfully participate in this adjudicatory proceeding, particularly why publicly available versions of the application would not be sufficient to provide the basis and specificity for a proffered contention;
d. If the request is for SGI, the identity of the individual requesting access to SGI and the identity of any expert, consultant or assistant who will aid the requester in evaluating the SGI, and information that shows:
(i) Why the information is indispensable to meaningful participation in this licensing proceeding; and
(ii) The technical competence (demonstrable knowledge, skill, experience, training or education) of the requester to understand and use (or evaluate) the requested information to provide the basis and specificity for a proffered contention. The technical competence of a potential party or its counsel may be shown by reliance on a qualified expert, consultant or assistant who demonstrates technical competence as well as trustworthiness and reliability, and who agrees to sign a non-disclosure affidavit and be bound by the terms of a protective order; and
e. If the request is for SGI, Form SF-85, “Questionnaire for Non-Sensitive Positions,” Form FD-248 (fingerprint card), and a credit check release form completed by the individual who seeks access to SGI and each individual who will aid the requester in evaluating the SGI. For security reasons, Form SF-85 can only be submitted electronically, through a restricted-access database. To obtain online access to the form, the requester should contact the NRC's Office of Administration at 301-415-0320.
These forms will be used to initiate the background check, which includes fingerprinting as part of a criminal history records check.
Copies of these forms do not need to be included with the request letter to the Office of the Secretary, but the request letter should state that the forms and fees have been submitted as described above.
4. To avoid delays in processing requests for access to SGI, all forms should be reviewed for completeness and accuracy (including legibility) before submitting them to the NRC. Incomplete packages will be returned to the sender and will not be processed.
5. Based on an evaluation of the information submitted under items 2 and 3.a through 3.d, above, the NRC staff will determine within ten days of receipt of the written access request whether (1) there is a reasonable basis to believe the petitioner is likely to establish standing to participate in this NRC proceeding, and (2) there is a legitimate need for access to SUNSI or need to know the SGI requested. For SGI, the need to know determination is made based on whether the information requested is necessary (i.e., indispensable) for the proposed recipient to proffer and litigate a specific contention in this NRC proceeding
6. If standing and need to know SGI are shown, the NRC staff will further determine based upon completion of the background check whether the proposed recipient is trustworthy and reliable. The NRC staff will conduct (as necessary) an inspection to confirm that the recipient's information protection systems are sufficient to protect SGI from inadvertent release or disclosure. Recipients may opt to view SGI at the NRC's facility rather than establish their own SGI protection program to meet SGI protection requirements.
7. A request for access to SUNSI or SGI will be granted if:
a. The request has demonstrated that there is a reasonable basis to believe that a potential party is likely to establish standing to intervene or to otherwise participate as a party in this proceeding;
b. The proposed recipient of the information has demonstrated a need for SUNSI or a need to know for SGI, and that the proposed recipient of SGI is trustworthy and reliable;
c. The proposed recipient of the information has executed a Non-Disclosure Agreement or Affidavit and agrees to be bound by the terms of a Protective Order setting forth terms and conditions to prevent the unauthorized or inadvertent disclosure of SUNSI and/or SGI; and
d. The presiding officer has issued a protective order concerning the information or documents requested.
8. If the request for access to SUNSI or SGI is granted, the terms and conditions for access to sensitive unclassified information will be set forth in a draft protective order and affidavit of non-disclosure appended to a joint motion by the NRC staff, any other affected parties to this proceeding,
9. If the request for access to SUNSI is denied by the NRC staff or a request for access to SGI is denied by NRC staff either after a determination on standing and need to know or, later, after a determination on trustworthiness and reliability, the NRC staff shall briefly state the reasons for the denial. Before the Office of Administration makes an adverse determination regarding access, the proposed recipient must be provided an opportunity to correct or explain information. The requester may challenge the NRC staff's adverse determination with respect to access to SUNSI or with respect to standing or need to know for SGI by filing a challenge within five (5) days of receipt of that determination with (a) The presiding officer designated in this proceeding; (b) if no presiding officer has been appointed, the Chief Administrative Judge, or if he or she is unavailable, another administrative judge, or an administrative law judge with jurisdiction pursuant to § 2.318(a); or (c) if another officer has been designated to rule on information access issues, with that officer. In the same manner, an SGI requester may challenge an adverse determination on trustworthiness and reliability by filing a challenge within fifteen (15) days of receipt of that determination.
In the same manner, a party other than the requester may challenge an NRC staff determination granting access to SUNSI whose release would harm that party's interest independent of the proceeding. Such a challenge must be filed within five (5) days of the notification by the NRC staff of its grant of such a request.
If challenges to the NRC staff determinations are filed, these procedures give way to the normal process for litigating disputes concerning access to information. The availability of interlocutory review by the Commission of orders ruling on such NRC staff determinations (whether granting or denying access) is governed by 10 CFR 2.311.
10. The Commission expects that the NRC staff and presiding officers (and any other reviewing officers) will consider and resolve requests for access to SUNSI and/or SGI, and motions for protective orders, in a timely fashion in order to minimize any unnecessary delays in identifying those petitioners who have standing and who have propounded contentions meeting the specificity and basis requirements in 10 CFR Part 2.
Attachment 1 to this Order summarizes the general target schedule for processing and resolving requests under these procedures.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Weeks of June 9, 16, 23, 30, July 7, 14, 2008.
Commissioners' Conference Room, 11555 Rockville Pike, Rockville, Maryland.
Public and Closed.
There are no meetings scheduled for the Week of June 9, 2008.
This meeting will be webcast live at the Web address—
This meeting will be webcast live at the Web address—
There are no meetings scheduled for the week of July 7, 2008.
This meeting will be webcast live at the Web address—
*The schedule for Commission meetings is subject to change on short notice. To verify the status of meetings, call (recording)—(301) 415-1292. Contact person for more information: Michelle Schroll, (301) 415-1662.
By a vote of 4-0 on June 2, 2008, the Commission determined pursuant to U.S.C. 552b(e) and § 9.107(a) of the Commission's rules that “Affirmation of U.S. Department of Energy (High-Level Waste Repository Pre-Application Matters, Advisory Pre-License Application Presiding Officer (PAPO) Board), Nevada Motion to Disqualify Department of Energy Counsel” be held June 5, 2008, and on less than one week's notice to the public.
The NRC Commission Meeting Schedule can be found on the Internet at:
The NRC provides reasonable accommodation to individuals with disabilities where appropriate. If you need a reasonable accommodation to participate in these public meetings, or need this meeting notice or the transcript or other information from the public meetings in another format (e.g. braille, large print), please notify the NRC's Disability Program Coordinator, Rohn Brown, at 301-492-2279, TDD: 301-415-2100, or by e-mail at
This notice is distributed by mail to several hundred subscribers; if you no longer wish to receive it, or would like to be added to the distribution, please contact the Office of the Secretary, Washington, DC 20555 (301-415-1969). In addition, distribution of this meeting notice over the Internet system is available. If you are interested in receiving this Commission meeting schedule electronically, please send an electronic message to
U.S. Nuclear Regulatory Commission.
Withdrawal of Regulatory Guide 1.139.
Stephen C. O'Connor, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone 301-415-2169 or e-mail
The U.S. Nuclear Regulatory Commission (NRC) is withdrawing Regulatory Guide 1.139, “Guidance for Residual Heat Removal,” which the agency issued for comment in May 1978. Regulatory Guide 1.139 proposed a method acceptable to the NRC staff for complying with General Design Criterion (GDC) 34, “Residual Heat Removal,” of Appendix A, “General Design Criteria for Nuclear Power Plants,” to Title 10, Part 50, “Domestic Licensing of Production and Utilization Facilities,” of the Code of Federal Regulations (10 CFR Part 50) with regard to actions taken in the control room (see GDC 19, “Control Room”) to remove decay heat and sensible heat after a reactor shutdown. The NRC is withdrawing Regulatory Guide 1.139, “Guidance for Residual Heat Removal,” which the agency issued for comment in May 1978. Regulatory Guide 1.139 proposed a method acceptable to the NRC staff for complying with General Design Criterion (GDC) 34, “Residual Heat Removal,” of Appendix A, “General Design Criteria for Nuclear Power Plants,” to Title 10, Part 50, “Domestic Licensing of Production and Utilization Facilities,” of the Code of Federal Regulations (10 CFR Part 50) with regard to actions taken in the control room (see GDC 19, “Control Room”) to remove decay heat and sensible heat after a reactor shutdown. The NRC is withdrawing Regulatory Guide 1.139 because it describes an overly conservative and prescriptive method for complying with the aforementioned criteria. Licensees for existing nuclear power plants have proposed alternative ways for complying with these criteria that the NRC staff has found to be acceptable in individual power plants based on case by case reviews. These alternatives were developed by licensees without guidance from the NRC. At this time, it also appears unlikely that future applicants would need additional guidance from the NRC with regard to how to comply with these criteria. As such, Regulatory Guide 1.139 no longer provides useful information to licensees or applicants and additional guidance in this area is unnecessary.
The withdrawal of Regulatory Guide 1.139 does not, in and of itself, alter any prior or existing licensing commitments based on its use. The guidance provided in this regulatory guide is no longer necessary. Regulatory guides may be withdrawn when their guidance is superseded by congressional action, the methods or techniques described in the regulatory guide no longer describe a preferred approach, or the regulatory guide does not provide useful information.
Regulatory guides are available for inspection or downloading through the NRC's public Web site under “Regulatory Guides” in the NRC's Electronic Reading Room at
Regulatory guides are not copyrighted, and NRC approval is not required to reproduce them.
For the Nuclear Regulatory Commission.
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 17Ad-17 (17 CFR 240.17Ad-17) requires approximately 608 registered transfer agents to conduct searches using third party database vendors to attempt to locate lost securityholders. These recordkeeping requirements assist the Commission and other regulatory agencies with monitoring transfer agents and ensuring compliance with the rule.
The staff estimates that the average number of hours necessary for each transfer agent to comply with Rule 17Ad-17 is five hours annually. The total burden is approximately 2,432 hours annually for all transfer agents. The cost of compliance for each individual transfer agent depends on the number of lost accounts for which it is responsible. Based on information received from transfer agents, we estimate that the annual cost industry wide is $3.3 million.
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
Comments should be directed to: R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, C/O Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312 or send an e-mail to:
Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94-409, that the Securities and Exchange Commission will hold an Open Meeting on June 11, 2008 at 10 a.m., in the Auditorium, Room L-002.
The subject matter of the Open Meeting will be: The Commission will consider whether to propose rules relating to Nationally Recognized Statistical Rating Organizations and credit ratings.
At times, changes in Commission priorities require alterations in the scheduling of meeting items.
For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400.
On May 23, 2006, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) filed with the Securities and Exchange Commission (“Commission), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”)
The Proposal was published for comment in the
The Commission received 32 comments regarding the Petition. These comment letters,
Under Section 19 of the Exchange Act, the Commission must approve a proposed rule change related to setting fees for market data if it finds that the proposed rule change is consistent with the requirements of the Exchange Act and the rules thereunder. The attached Draft Order describes the relevant Exchange Act provisions and rules.
The Proposal involves assessing fees for non-core market data. Core data is the best-priced quotations and comprehensive last sale reports of all markets that the Commission requires a central processor to consolidate and distribute to the public pursuant to joint-SRO plans. In contrast, individual exchanges and other market participants distribute non-core data voluntarily. The Commission believes it is able to incorporate the existence of competitive forces in its determination of whether an exchange's proposal to distribute non-core data meets the standards of the Exchange Act provisions and rules. This approach follows the clear intent of Congress in adopting section 11A of the Exchange Act that, whenever possible, competitive forces should dictate the services and practices that constitute the U.S. national market system for trading equity securities.
This market-based approach to non-core data has two parts. The first is to ask whether the exchange was subject to significant competitive forces in setting the terms of its proposal for non-core data, including the level of any fees. If an exchange was subject to significant competitive forces in setting the terms of a proposal, the Commission would approve the proposal unless it determines that there is a substantial countervailing basis to find that the terms nevertheless fail to meet an applicable requirement of the Exchange Act or the rules thereunder. If, however, the exchange was not subject to significant competitive forces in setting the terms of a proposal for non-core data, the Commission would require the exchange to provide a substantial basis, other than competitive forces, in its proposed rule change demonstrating that the terms of the proposal are equitable, fair, reasonable, and not unreasonably discriminatory.
The Commission believes that, when possible, reliance on competitive forces is the most appropriate and effective means to assess whether terms for the distribution of non-core data are equitable, fair and reasonable, and not unreasonably discriminatory. If competitive forces are operative, the self-interest of the exchanges themselves
As discussed in the attached Draft Order, the Commission believes that at least two broad types of significant competitive forces applied to NYSE Arca in setting the terms of its Proposal: (1) NYSE Arca's compelling need to attract order flow from market participants; and (2) the availability to market participants of alternatives to purchasing its data. The Commission requests comment on whether NYSE Arca was subject to competitive forces in setting the terms of its Proposal, including the level of fees and the different rates for professional and non-professional subscribers.
The Draft Order states that broker-dealers are not required to obtain depth-of-book order data, including the NYSE Arca data, to meet their duty of best execution and notes the established principles of best execution that support this statement.
Interested persons are invited to submit written data, views, and arguments concerning any aspect of the Draft Order. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an e-mail to
• Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
By the Commission.
On May 23, 2006, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”)
The Commission has considered the Petition and the comments submitted on the Petition as well as the comments submitted on the proposal. For the reason described below, it is setting the earlier action taken by delegated authority and approving the Proposal directly.
The Commission's Rules of Practice set forth procedures for the review of actions made pursuant to delegated authority. Rule 431(b)(2) provides that the Commission, in deciding whether to accept or decline a discretionary review, will consider the factors set forth in Rule 411(b)(2). One of these factors is whether an action pursuant to delegated authority embodies a decision of law or policy that is important and that the Commission should review.
The Petitioner and commenters raised a number of important issues that the Commission believes it should address directly at this time. In particular, section V below addresses issues related to the nature of the Commission's review of proposed rule changes for the distribution of “non-core” market data, which includes the NYSE Arca data that is the subject of the Proposal. Individual exchanges and other market participants distribute non-core data independently. Non-core data should be contrasted with “core” data—the best-priced quotations and last sale information of all markets in U.S.-listed equities that Commission rules require to be consolidated and distributed to the public by a single central processor.
Price transparency is critically important to the efficient functioning of the equity markets. In 2006, the core data feeds reported prices for more than $39.4
In December 2007, NYSE Arca executed a 15.4% share of trading in U.S.-listed equities.
In 2005, however, the Commission stated its intention to apply a market-based approach that relies primarily on competitive forces to determine the terms on which non-core data is made available to investors.
The Petitioner and commenters discussed and recommended solutions for a wide range of market data issues that were beyond the scope of the Proposal. The Petitioner particularly called attention to the data needs of users of advertiser-supported Internet Web sites, many of whom are individual retail investors. In this regard, the Commission recognizes that exchanges have responded by developing innovative new data products specifically designed to meet the reference data needs and economic circumstances of these Internet users.
Some commenters also suggested that, pending a comprehensive resolution of all market data issues, the Commission impose a moratorium on all proposed rule changes related to market data, including the Proposal. The Commission recognizes the importance of many of the issues raised by commenters relating to core data that are beyond the scope of the Proposal. It is continuing to consider these issues, and others, as part of its ongoing review of SRO structure, governance, and transparency.
Through NYSE Arca, LLC, the equities trading facility of NYSE Arca Equities, Inc., the Exchange makes available on a real-time basis ArcaBook
The Exchange's proposal would establish fees for the receipt and use of NYSE Arca Data. Specifically, the Exchange proposes to establish a $750 per month access fee for access to the Exchange's data feeds that carry the NYSE Arca Data. In addition, the Exchange proposes to establish professional and non-professional device fees for the NYSE Arca Data.
The Exchange also proposes a maximum monthly payment for device fees paid by any broker-dealer for non-professional subscribers that maintain brokerage accounts with the broker-dealer.
Lastly, the Exchange proposes to waive the device fees for ArcaBook data during the duration of the billable month in which a subscriber first gains access to the data.
The Commission received four comments from three commenters regarding the Proposal after it was published for comment.
The comments submitted in connection with the Proposal and the Petition are summarized in this section. NYSE Arca's responses are summarized in section V below.
Several commenters seeking a reversal of the staff's approval of the Proposal by delegated authority believed that recent regulatory and market structure developments warrant a broader review of market data fees and of the Commission's procedures for reviewing and evaluating market data proposals.
In light of the significance and complexity of the issues raised, several commenters asked the Commission not only to reverse the staff's action, but also to impose a moratorium on the approval or processing of market data proposals while the Commission conducts a broader review of the issues associated with market data, including “the underlying issues of market structure, market power, transparency, and ease of dissemination and analysis of market data.”
Several commenters argued that the staff erred in approving the Proposal because NYSE Arca did not provide a cost-based justification for the Proposal's market data fees or other evidence to demonstrate that its proposed fees meet the applicable Exchange Act standards.
Several commenters argued that the Commission itself has recognized the need for a cost-based justification of market data fees.
[T]he fees charged by a monopolistic provider of a service (such as the exclusive processors of market information) need to be tied to some type of cost-based standard in order to preclude excessive profits if fees are too high or underfunding or subsidization if fees are too low. The Commission therefore believes that the total amount of market information revenues should remain reasonably related to the cost of market information.
Similarly, a commenter stated that the Commission acknowledged in its Concept Release Concerning Self-Regulation that the amount of market data revenues should be reasonably related to the cost of market information.
The commenters believed, further, that the costs attributable to market data should be limited to the cost of collecting, consolidating, and distributing the data,
One commenter argued that NYSE Arca's proposed fees are not an “equitable allocation” of costs among its users and are unreasonably discriminatory because the fees are based on the number of people who view the data. Thus, a broker-dealer with many customers seeking to view market data pays considerably more for market data than an institution or algorithmic trader that pays only for the data link to its computer systems.
One commenter argued that the Proposal fails to satisfy the requirements of Exchange Act Rule 19b-4 and Form 19b-4, because, among other things, the Proposal does not: (1) Explain why NYSE Arca must charge for data that it previously provided free of charge; (2) address the change in circumstances caused by the NYSE's conversion from a member-owned, not-for-profit entity to a shareholder-owned, for-profit entity; (3) address the effect of the fee on retail investors, whom the commenter believes will be denied access to NYSE Arca's data as a result of the fees; (4) explain how making available a faster single-market data feed at a high price, while most investors must rely on slower consolidated market data products, is consistent with the mandates under the Exchange Act for equal access to and transparency in market data; and (5) include the contract terms governing access to and use of NYSE Arca's data or address the administrative costs and burdens that the contract terms impose.
Commenters also raised more general concerns regarding the Exchange Act Rule 19b-4 rule filing process as it applies to proposed rule changes relating to market data. In light of the significant policy issues that market data proposals raise, commenters questioned whether such proposals should be eligible to be effective upon filing pursuant to Exchange Act Rule 19b-4(f)(6).
One commenter maintained that because single-market depth-of-book data products have significant advantages over consolidated top-of-book products in terms of both speed and the depth of interest displayed, many broker-dealers believe that it is prudent to purchase single-market depth-of-book data to satisfy their best execution and Regulation NMS order routing obligations.
One commenter argued that the central processors that distribute consolidated data have little incentive to invest in modernizing their operations.
Another commenter believed that depth-of-book information should be considered basic information for retail investors as well as professional investors and that one goal of the National Market System should be to assure that “all investors * * * whether professional or non-professional * * * have equal access to the same quality information, at a reasonable price, and at the same time.”
Commenters argued that there are no effective competitive or market forces that limit what an exchange may charge for its depth-of-book data.
Other commenters believed that an exchange has a monopoly position as the exclusive processor of its proprietary data that “creates a serious potential for abusive pricing practices,”
In addition, several commenters believed that the transformation of most U.S. securities exchanges from not-for-profit membership organizations to for-profit entities has eliminated an important constraint on market data fees as the for-profit exchanges seek to maximize value for their shareholders.
With respect to the increase in the NYSE Group's market data revenues following its merger with Archipelago, one commenter stated that “NYSE Group's reported market data segment revenues totaled $57.5 million in the third quarter of 2006: up 33.7% from the same three month period in 2005.”
To address the issues raised by market data fees, the commenters suggested several potential solutions. One commenter recommended that the Commission adopt a specialized market data form for market data rule proposals that would require a detailed justification of proposed fee changes by the SROs.
The commenter also believed that the contract terms governing the use of market data should be included in market data rule filings and subject to notice and comment.
The commenters also suggested structural changes to address market data issues, including requiring exchanges to place their market data operations in a separate subsidiary and to make their raw market data available to third parties on the same terms as they make the data available to their market data subsidiary and to the independent central processor.
Finally, the commenters suggested that the Commission increase the quality and depth of the required consolidated quotation information to allow retail investors to determine the prices at which their orders will be executed and to observe pricing movements in the market.
Several commenters who supported the approval of the Proposal by delegated authority argued that the staff applied the correct legal standard
Several commenters rejected the assertion that a cost-based standard is the correct standard for the Commission to apply in reviewing market data fee proposals.
One commenter disagreed with the assertion that an exchange possesses monopoly pricing power with respect to its proprietary data products. It contended that assertions concerning an exchange's monopoly pricing power “ignore * * * market reality and market discipline. If any exchange attempts to charge excessive fees, there simply will not be buyers for such products.”
The commenters emphasized that the exchanges face significant competition in their efforts to attract order flow:
Exchanges compete not only with one another, but also with broker-dealers that match customer orders within their own systems and also with a proliferation of alternative trading systems (“ATSs”) and electronic communications networks (“ECNs”) that the Commission has also nurtured and authorized to execute trades in any listed issue. As a result, market share of trading fluctuates among execution facilities based on their ability to service the end customer. The execution business is highly competitive and exhibits none of the characteristics of a monopoly as suggested in the NetCoalition Petition.
Similarly, another commenter stated that “the market for proprietary data products is currently competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary products themselves.”
In its responses to commenters on the Proposal, the Exchange argued that the Proposal establishes “a framework for distributing data in which all vendors and end users are permitted to receive and use the Exchange's market data on equal, non-discriminatory terms.”
With respect to its proposed fees, the Exchange noted, further, that it had invested significantly in its ArcaBook products, including making technological enhancements that allowed the Exchange to expand capacity and improve processing efficiency as message traffic increased, thereby reducing the latency associated with the distribution of ArcaBook data.
The Exchange stated that it proposes to use the CTA and CQ Plan contracts to govern the distribution of NYSE Arca Data and that it was not amending the terms of these existing contracts or imposing restrictions on the use or display of its data beyond those that are currently set forth in the contracts.
In its response to commenters on the Petition, the Exchange argued that recent market-based solutions have mooted the concerns expressed in the Petition regarding the affordability of market data for internet portals.
The Exchange also reiterated the argument that the proposed market data fees meet the statutory standards for such fees under the Exchange Act.
The Exchange argued that the proposed market data fees are not “unreasonably discriminatory” since “all professional subscribers are subject to the same fees and all nonprofessional subscribers are subject to the same fees.”
The Exchange asserted that the fees are fair and reasonable because: (1) “They compare favorably to the level of fees that other U.S. markets and the CTA and Nasdaq/UTP Plans impose for comparable products”; (2) “the quantity and quality of data NYSE Arca includes in Arca Book compares favorably to the data that other markets include in their market data products”; and (3) “the fees will enable NYSE Arca to recover the resources that NYSE Arca devoted to the technology necessary to produce Arca Book data.”
The Exchange also rejected the Petitioner's assertion that the Exchange acted “arbitrarily or capriciously” by using a comparison of similar market data fees in setting the level of the proposed fees.
The Exchange also rejected the Petitioner's assertion that all proposed market data fees must be subjected to a rigorous cost-based analysis.
The Exchange also disputed Petitioner's argument that the Exchange's proposed market data fees amount to an exercise of monopoly pricing power.
As a result of all of the choices and discretion that are available to brokers, the displayed depth-of-book data of one trading center does not provide a complete picture of the full market for the security. It displays only a portion of all interest in the security. A brokerage firm has potentially dozens of different information sources to choose from
The Exchange also addressed other concerns raised by commenters in connection with the Petition. First, the Exchange indicated that it has no intention of retroactively imposing the proposed market data fees.
The Commission finds that the Proposal is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange. In particular, it is consistent with section 6(b)(4) of the Exchange Act,
The Commission also finds that the Proposal is consistent with the provisions of section 6(b)(8) of the Exchange Act,
The standards in Section 6 of the Exchange Act and Rule 603 of Regulation NMS do not differentiate between types of data and therefore apply to exchange proposals to distribute both core data and non-core data. Core data is the best-priced quotations and comprehensive last sale reports of all markets that the Commission, pursuant to Rule 603(b), requires a central processor to consolidate and distribute to the public pursuant to joint-SRO plans.
The requirements for distributing core data to the public were first established in the 1970s as part of the creation of the national market system for equity securities.
Pursuant to this Exchange Act authority, the Commission has required the SROs to participate in three joint-industry plans (“Plans”) pursuant to which core data is distributed to the public.
The Plans promote the wide availability of core market data.
For many years, the core data distributed through the Networks overwhelmingly dominated the field of equity market data in the U.S. With the initiation of decimal trading in 2001, however, the value to market participants of non-core data, particularly depth-of-book order data, increased. An exchange's depth-of-book order data includes displayed trading interest at prices
In 2005, the Commission adopted new rules that, among other things, addressed market data.
The Commission ultimately decided that the consolidation model should be retained for core data because of the benefit it afforded to investors, namely “helping them to assess quoted prices at the time they place an order and to evaluate the best execution of their orders against such prices by obtaining data from a single source that is highly reliable and comprehensive.”
With respect to the distribution of non-core data, however, the Commission decided to maintain a deconsolidation model that allows greater flexibility for market forces to determine data products and fees.
Some commenters on the Proposal and the Petition recommended fundamental changes in the regulatory treatment of non-core data in general and depth-of-book quotations in particular.
The Exchange Act and its legislative history strongly support the Commission's reliance on competition, whenever possible, in meeting its regulatory responsibilities for overseeing the SROs and the national market system. Indeed, competition among multiple markets and market participants trading the same products is the hallmark of the national market system.
In 1936, this Committee pointed out that a major responsibility of the SEC in the administration of the securities laws is to “create a fair field of competition.” This responsibility continues today. The bill would more clearly identify this responsibility and clarify and strengthen the SEC's authority to carry it out. The objective would be to enhance competition and to allow economic forces, interacting within a fair regulatory field, to arrive at appropriate variations in practices and services.
In addition, Congress explicitly noted the importance of relying on competition in overseeing the activities of the SROs:
S. 249 would give the SEC broad authority not only to oversee the general development of a national market system but also to insure that the ancillary programs of the self-regulatory organizations and their affiliates are consistent with the best interests of the securities industry and the investing public. * * * This is not to suggest that under S. 249 the SEC would have either the responsibility or the power to operate as an `economic czar' for the development of a national market system. Quite the contrary, for a fundamental premise of the bill is that the initiative for the development of the facilities of a national market system must come from private interests and will depend on the vigor of competition within the securities industry as broadly defined.
With respect to market information, Congress again expressed its preference for the Commission to rely on competition, but noted the possibility that competition might not be sufficient in the specific context of core data—the central facilities for the required distribution of consolidated data to the public:
It is the intent of the conferees that the national market system evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed. The conferees expect, however, that in those situations where competition may not be sufficient, such as in the creation of a
The Commission's approach to core data and non-core data follows this Congressional intent exactly. With respect to the systems for the required distribution of consolidated core data, the Commission retained a regulatory approach that uses joint-industry plans and a central processor designed to assure access to the best quotations and most recent last sale information that is so vital to investors. With respect to non-core data, in contrast, the Commission has maintained a market-based approach that leaves a much fuller opportunity for competitive forces to work.
This market-based approach to non-core data has two parts. The first is to ask whether the exchange was subject to significant competitive forces in setting the terms of its proposal for non-core data, including the level of any fees. If an exchange was subject to significant competitive forces in setting the terms of a proposal, the Commission will approve the proposal unless it determines that there is a substantial countervailing basis to find that the terms nevertheless fail to meet an applicable requirement of the Exchange Act or the rules thereunder. If, however, the exchange was not subject to significant competitive forces in setting the terms of a proposal for non-core data, the Commission will require the exchange to provide a substantial basis, other than competitive forces, in its proposed rule change demonstrating that the terms of the proposal are equitable, fair, reasonable, and not unreasonably discriminatory.
As discussed above, the Commission believes that, when possible, reliance on competitive forces is the most appropriate and effective means to assess whether terms for the distribution of non-core data are equitable, fair and reasonable, and not unreasonably discriminatory. If competitive forces are operative, the self-interest of the exchanges themselves will work powerfully to constrain unreasonable or unfair behavior. As discussed further below, when an exchange is subject to competitive forces in its distribution of non-core data, many market participants would be unlikely to purchase the exchange's data products if it sets fees that are inequitable, unfair, unreasonable, or unreasonably discriminatory. As a result, competitive forces generally will constrain an exchange in setting fees for non-core data because it should recognize that its own profits will suffer if it attempts to act unreasonably or unfairly. For example, an exchange's attempt to impose unreasonably or unfairly discriminatory fees on a certain category of customers would likely be counter-productive for the exchange because, in a competitive environment, such customers generally would be able respond by using alternatives to the exchange's data.
Even when competitive forces are operative, however, the Commission will continue to review exchange proposals for distributing non-core data to assess whether there is a substantial countervailing basis for determining that a proposal is inconsistent with the Exchange Act.
The terms of an exchange's proposed rule change to distribute market data for which it is an exclusive processor must, among other things, provide for an equitable allocation of reasonable fees under section 6(b)(4), not be designed to permit unfair discrimination under section 6(b)(5), be fair and reasonable under Rule 603(a)(1), and not be unreasonably discriminatory under Rule 603(a)(2). Because NYSE Arca is
At least two broad types of significant competitive forces applied to NYSE Arca in setting the terms of its Proposal to distribute the ArcaBook data: (1) NYSE Arca's compelling need to attract order flow from market participants; and (2) the availability to market participants of alternatives to purchasing the ArcaBook data.
Attracting order flow is the core competitive concern of any equity exchange—it is the “without which, not” of an exchange's competitive success. If an exchange cannot attract orders, it will not be able to execute transactions. If it cannot execute transactions, it will not generate transaction revenue. If an exchange cannot attract orders or execute transactions, it will not have market data to distribute, for a fee or otherwise, and will not earn market data revenue.
In the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution. They include, of course, any of the nine national securities exchanges that currently trade equities, but also include a wide variety of non-exchange trading venues: (1) Electronic communication networks (“ECNs”) that display their quotes directly in the core data stream by participating in FINRA's Alternative Display Facility (“ADF”) or displaying their quotations through an exchange; (2) alternative trading systems (“ATSs”) that offer a wide variety of order execution strategies, including block crossing services for institutions that wish to trade anonymously in large size and midpoint matching services for the execution of smaller orders; and (3) securities firms that primarily trade as principal with their customer order flow.
NYSE Arca must compete with all of these different trading venues to attract order flow, and the competition is fierce. For example, in its response to the commenters, NYSE Arca notes that its share of trading in 2005 was 3.6% in Network A stocks, 23% in Network C stocks, and 30% in Network B stocks.
Given the competitive pressures that currently characterize the U.S. equity markets, no exchange can afford to take its market share percentages for granted—they can change significantly over time, either up or down.
Table 1 below provides a useful recent snapshot of the state of competition in the U.S. equity markets in the month of December 2007:
Perhaps the most notable item of information from Table 1 is that non-exchange trading venues collectively have a larger share of trading than any single exchange. Much of this volume is attributable to ECNs such as BATS and Direct Edge, noted above. In addition, the proliferation of non-exchange pools of liquidity has been a significant development in the U.S. equity markets.
The market share percentages in Table 1 strongly indicate that NYSE Arca must compete vigorously for order flow to maintain its share of trading volume. As discussed below, this compelling need
Some commenters asserted that an exchange's distribution of depth-of-book order data is not affected by its need to attract order flow.
For example, orders can be divided into two broad types—those that seek to offer liquidity to the market at a particular price (non-marketable orders) and those that seek an immediate execution by taking the offered liquidity (marketable orders). The wide distribution of an exchange's market data, including depth-of-book order data, to many market participants is an important factor in attracting both types of orders. Depth-of-book order data consists of non-marketable orders that a prospective buyer or seller has chosen to display. The primary reason for a prospective buyer or seller to display its trading interest at a particular price, and thereby offer a free option to all market participants at that price, is to attract contra trading interest and a fast execution. The extent to which a displayed non-marketable order attracts contra interest will depend greatly on the wide distribution of the displayed order to many market participants. If only a limited number of market participants receive an exchange's depth-of-book order data, it reduces the chance of an execution for those who display non-marketable orders on that exchange. Limited distribution of displayed orders thereby reduces the ability of the exchange to attract such orders. Moreover, by failing to secure wide distribution of its displayed orders, the exchange will reduce its ability to attract marketable orders seeking to take the displayed liquidity. In other words, limited distribution of depth-of-book order data will limit an exchange's ability to attract both non-marketable and marketable orders. Consequently, an exchange generally will have strong competitive reasons to price its depth-of-book order data so that it will be distributed widely to those most likely to use it to trade.
A notable example of the close connection between a trading venue's distribution of order data and its ability to attract order flow was provided by the Island ECN in 2002. To avoid the application of certain regulatory requirements, Island ceased displaying its order book to the public in three very active exchange-traded funds (“ETFs”) in which it enjoyed a substantial market share. After going “dark,” Island's market share in the three ETFs dropped by 50%.
This competitive pressure to attract order flow is likely what led NYSE Arca, and its predecessor corporation, to distribute its depth-of-book order data without charge in the past.
In addition to the need to attract order flow, the availability of alternatives to an exchange's depth-of-book order data significantly affects the terms on which an exchange distributes such data.
In setting the fees for its depth-of-book order data, an exchange must consider the extent to which sophisticated traders would choose one or more alternatives instead of purchasing the exchange's data.
For more specific information concerning depth, market participants can choose among the depth-of-book order products offered by the various exchanges and ECNs.
Market depth also can be assessed with tools other than depth-of-book order data. For example, market participants can “ping” the various markets by routing oversized marketable limit orders to access an exchange's total liquidity available at an order's limit price or better.
Another alternative to depth-of-book order data products offered by exchanges is the threat of independent distribution of order data by securities firms and data vendors.
The Commission recognizes that the depth-of-book order data for a particular exchange may offer advantages over the alternatives for assessing market depth. The relevant issue, however, is whether the availability of these alternatives imposes significant competitive restraints on an exchange in setting the
In sum, there are a variety of alternative sources of information that impose significant competitive pressures on an exchange in setting fees for its depth-of-book order data. The Commission believes that the availability of these alternatives, as well as NYSE Arca's compelling need to attract order flow, imposed significant competitive pressure on NYSE Arca to act equitably, fairly, and reasonably in setting the terms of the Proposal.
Some commenters suggested that exchanges are impervious to competitive forces in distributing their order data because Exchange Act rules require broker-dealers to provide their orders to an exchange, and that exchanges therefore enjoy a regulatory monopoly.
Some commenters asserted that exchanges act as monopolies in distributing depth-of-book order data because they are the exclusive processors of such data, as defined in section 3(a)(22)(B) of the Exchange Act. Many businesses, however, are the exclusive sources of their own products, but this exclusivity does not mean that a business has monopoly pricing power when selling its product and is impervious to competitive pressures. The particular circumstances of the business and its product must be examined. As discussed above, the U.S. exchanges are subject to significant competitive forces in setting the terms for their depth-of-book order products, including the need to attract order flow and the availability of alternatives to their depth-of-book order products. Consequently, NYSE Arca does not have monopoly pricing power for ArcaBook data merely because it meets the statutory definition of an exclusive processor of the data.
Commenters cited a decision of the U.K. competition authorities concerning proposed acquisitions of the London Stock Exchange plc (“LSE”) for the proposition that an exchange is a monopolist of its proprietary market information.
In addition, the existence of significant competitive forces applicable to NYSE Arca renders inapposite the citations of commenters to statements in Exchange Act legislative history and Commission releases regarding monopoly data distribution. Such statements were made in the context of the central processors of core data for the Networks, which in fact have monopoly pricing power for such mandated data. Central processors of core data therefore are in a very different economic and legal position than NYSE Arca as exclusive processor for its depth-of-book order data.
For example, commenters cited a passage from the legislative history of the 1975 amendments to the Exchange Act for the proposition that any exclusive processor must be considered a monopoly, but this passage applies only to the central processors of consolidated core data that Rule 603(b) requires to be consolidated:
Despite the diversity of views with respect to the practical details of a national market system, all current proposals appear to assume there will be an exclusive processor or service bureau
These Congressional concerns apply to a central processor that has no competitors in the distribution of data that must be consolidated from all the markets. They do not apply to the independent distribution of non-core data by an individual exchange that is subject to significant competitive forces.
Similarly, commenters cited a passage from the Commission's Market Information Concept Release for the proposition that an exchange must submit cost data to justify a proposed fee for the exchange's depth-of-book order data.
Moreover, the Commission did not propose, much less adopt, a “strictly cost-of-service (or ‘ratemaking') approach to its review of market information fees in every case,” noting that “[s]uch an inflexible standard, although unavoidable in some contexts, can entail severe practical difficulties.”
Some commenters suggested that depth-of-book order data has become so important since the initiation of decimal trading that broker-dealers now are effectively required to purchase the exchanges' depth-of-book data products.
Commenters also asserted that an exchange's depth-of-book order data may be necessary for a broker-dealer to meet its duty of best execution to its customers.
As discussed in the preceding section, NYSE Arca was subject to significant competitive forces in setting the terms of the Proposal. The Commission therefore will approve the Proposal in the absence of a substantial countervailing basis to find that its terms nevertheless fail to meet an applicable requirement of the Exchange Act or the rules thereunder.
First, the proposed fees for ArcaBook data will apply equally to all professional subscribers and equally to all non-professional subscribers (subject only to the maximum monthly payment for device fees paid by any broker-dealer for non-professional subscribers). The fees therefore do not unreasonably discriminate among types of subscribers, such as by favoring participants in the NYSE Arca market or penalizing participants in other markets.
Second, the proposed fees for the ArcaBook data are substantially less than those charged by other exchanges for depth-of-book order data. For example, the NYSE charges a $60 per month terminal fee for depth-of-book order data in NYSE-listed stocks. Similarly, Nasdaq charges a $76 per month device fee for professional subscribers to depth-of-book order data on all NMS stocks. By comparison, the NYSE Arca fee is 75% less than the NYSE fee for data in NYSE-listed stocks, and more than 60% less than the Nasdaq fee for data in all NMS stocks. It is reasonable to conclude that competitive pressures led NYSE Arca to set a substantially lower fee for its depth-of-book order data than the fees charged by other markets. If, in contrast, NYSE Arca were a monopoly data provider impervious to competitive pressures, there would be little reason for it to set significantly lower fees than other exchanges.
Third, NYSE Arca projects that the total revenues generated by the fee for ArcaBook data initially will amount to less than $8 million per year,
One commenter, although agreeing that exchange transaction fees are subject to intense competitive pressure, asserted that such “intermarket competition does not constrain the exchanges” pricing of market data, but it actually creates an incentive for the exchanges to increase their prices for data.”
Several commenters expressed concern that the Proposal would adversely affect market transparency.
Assuring the wide availability of quotation and trade information is a primary objective of the national market system.
One of the most important functions that the Commission can perform for retail investors is to ensure that they have access to the information they need to protect and further their own interests. Communications technology now has progressed to the point that broad access to real-time market information should be an affordable option for most retail investors, as it long has been for professional investors. This information could greatly expand the ability of retail investors to monitor and control their own securities transactions, including the quality of execution of their transactions by broker-dealers. The Commission intends to assure that market information fees applicable to retail investors do not restrict their access to market information, in terms of both number of subscribers and quality of service. In addition, such fees must not be unreasonably discriminatory when compared with the fees charged to professional users of market information.
The Commission appreciates the efforts of the Petitioner and other commenters in advocating the particular needs of users of advertiser-supported Internet Web sites, a great many of whom are likely to be individual retail investors. The Commission believes that the exchanges and other entities that distribute securities market information will find business-justified ways to attend to the needs of individual investors and, as markets evolve, develop innovative products that meet the needs of these users and are affordable in light of the users' economic circumstances. In this respect, it recognizes the exchange proposals to distribute new types of data products specifically designed to meet the needs of Internet users for reference data on equity prices.
The Commission does not believe, however, that the Proposal will significantly detract from transparency in the equity markets. Of course, any increase in fees can lower the marginal demand for a product. To assess an effect on transparency, however, the relevant question is whether the fees for a particular product deter a significant number of market participants from obtaining the market data they need because the fees are not affordable given their economic circumstances.
With respect to professional data users (
Two commenters stated that the average retail order is 1000 or more shares and is larger than the size typically reflected in the consolidated quotation in core data.
Some commenters suggested that the core data provided by the Networks disadvantaged retail investors because it was not distributed as fast as the depth-of-book order data obtained directly from an exchange.
Moreover, outside of trading contexts, the ArcaBook data will be far broader than individual investors typically need. The ArcaBook data encompasses all quotations for a stock at many prices that are well away from the current best prices. For retail investors that are not trading but simply need a useful reference price to track the value of their portfolio and monitor the market, the enormous volume of data regarding trading interest outside the best prices is not needed.
Some commenters asserted that the Proposal failed to satisfy the requirements of Exchange Act Rule 19b-4 and Form 19b-4.
One commenter argued that NYSE Arca should have addressed a number of specific points that it raised in opposition to the Proposal, such as including a statement of costs to produce the ArcaBook data.
Finally, commenters raised concerns regarding the contract terms that will govern the distribution of ArcaBook data.
NYSE Arca has stated, however, that it plans to use the vendor and subscriber agreements used by CTA and CQ Plan Participants (the “CTA/CQ Vendor and Subscriber Agreements”) to govern the distribution of NYSE Arca Data. According to the Exchange, the CTA/CQ Vendor and Subscriber Agreements “are drafted as generic one-size-fits-all agreements and explicitly apply to the receipt and use of certain market data that individual exchanges make available in the same way that they apply to data made available under the CTA and CQ Plans,” and the contracts need not be amended to cause them to govern the receipt and use of the Exchange's data.
The Commission believes that the Exchange may use the CTA/CQ Vendor and Subscriber Agreements to govern the distribution of NYSE Arca Data.
[The Exchange] chose to fold itself into an existing contract and administration system rather than to burden clients with another set of market data agreements and another market data reporting system, both of which would require clients to commit additional legal and technical resources to support the Exchange's data products.
In addition, the Exchange has represented that it is “not imposing restrictions on the use or display of its data beyond those set forth” in the existing CTA/CQ Vendor and Subscriber Agreements.
A commenter also stated that the Exchange has not recognized the rights of a broker or dealer, established in Regulation NMS, to distribute its order information, subject to the condition that it does so on terms that are fair and reasonable and not unreasonably discriminatory.
A commenter also stated that the Exchange has failed to consider the administrative burdens that the proposal would impose, including the need for broker-dealers to develop system controls to track ArcaBook access and usage.
It is therefore ordered that the earlier action taken by delegated authority, Securities Exchange Act Release No. 54597 (October 12, 2006) 71 FR 62029 (October 20, 2006), is set aside and, pursuant to section 19(b)(2) of the Exchange Act, the Proposal (SR-NYSEArca-2006-21) is approved.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act” or “SEA”)
FINRA is proposing to amend certain provisions of NASD Rule 2821.
(a) General Considerations
(1) Application
This Rule applies to
(2) No change.
(3) No change.
(b) Recommendation Requirements
(1) No member or person associated with a member shall recommend to any customer the purchase or exchange of a deferred variable annuity unless such member or person associated with a member has a reasonable basis to believe
(A) that the transaction is suitable in accordance with Rule 2310 and, in particular, that there is a reasonable basis to believe that
(i) No change.
(ii) No change.
(iii) the particular deferred variable annuity as a whole, the underlying subaccounts to which funds are allocated at the time of the purchase or exchange of the deferred variable annuity, and riders and similar product enhancements, if any, are suitable (and, in the case of an exchange, the transaction as a whole also is suitable) for the particular customer based on the information required by [sub]paragraph (b)(2) of this Rule; and
(B) in the case of an exchange of a deferred variable annuity, the exchange also is consistent with the suitability determination required by [sub]paragraph (b)(1)(A) of this Rule, taking into consideration whether
(i) No change.
(ii) No change.
(iii) the customer['s account] has had another deferred variable annuity exchange within the preceding 36 months.
The determinations required by this paragraph shall be documented and signed by the associated person recommending the transaction.
(2) No change.
(c) Principal Review and Approval
Prior to transmitting a customer's application for a deferred variable annuity to the issuing insurance company for processing, but no later than seven business days after [the customer signs the application]
[Subject to the exception in this paragraph, and treating all transactions as if they have been recommended for purposes of this principal review, a]
The determinations required by this paragraph shall be documented and signed by the registered principal who reviewed and
(d) No change.
(e) Training
Members shall develop and document specific training policies or programs reasonably designed to ensure that associated persons who effect and registered principals who review transactions in deferred variable annuities comply with the requirements of this Rule and that they understand the material features of deferred variable annuities, including those described in [sub]paragraph (b)(1)(A)(i) of this Rule.
In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
FINRA is proposing to amend NASD Rule 2821 to modify the rule's scope and the timing of principal review. FINRA also is proposing to clarify various issues that commenters have raised through a “Supplementary Material” section following the rule text. Reasons for these changes are discussed below.
As approved by the Commission, NASD Rule 2821(c) requires principals to treat “all transactions as if they have been recommended for purposes of this principal review.” Following the Commission's approval of the rule, however, numerous commenters asked the SEC and FINRA to reconsider this approach. Some of the commenters asserted that applying the rule to non-recommended transactions would have the unintended and harmful consequence of essentially forcing some firms that offer low-priced alternatives and do not allow recommendations or use transaction-based compensation out of the deferred variable annuities business. Still other commenters believed that, absent a recommendation, a customer should be completely free to invest in a deferred variable annuity without interference or second guessing from a broker-dealer.
After further reflection, FINRA is proposing to limit the rule's application to recommended transactions. This approach is consistent with that taken by FINRA's general suitability rule, Rule 2310. This change, moreover, should not detract from the effectiveness of Rule NASD 2821 in providing additional protection to investors in deferred variable annuities. For instance, brokers recommend the vast majority of purchases and exchanges of
NASD Rule 2821(c) requires principal review and approval “[p]rior to transmitting a customer's application for a deferred variable annuity to the issuing insurance company for processing, but no later than seven business days after the customer signs the application.” A number of firms asserted that seven business days beginning from the time when the customer signs the application may not allow for a thorough principal review in all cases. These firms provided examples of situations where a principal might not be able to complete the required review within the allotted time, such as when a customer inadvertently omits information from the application, when information provided by a customer on the application needs clarification, when a customer signs the application but does not mail it for several days after signature, and when a customer mails the application by regular U.S. mail.
FINRA is proposing to modify the beginning of the period within which the principal must review and determine whether to approve or reject the application. Under the proposal, the period would begin to run not from the date of the customer's signature but from the date when the firm's office of supervisory jurisdiction (OSJ) receives a complete and correct copy of the application.
To help ensure that the process remains efficient from the beginning, the proposal also would require the associated person who recommended the annuity to promptly transmit the complete and correct application package to the OSJ. However, that latter provision, proposed paragraph (b)(3) of NASD Rule 2821, would not preclude the customer from transmitting the complete and correct application package to the OSJ. For instance, there may be occasions where the application package is technically complete and correct but the customer wants to take it home and consider the purchase or exchange some more before sending the application to the OSJ. Proceeding in such a manner would not be inconsistent with the proposed provision.
Commenters have raised a number of additional issues requiring clarification. A “Supplementary Material” section following the rule's text examines those issues that were raised by multiple groups and that potentially could have a significant impact on how members sell or process deferred variable annuities. FINRA refuted, for instance, the misconception that firms generally allowed to handled and carry customer funds under Exchange Act Rules 15c3-1 and 15c3-3 could not deposit funds for a deferred variable annuity prior to principal approval.
FINRA also reconsidered the question of whether members could forward funds to insurance companies for deposit in the companies' “suspense accounts” prior to principal approval. FINRA modified its earlier position rejecting such a process, discussed in
In addition, the Supplementary Material section discusses customers' lump sum payments for the purchase of deferred variable annuities and other products, the forwarding of customer checks or funds to an IRA custodian prior to principal approval, the timing of “transmittal” of the application where an insurance company and its affiliated broker-dealer share office space and/or employees, consideration of what constitutes a “reasonable effort” to determine whether a customer has had a recent exchange at another broker-dealer,
FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Exchange Act,
FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act.
Written comments were neither solicited nor received.
Within 35 days of the date of publication of this notice in the
(A) By order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Exchange Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an e-mail to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2008-019 and should be submitted on or before July 1, 2008.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The ISE proposes to amend its rules governing equities to allow cross orders and the stock leg(s) of complex orders to be entered and executed in odd-lot or mixed-lot sizes. The text of the proposed rule change is available on the Exchange's Web site (
In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of this filing is to amend ISE Rule 2105 (Order Entry) to allow cross orders,
Currently, the System rejects odd-lot orders in their entirety and rejects the odd-lot component of a mixed-lot order subsequent to executing the round lot portion(s) of the mixed-lot order. The Exchange has recently adopted four new order types that allow Equity Electronic Access Members to enter various two-
The basis for this proposed rule change is found in Section 6(b)(5)
The Exchange believes that the proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
The Exchange has designated the proposed rule change as one that: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. Therefore, the foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
The Commission has determined that waiving the 30-day operative delay of the Exchange's proposal is consistent with the protection of investors and the public interest and will promote competition because such waiver will allow the Exchange immediately to begin accepting and processing certain orders in odd-lot and mixed-lot sizes.
At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an e-mail to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange proposes to modify the processing of Price to Comply orders contained in Nasdaq Rule 4751(f)(7). The Exchange proposes to implement the proposed rule change on June 2, 2008. The text of the proposed rule change is available at Nasdaq, the Commission's Public Reference Room, and
In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to modify the rule language pertaining to “Price to Comply Order” as set forth in Rule 4751(f)(7) of the Nasdaq Rules. Price to Comply Orders were originally conceived and approved when Nasdaq integrated its three execution systems into the Nasdaq Single Book in 2007.
Price to Comply Orders were designed to allow members to quote aggressively and still comply with the locked and crossed markets provisions of Regulation NMS.
In order to increase transparency and efficiency, Nasdaq is proposing to modify the display of Price to Comply Orders, while maintaining the current processing logic. Nasdaq will continue the current practice of posting Price to Comply orders using the current logic, buy orders are priced at the inside offer and sell orders are priced at the inside bid. Rather than convert a locking or crossing order to Non-Displayed, Nasdaq will display the order at the most aggressive price possible, one minimum price increment worse than the locking price. With the change, orders will now be displayed at a price which is either alone or will join the National Best Bid and Offer (“NBBO”).
An example of how this will apply to orders is below: The National market is $9.97 × $10.00. A firm enters a Price to Comply order to buy at $10.01.
• Today, the order will reside on the Nasdaq book as non-displayed for $10.00.
• With the proposed rule change, the order will reside on the Nasdaq book non-displayed for $10.00 and will also be displayed at $9.99. If a seller comes to Nasdaq at $9.99, the order will execute at $10.00.
As noted in the proposed rule, Price to Comply Orders that would lock or cross the market will be displayed at the best price possible consistent with the provisions of Regulation NMS. The displayed and undisplayed price of an individual order may be priced one or more times depending upon the manner of order entry into the System. Specifically, if a member chooses to enter a Price to Comply Order via Nasdaq's RASH protocol, the order is priced upon entry and may be adjusted multiple times in response to changes in the prevailing NBBO to move the displayed price closer to the original entered price and display the best possible price consistent with the provisions of Regulation NMS. Each time the displayed price is adjusted, the order will receive a new timestamp for purposes of determining its price/time priority according to Nasdaq's existing processing rules. If a Price to Comply Order is entered via Nasdaq's OUCH protocol, the order will be repriced only upon entry. The order is not repriced in the event the prevailing NBBO changes.
Nasdaq believes that the implementation of the aforementioned rule change modifying Nasdaq order display will enhance transparency and order execution opportunities on Nasdaq. Currently, all Price to Comply orders are non-displayed. In the new environment, since the order is displayed, it will be more transparent and better able to promote order interaction.
Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. To the contrary, Nasdaq believes that its processing of Price to Comply Orders is designed to compete with orders already approved and in use at other national securities exchanges, enhancing competition between the exchanges.
Written comments were neither solicited nor received.
Because the foregoing rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate, it has become effective pursuant to Section
A proposed rule change filed under Rule 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing.
At any time within 60 days of the filing of such proposed rule change the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors or otherwise in furtherance of the purposes of the Act.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an e-mail to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2008-049. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange proposes to amend the section of its Schedule of Fees and Charges for Exchange Services (“Fee Schedule”) that applies to orders submitted by ETP Holders.
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Exchange currently charges a fee of $0.003 per share with respect to all inbound orders in Tape B securities (
In addition, the Exchange currently charges a fee of $0.0035 per share with respect to all Tape B securities routed away and executed by another market center or participant. The Exchange now intends to introduce a new routing pricing tier for Tape B securities of $0.0029 per share if the ETP holder (i) transacts an average daily share volume per month greater than 20 million shares (including transactions that take liquidity, provide liquidity, or route to away market centers) and (ii) provides liquidity an average daily share volume per month greater than 5 million shares.
The Exchange will also clarify certain language contained in the Fee Schedule. While changes to the Fee Schedule pursuant to this proposal will be effective upon filing, the changes will become operative on June 1, 2008.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
Written comments on the proposed rule change were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an e-mail to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
U.S. Small Business Administration.
Notice.
This is a notice of an Administrative declaration of a disaster for the State of Texas dated 06/04/2008.
06/04/2008.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416
Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The number assigned to this disaster for physical damage is 11274 B and for economic injury is 11275 0.
The State which received an EIDL Declaration # is Texas.
Notice of request for public comment and submission to OMB of proposed collection of information.
The Department of State has submitted the following information collection request to the Office of Management and Budget (OMB) for approval in accordance with the Paperwork Reduction Act of 1995.
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Submit comments to the Office of Management and Budget (OMB) for up to 30 days from June 10, 2008.
Direct comments and questions to Katherine Astrich, the Department of State Desk Officer in the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB), who may be reached at 202-395-4718. You may submit comments by any of the following methods:
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You may obtain copies of the proposed information collection and supporting documents from Marvin E. Moore, Bureau of Human Resources, Recruitment Division, Student Programs, U.S. Department of State, Washington, DC 20520, who may be reached on 202-261-8869 or by e-mail at
We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary to properly perform our functions.
• Evaluate the accuracy of our estimate of the burden of the proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond,
The DS-1950 is used by individuals to apply for certain excepted jobs at the Department of State such as Foreign Service specialist and student intern positions.
Information from the DS-1950 will be collected via mail, fax, and electronic submission.
The U.S. Advisory Commission on Public Diplomacy will hold a public meeting from 11 a.m. to 12 p.m. on Wednesday, June 25, 2008, in Room 1408 at the U.S. Department of State at 2201 C Street, NW., Washington, DC 20520. The Commissioners will present their report on the human resources dimension of State Department public diplomacy operations, including the following topics:
• The manner in which public diplomacy officers are recruited;
• The degree to which the Foreign Service examination process tests for public diplomacy-related instincts, knowledge and skills;
• The way public diplomacy officers are trained;
• The degree to which the employee evaluation report (EER) incentivizes the performance of public diplomacy outreach;
• The function, in the post-USIA era, of the public diplomacy area offices housed within the Department's regional bureaus;
• The role, in the post-USIA era, of public affairs officers (PAOs) at large posts; and
• The degree to which the 1999 merger of the USIA into the State Department has resulted in better integration of the public diplomacy function into the work of the State Department, in particular, as measured by the presence of PD officers in the Department's decision-making ranks.
The Advisory Commission was originally established under Section 604 of the United States Information and Exchange Act of 1948, as amended (22 U.S.C. 1469) and Section 8 of Reorganization Plan Numbered 2 of 1977. It was reauthorized pursuant to Public Law 110-21 (2007). The Commission is a bipartisan panel created by Congress in 1948 to assess public diplomacy policies and programs of the U.S. government and publicly funded nongovernmental organizations. The Commission reports its findings and recommendations to the President, the Congress and the Secretary of State and the American people. Current Commission members include William J. Hybl of Colorado, who is the Chairman; Ambassador Elizabeth Bagley of Washington, DC, who is the Vice Chairman; Maria Sophia Aguirre of Washington, DC; Ambassador Penne Percy Korth of Washington, DC; John E. Osborn of Pennsylvania; Harold Pachios of Maine; and Jay T. Snyder of New York.
Seating is limited. To attend the meeting and for identification requirements to enter the State Department and other information, please contact Carl Chan at (202) 203-7883. E-mail:
The following Applications for Certificates of Public Convenience and Necessity and Foreign Air Carrier Permits were filed under Subpart B (formerly Subpart Q) of the Department of Transportation's Procedural Regulations (See 14 CFR 301.201
Federal Aviation Administration, DOT.
Notice of availability of Record of Decision.
The Federal Aviation Administration (FAA) is issuing this notice to advise the public that it has published a Record of Decision (ROD) for the Environmental Impact Statement (EIS) that evaluated proposed approval of an Operations Specifications Amendment to allow Horizon Air to conduct scheduled air service to Mammoth Yosemite Airport (MMH). FAA approved the ROD on May 14, 2008.
Mr. Chuck Cox, Regional Environmental Technical Specialist, Northwest Mountain Region, Flight Standards Division, 1601 Lind Avenue, SW., Renton, WA 98055, Phone: (425) 227-2243, Fax: (425) 227-1200.
Pursuant to the National Environmental Policy Act, notice is hereby given that the U.S. Department of Transportation—Federal Aviation Administration (FAA) issued a Record of Decision (ROD) approving the proposed Horizon Air Operations Specifications Amendment to allow scheduled air service to Mammoth Yosemite Airport (MMH) on May 14, 2008. The ROD documents the FAA's decision to approve the federal actions necessary to implement Horizon Air's requested Operations Specifications Amendment that permits scheduled air service to and from MMH using Bombardier DHC 8-400 (Q-400) turbopropeller powered aircraft. Horizon Air may proceed with implementing commercial air service with two daytime flights between MMH and Los Angeles International Airport beginning in the winter ski season of 2008/2009 (approximately December to April) provided the Town of Mammoth Lakes obtains a 14 CFR Part 139 Class 1 Airport Operating Certificate for MMH.
The ROD was based on the FAA's Final Environmental Impact Statement, dated March 2008, that evaluated Horizon Air's Request for Operations Specifications Amendment to Provide
Copies of the ROD and the Final EIS are available for review at the following locations during normal business hours:
U.S. Department of Transportation, Federal Aviation Administration, Northwest-Mountain Region, Flight Standards Division, 1601 Lind Avenue, SW., Renton, Washington 98055; U.S. Department of Transportation, Federal Aviation Administration, Western-Pacific Region, San Francisco Airports District Office, 831 Mitten Road, Burlingame, California 94010;
U.S. Department of Transportation, Federal Aviation Administration, Western-Pacific Region, Office of the Airports Division, 15000 Aviation Boulevard, Hawthorne, California 9026;
U.S. Department of Transportation, Federal Aviation Administration, National Headquarters, Planning and Environmental Division, 800 Independence Avenue, SW, Washington, DC 20591;
Administrative Offices at Mammoth Yosemite Airport; 1 Airport Road, Mammoth Lakes, California 93546;
Town of Mammoth Lakes City Office, 437 Old Mammoth Road, Suite R, Mammoth Lakes, California 93546;
Mono County Library Mammoth Lakes Branch, 960 Forest Trail, Mammoth Lakes, California, 93546;
Inyo County Library, Bishop Branch, 210 Academy Avenue, Bishop, California, 93514.
Questions may be directed to the individual above under the heading
Federal Aviation Administration (FAA), DOT.
Notice of Request to Release Airport Property.
The FAA proposes to rule and invite public comment on the release of land at Scappoose Industrial Airpark under the provisions of Section 125 of the Wendell H. Ford Aviation Investment Reform Act for the 21st Century (AIR 21), now 49 U.S.C. 47107(h)(2).
Comments must be received on or before July 10, 2008.
Comments on this application may be mailed or delivered to the FAA at the following address: Ms. Carol Key, Manager, Federal Aviation Administration, Northwest Mountain Region, Airports Division, Seattle Airports District Office, 1601 Lind Avenue, SW., Suite 250, Renton, Washington 98057-3356.
In addition, one copy of any comments submitted to the FAA must be mailed or delivered to Ms. Kim Shade, Operations Manager of the Port of St. Helens, at the following address: Ms. Kim Shade, Port of St. Helens, 100 E. Street, Columbia City, Oregon 97018.
Mr. Dave Roberts, Civil Engineer, Federal Aviation Administration, Northwest Mountain Region, Seattle Airports District Office, 1601 Lind Avenue, SW., Suite 250, Renton, Washington 98057-3356.
The request to release property may be reviewed, by appointment, in person at this same location.
The FAA invites public comment on the request to release property at the Scappoose Industrial Airpark under the provisions of the AIR 21 (49 U.S.C. 47107(h)(2)).
On May 27, 2008, the FAA determined that the request to release property at Scappoose Industrial Airpark submitted by the airport meets the procedural requirements of the Federal Aviation Administration. The FAA may approve the request, in whole or in part, no later than July 10, 2008.
The following is a brief overview of the request:
The Port of St. Helens is proposing the release, through fee acquisition and permanent easements for slopes, of approximately 21,967 square feet of Scappoose Industrial Airpark property to Columbia County. The land would be used for road curvature improvements at the Westlane/Honeyman Road intersection to Skyway Drive to increase traffic safety. The revenue made from this sale will be used toward Airport capital improvement.
Any person may inspect, by appointment, the request in person at the FAA office listed above under
In addition, any person may, upon appointment and request, inspect the application, notice and other documents germane to the application in person at Scappoose Industrial Airpark.
Federal Aviation Administration (FAA), DOT.
Monthly Notice of PFC Approvals and Disapprovals. In April 2008, there were seven applications approved. Additionally, nine approved amendments to previously approved applications are listed.
The FAA publishes a monthly notice, as appropriate, of PFC approvals and disapprovals under the provisions of the Aviation Safety and Capacity Expansion Act of 1990 (Title IX of the Omnibus Budget Reconciliation Act of 1990) (Pub. L. 101-508) and Part 158 of the Federal Aviation Regulations (14 CFR Part 158). This notice is published pursuant to paragraph d of 158.29.
The amendment denoted by an asterisk (*) includes a change to the PFC level charged from $3.00 per enplaned passenger to $4.50 per enplaned passenger. For Lubbock, TX, this change is effective on June 1, 2008.
Federal Motor Carrier Safety Administration (FMCSA), DOT.
July 10, 2008, 12 noon to 3 p.m., Eastern Daylight Time.
This meeting will take place telephonically. Any interested person may call Mr. Avelino Gutierrez at (505) 827-4565 to receive the toll free number and pass code needed to participate in these meetings by telephone.
Open to the public.
The Unified Carrier Registration Plan Board of Directors (the Board) will continue its work in developing and implementing the Unified Carrier Registration Plan and Agreement and to that end, may consider matters properly before the Board.
Mr. Avelino Gutierrez, Chair, Unified Carrier Registration Board of Directors at (505) 827-4565.
National Highway Traffic Safety Administration, DOT.
Notice of receipt of petition for decision that nonconforming 2004-2005 Ferrari 575 passenger cars are eligible for importation.
This document announces receipt by the National Highway Traffic Safety Administration (NHTSA) of a petition for a decision that 2004-2005 Ferrari 575 passenger cars that were not originally manufactured to comply with all applicable Federal motor vehicle safety standards (FMVSS) are eligible for importation into the United States because (1) they are substantially similar to vehicles that were originally manufactured for sale in the United States and that were certified by their manufacturer as complying with the safety standards (the U.S.-certified version of the 2004-2005 Ferrari 575 passenger car), and (2) they are capable of being readily altered to conform to the standards.
The closing date for comments on the petition is July 10, 2008.
Comments should refer to the docket and notice numbers above and be submitted by any of the following methods:
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•
•
•
(1) Go to the Federal Docket Management System (FDMS) Web page
(2) On that page, click on “Advanced Docket Search.”
(3) On the next page select “NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION” from the drop-down menu in the Agency field
(4) After entering that information, click on “submit.”
(5) The next page contains docket summary information for the docket you selected. Click on the comments you wish to see. You may download the comments. Please note that even after the comment closing date, we will continue to file relevant information in the Docket as it becomes available. Further, some people may submit late comments. Accordingly, we recommend that you periodically search the Docket for new material.
Coleman Sachs, Office of Vehicle Safety Compliance, NHTSA (202-366-3151).
Under 49 U.S.C. 30141(a)(1)(A), a motor vehicle that was not originally manufactured to conform to all applicable FMVSS shall be refused admission into the United States unless NHTSA has decided that the motor vehicle is substantially similar to a motor vehicle originally manufactured for importation into and sale in the United States, certified under 49 U.S.C. 30115, and of the same model year as the model of the motor vehicle to be compared, and is capable of being readily altered to conform to all applicable FMVSS.
Petitions for eligibility decisions may be submitted by either manufacturers or importers who have registered with NHTSA pursuant to 49 CFR Part 592. As specified in 49 CFR 593.7, NHTSA publishes notice in the
J.K. Technologies, LLC, of Baltimore, Maryland (JK) (Registered Importer 90-006) has petitioned NHTSA to decide whether nonconforming 2004-2005 Ferrari 575 passenger cars are eligible for importation into the United States. The vehicles which JK believes are substantially similar are 2004-2005 Ferrari 575 passenger cars that were manufactured for sale in the United States and certified by their manufacturer as conforming to all applicable FMVSS.
The petitioner claims that it compared non-U.S. certified 2004-2005 Ferrari 575 passenger cars to their U.S.-certified counterparts, and found the vehicles to be substantially similar with respect to compliance with most FMVSS.
JK submitted information with its petition intended to demonstrate that non-U.S. certified 2004-2005 Ferrari 575 passenger cars, as originally manufactured, conform to many FMVSS in the same manner as their U.S. certified counterparts, or are capable of being readily altered to conform to those standards.
Specifically, the petitioner claims that non-U.S. certified 2004-2005 Ferrari 575 passenger cars are identical to their U.S. certified counterparts with respect to compliance with Standard Nos. 102
The petitioner also contends that the vehicles are capable of being readily altered to meet the following standards, in the manner indicated:
Standard No. 101
Standard No. 108
Standard No. 110
Standard No. 111
Standard No. 114
Standard No. 208
The petitioner states that the crash protection system used in these vehicles consists of dual front airbags and knee bolsters, and combination lap and shoulder belts at the front outboard seating positions. These manual systems are automatic, self-tensioning, and are released by means of a single red push-button.
Standard No. 209
Standard No. 225
Standard No. 301
Standard No. 401
In addition, the petitioner claims that the bumpers must be modified by the installation of U.S.-model components to meet the requirements of the Bumper Standard found in 49 CFR Part 581.
The petitioner additionally states that a vehicle identification plate must be affixed to the vehicles near the left windshield post to meet the requirements of 49 CFR Part 565.
All comments received before the close of business on the closing date indicated above will be considered, and will be available for examination in the docket at the above addresses both before and after that date. To the extent possible, comments filed after the closing date will also be considered. Notice of final action on the petition will be published in the
49 U.S.C. 30141(a)(1)(A) and (b)(1); 49 CFR 593.8; delegations of authority at 49 CFR 1.50 and 501.8.
Surface Transportation Board, DOT.
Notice of Public Hearing.
The Surface Transportation Board will hold a public hearing beginning at 9 a.m. on Wednesday, July 16, 2008, at its headquarters in Washington, DC. The purpose of the public hearing will be to examine issues related to the common carrier obligation of railroads with respect to the transportation of hazardous materials. Persons wishing to speak at the hearing should notify the Board in writing.
The public hearing will take place on Wednesday, July 16, 2008. Any person wishing to speak at the hearing should file with the Board a written notice of intent to participate, and should identify the party, the proposed speaker, and the time requested, as soon as possible but no later than July 2, 2008. Each speaker should also file with the Board his/her written testimony in that same document. Written submissions by interested persons who do not wish to appear at the hearing will also be due by July 2, 2008.
All notices of intent to participate and testimony may be submitted either via the Board's e-filing format or in the traditional paper format. Any person using e-filing should attach a document and otherwise comply with the Board's
Joseph Dettmar, (202) 245-0395. [Assistance for the hearing impaired is available through the Federal Information Relay Service (FIRS) at: (800) 877-8339.]
The common carrier obligation refers to the statutory duty of railroads to provide “transportation or service on reasonable request.” 49 U.S.C. 11101(a). A railroad may not refuse to provide service merely because to do so would be inconvenient or unprofitable.
That hearing raised many issues involving the obligation of railroads to haul hazardous materials, including toxic by inhalation hazards (TIH). For many hazardous materials, including TIH, rail is the safest and most efficient mode of transportation. But, according to the railroads, the transportation of these materials subjects them to ruinous liability in the event of an accident. To allow a more detailed discussion, the Board is holding a hearing to explore the issues surrounding the transportation of hazardous materials by rail.
The Board is interested in specific potential policy solutions to the liability issue, including solutions modeled on the Price-Anderson Act of 1957. The Price-Anderson Act was designed to ensure that adequate funds would be available to satisfy liability claims of members of the public for personal injury and property damage in the event of a catastrophic nuclear accident. Parties may also comment on the appropriate role of the Board in developing such a policy solution. The Board is also interested in the wide range of views from all stakeholders, including any diversity of views from similarly situated companies or groups.
Parties are also invited to comment on what constitutes a reasonable request for service involving the movement of TIH, as well as whether there are unique costs associated with the transportation of hazardous materials, and if so, how railroads recover those costs. Also, the Board would benefit from a discussion of efforts by various federal agencies, including the Federal Railway Administration and the Pipeline and Hazardous Materials Safety Administration, to address the transportation of hazardous materials.
This action will not significantly affect either the quality of the human environment or the conservation of energy resources.
Surface Transportation Board, DOT.
Notice of National Grain Car Council meeting.
Notice is hereby given of a meeting of the National Grain Car Council (NGCC), pursuant to section 10(a)(2) of the Federal Advisory Committee Act, Pub. L. No. 92-463, as amended (5 U.S.C., App. 2).
The meeting will be held on Wednesday, June 25, 2008, beginning at 10:30 a.m. and is expected to conclude at 3:00 p.m.
The meeting will be held at the headquarters of the Surface Transportation Board, 395 E Street, SW., in Washington, DC.
Mel Clemens at (202) 245-0241 or Tom
The NGCC arose from a proceeding instituted by the Surface Transportation Board's (Board) predecessor agency, the Interstate Commerce Commission (ICC), in National Grain Car Supply—Conference of Interested Parties, Ex Parte No. 519. The NGCC was formed as a working group to facilitate private-sector solutions and recommendations to the ICC (and now the Board) on matters affecting grain transportation.
The general purpose of this meeting is to discuss rail carrier preparedness to transport the 2008 Fall grain harvest. Agenda items include the following: Remarks by Board Chairman Charles D. Nottingham, Vice Chairman Francis P. Mulvey (who serves as Co-Chairman of the NGCC), and Commissioner W. Douglas Buttrey; a presentation and discussion regarding the new centralized database (OT-5 TAG), developed by carriers to facilitate shipper requests to load and store private rail cars on carrier track; reports by rail carriers and shippers on grain-service related issues; a report by rail car manufacturers and lessors on current and future availability of various grain-car types; and an open forum on the impact of current Federal regulation on grain car supply.
The meeting, which is open to the public, will be conducted pursuant to the NGCC's charter and Board procedures. Further communications about this meeting may be announced through the Board's Web site at
This action will not significantly affect either the quality of the human environment or the conservation of energy resources.
Community Development Financial Institutions Fund, Department of the Treasury.
Notice of open meeting.
This notice announces the next meeting of the Community Development Advisory Board (the Advisory Board), which provides advice to the Director of the Community Development Financial Institutions Fund (the Fund).
The next meeting of the Advisory Board will be held from 9 a.m. to 1 p.m. on June 25, 2008.
The Advisory Board meeting will be held in the John Adams Salons A & B at The Madison Hotel located at 1177 Fifteenth Street, NW., Washington, DC 20005.
The Office of Public and Legislative Affairs of the Fund, 601 Thirteenth Street, NW., Suite 200 South, Washington, DC 20005, (202) 622-8042 (this is not a toll free number). Other information regarding the Fund and its programs may be obtained through the Fund's Web site at
Section 104(d) of the Community Development Banking and Financial Institutions Act of 1994 (12 U.S.C. 4703(d)) established the Advisory Board. The charter for the Advisory Board has been filed in accordance with the Federal Advisory Committee Act, as amended (5 U.S.C. App.), and with the approval of the Secretary of the Treasury.
The function of the Advisory Board is to advise the Director of the Fund (who has been delegated the authority to administer the Fund) on the policies regarding the activities of the Fund. The Advisory Board shall not advise the Fund on the granting or denial of any particular application for monetary or non-monetary awards. The Advisory Board shall meet at least annually.
The next meeting of the Advisory Board, all of which will be open to the public, will be held in the John Adams Salons A & B at The Madison Hotel located at 1177 Fifteenth Street, NW., Washington, DC 20005, from 9 a.m. to 1 p.m. on June 25, 2008. The room will accommodate up to 20 members of the public. Seats are available to members of the public on a first-come, first-served basis.
Participation in the discussions at the meeting will be limited to Advisory Board members, Department of the Treasury staff, and certain invited guests. Anyone who would like to have the Advisory Board consider a written statement must submit it to the Fund's Office of Public and Legislative Affairs of the Fund, 601 Thirteenth Street, NW., Suite 200 South, Washington, DC 20005, by 5 p.m. EDT on Friday, June 20, 2008.
The Advisory Board meeting will include a report from the Director on the activities of the Fund since the last Advisory Board meeting, as well as policy, programmatic, fiscal and legislative initiatives for the years 2008 and 2009.
12 U.S.C. 4703; Chapter X, Pub. L. 104-19, 109 Stat. 237.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521), this notice announces that the Veterans Benefits Administration (VBA), Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden; it includes the actual data collection instrument.
Comments must be submitted on or before July 10, 2008.
Submit written comments on the collection of information through
Denise McLamb, Records Management Service (005R1B), Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, (202) 461-7485, FAX (202) 273-0443 or e-mail
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The
By direction of the Secretary.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521), this notice announces that the Veterans Benefits Administration (VBA), Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden; it includes the actual data collection instrument.
Comments must be submitted on or before July 10, 2008.
Submit written comments on the collection of information through
Denise McLamb, Records Management Service (005R1B), Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, (202) 461-7485, FAX (202) 273-0443 or e-mail
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The
By direction of the Secretary.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521), this notice announces that the Veterans Benefits Administration (VBA), Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden; it includes the actual data collection instrument.
Comments must be submitted on or before July 10, 2008.
Submit written comments on the collection of information through
Denise McLamb, Records Management Service (005R1B), Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, (202) 461-7485, FAX (202) 273-0443 or e-mail
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The
By direction of the Secretary.
Veterans Health Administration, Department of Veterans Affairs.
Notice.
The Veterans Health Administration (VHA) is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish notice in the
Written comments and recommendations on the proposed collection of information should be received on or before August 11, 2008.
Submit written comments on the collection of information through
Mary Stout (202) 461-5867 or FAX (202) 273-9381.
Under the PRA of 1995 (Pub. L. 104-13; 44 U.S.C. 3501-3521), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, VHA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of VHA's functions, including whether the information will have practical utility; (2) the accuracy of VHA's estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology.
By direction of the Secretary.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521), this notice announces that the Veterans Benefits Administration (VBA), Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden; it includes the actual data collection instrument.
Comments must be submitted on or before July 10, 2008.
Submit written comments on the collection of information through
Denise McLamb, Records Management Service (005R1B), Department of Veterans Affairs, 810 Vermont Avenue,
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The
By direction of the Secretary.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
The Veterans Benefits Administration (VBA), Department of Veterans Affairs (VA), is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish notice in the
Written comments and recommendations on the proposed collection of information should be received on or before August 11, 2008.
Submit written comments on the collection of information through
Nancy J. Kessinger at (202) 461-9769 or FAX (202) 275-5947.
Under the PRA of 1995 (Pub. L. 104-13; 44 U.S.C. 3501-3521), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, VBA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of VBA's functions, including whether the information will have practical utility; (2) the accuracy of VBA's estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology.
By direction of the Secretary.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
The Veterans Benefits Administration (VBA), Department of Veterans Affairs (VA), is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish notice in the
Written comments and recommendations on the proposed collection of information should be received on or before August 11, 2008.
Submit written comments on the collection of information through
Nancy J. Kessinger at (202) 461-9769 or FAX (202) 275-5947.
Under the PRA of 1995 (Pub. L. 104-13; 44 U.S.C. 3501-3521), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, VBA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of VBA's functions, including whether the information will have practical utility; (2) the accuracy of VBA's estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology.
a. Application for Dependency and Indemnity Compensation, Death Pension and Accrued Benefits by a Surviving Spouse or Child (Including Death Compensation if Applicable), VA Form 21-534.
b. Application for Dependency and Indemnity Compensation by a Surviving Spouse or Child—In-service Death Only, VA Form 21-543a.
a. VA Form 21-534 is used to gather the necessary information to determine surviving spouse and/or children of veterans entitlement to dependency and indemnity compensation (DIC), death benefits,(including death compensation is applicable), and any accrued benefits not paid to the veteran prior to death.
b. Military Casualty Assistance Officers complete VA Form 21-534 to assist surviving spouse and/or children of veterans who died on active duty in processing claims for dependency and indemnity compensation benefits. Accrued benefits and death compensation are not payable in claims for DIC.
a. VA Form 21-534—76,136 hours.
b. VA Form 21-534a—600 hours.
a. VA Form 21-534—75 minutes.
b. VA Form 21-534a—15 minutes.
a. VA Form 21-534—76,136.
b. VA Form 21-534a—600.
By direction of the Secretary.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521), this notice announces that the Veterans Benefits Administration (VBA), Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden; it includes the actual data collection instrument.
Comments must be submitted on or before July 10, 2008.
Submit written comments on the collection of information through
Denise McLamb, Records Management Service (005R1B), Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, (202) 461-7485, fax (202) 273-0443 or e-mail
a. Application for Ordinary Life Insurance, Replacement Insurance for Modified Life Reduced at Age 65, National Service Life Insurance, VA Form 29-8485.
b. Application for Ordinary Life Insurance, Replacement Insurance for Modified Life Reduced at Age 70, National Service Life Insurance, VA Form 29-8485a.
c. Application for Ordinary Life Insurance, Replacement Insurance for Modified Life Reduced at Age 65, National Service Life Insurance, VA Form 29-8700.
d. Application for Ordinary Life Insurance, Replacement Insurance for Modified Life Reduced at Age 70, National Service Life Insurance, VA Form 29-8701.
e. Information About Modified Life Reduction, VA Forms 29-8700a-e and VA Forms 29-8701a-e.
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The
By direction of the Secretary.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521), this notice announces that the Veterans Benefits Administration (VBA), Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden; it includes the actual data collection instrument.
Comments must be submitted on or before July 10, 2008.
Submit written comments on the collection of information through
Denise McLamb, Records Management Service (005R1B), Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, (202) 461-7485, fax (202) 273-0443 or e-mail
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The
By direction of the Secretary.
Securities and Exchange Commission.
Proposed rule.
We are proposing rules requiring companies to provide financial statement information in a form that would improve its usefulness to investors. Under the proposed rules, financial statement information could be downloaded directly into spreadsheets, analyzed in a variety of ways using commercial off-the-shelf software, and used within investment models in other software formats. The rules would apply to domestic and foreign public companies that prepare their financial statements in accordance with generally accepted accounting principles as used in the United States (U.S. GAAP), and foreign private issuers that prepare their financial statements using International Financial Reporting Standards (IFRS) as promulgated by the International Accounting Standards Board (IASB). Companies would provide their financial statements to the Commission and on their corporate Web sites in interactive data format using the eXtensible Business Reporting Language (XBRL). The interactive data would be provided as an exhibit to periodic reports and registration statements, as well as to transition reports for a change in fiscal year. The proposed rules are intended not only to make financial information easier for investors to analyze, but also to assist in automating regulatory filings and business information processing. Interactive data has the potential to increase the speed, accuracy, and usability of financial disclosure, and eventually reduce costs.
Comments should be received on or before August 1, 2008.
Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an e-mail to
• Use the Federal eRulemaking Portal (
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
James C. Lopez, Legal Branch Chief, Division of Corporation Finance at (202) 551-3790; Mark W. Green, Senior Special Counsel (Regulatory Policy), Division of Corporation Finance at (202) 551-3430; Jeffrey W. Naumann, Assistant Director, Office of Interactive Disclosure at (202) 551-5352; or Melanie Jacobsen, Office of the Chief Accountant at (202) 551-5300, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-3628.
We propose to add Rules 405 and 406 to Regulation S-T,
Over the last several decades, developments in technology and electronic data communication have significantly decreased the time and cost of filing disclosure documents with us. Technological developments also have facilitated greater transparency in the form of easier access to, and analysis of, financial reporting and disclosures. Most notably, in 1993 we began to require electronic filing on our Electronic Data Gathering, Analysis and
We continue to update our filing standards and systems as technologies improve. These developments assist us in our goal to promote efficient and transparent capital markets. For example, since 2003 we have required electronic filing of certain ownership reports
Our proposal builds on our voluntary filer program, started in 2005,
In 2007, we extended the program to enable mutual funds voluntarily to submit in interactive data format supplemental information contained in the risk/return summary section of their prospectuses.
Financial reporting based on interactive data would create new ways for investors, analysts, and others to retrieve and use financial information in documents filed with us. For example, users of financial information could download it directly into spreadsheets, analyze it using commercial off-the-shelf software, or use it within investment models in other software formats. Through interactive data, what is currently static, text-based information can be dynamically searched and analyzed, facilitating the comparison of financial and business performance across companies, reporting periods, and industries.
Interactive data also could provide a significant opportunity to automate regulatory filings and business information processing, with the potential to increase the speed, accuracy, and usability of financial disclosure. Such automation could eventually reduce costs. A company that uses a standardized interactive data format at earlier stages of its reporting cycle could reduce the need for repetitive data entry and, therefore, the likelihood of human error. In this way, interactive data may improve the quality of information while reducing its cost.
Also, to the extent investors currently are required to pay for access to annual or quarterly report disclosure that has been extracted and reformatted into an interactive data format by third-party sources, the availability of interactive data in Commission filings could allow investors to avoid additional costs associated with third party sources.
We believe that requiring issuers to file their financial statements using interactive data format would enable investors, analysts, and the Commission staff to capture and analyze that information more quickly and at less cost than is possible using the same financial information provided in a static format. Any investor with a computer would have the ability to acquire and download interactive financial data that have generally been available only to large institutional users. The proposed interactive data requirements would not change what is currently reported, but would add a requirement to include financial statements in a new format as an exhibit. Thus, the proposal to require that filers provide financial statements using interactive data will not alter the disclosure or formatting standards of periodic reports, registration statements,
Throughout this release, we solicit comment on many issues concerning the use of interactive data, including specifically whether financial information in interactive data format should be required as exhibits to Securities Act registration statements and Exchange Act periodic and transition reports filed with us. We are seeking comment from investors, registrants, accountants, analysts and any other parties or individuals who may be affected by the use of interactive disclosure in Commission filings, and any other members of the public.
Companies filing electronically are required to file their registration statements, quarterly and annual reports, and transition reports in ASCII or HTML format.
Electronic formats such as HTML, XML, and XBRL are open standards
XBRL was derived from the XML standard. It was developed and continues to be supported by XBRL International, a collaborative consortium of approximately 550 organizations representing many elements of the financial reporting community worldwide in more than 20 jurisdictions, national and regional. XBRL U.S., the international organization's U.S. jurisdiction representative, is a non-profit organization that includes companies, public accounting firms, software developers, filing agents, data aggregators, stock exchanges, regulators, financial services companies, and industry associations.
Financial reporting in interactive format requires a standard list of tags. These tags are similar to definitions in an ordinary financial dictionary, and they cover a variety of financial concepts that can be read and understood by software applications. For financial statements prepared in accordance with U.S. GAAP, a filer would use the list of tags for U.S. financial statement reporting.
Applying data tags to financial statements is accomplished using commercially available software that guides a preparer in mapping information in the financial statements to the appropriate tags in the standard list. Each element in the standard list of tags has a standard label. A company can therefore match the standard labels to each caption in its financial statements. Occasionally, because filers have considerable flexibility in how financial information is reported under U.S. reporting standards, it is possible that a company may wish to use a non-standard financial statement line item that is not included in the standard list of tags.
For example, what a company identifies in its traditional format financial statements as “operating revenues” may be associated with an element that has “net revenues” as the standard label. In this situation, a company would need to change, or extend, the standard label to become “operating revenues” when tagging that disclosure with the element.
A company may choose to tag its own financial statements using commercially available software, or it may choose instead to outsource the tagging process. In the event a company relies upon a service provider to tag the company's financial statements, the company would want to carefully review the tagging done by the service provider in order to make sure that the tagged financial statements are accurate and consistent with the information the company presents in its traditional format filing.
Similarly, to create interactive data-formatted financial statements prepared in accordance with IFRS as issued by the IASB, a filer would use the IFRS list of tags.
Because financial statements in interactive data format, referred to as the interactive data file,
The Commission's Web site currently provides links to four viewers that allow the public to easily read company disclosures filed using interactive data.
In 2004, we began assessing the benefits of interactive data and its potential for improving the timeliness and accuracy of financial disclosure and analysis of Commission filings.
During this time, we have kept informed of technology advances and other interactive data developments. We note that several U.S. and foreign regulators have begun to incorporate interactive data into their financial reporting systems. The Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC) require the use of XBRL.
We also have kept informed of relevant advances and developments by hosting roundtables on the topic of interactive data financial reporting,
Building on our experience monitoring the voluntary program, and our participation in the other initiatives described above, we are now proposing rules to require financial reporting using interactive data. The proposed rules would apply to domestic and foreign public companies that prepare their financial statements in accordance with U.S. GAAP, and foreign private issuers
By enabling filers to further automate their financial processes, interactive data may eventually help filers improve the speed at which they generate financial information, while reducing the cost of filing and potentially increasing the accuracy of the data. For example, with standardized interactive data tags, registration statements and periodic reports may require less time for information gathering and review. Also, standardized interactive data tagging may enhance the ability of an issuer's in-house financial professionals to identify and correct errors in the issuer's registration statements and periodic reports filed in traditional electronic format. Filers also may gain benefits not directly related to public financial disclosures. For example, filers that use interactive data may be able to consolidate enterprise financial
The principal elements of the proposal are as follows:
• Domestic and foreign large accelerated filers
• All other domestic and foreign large accelerated filers using U.S. GAAP would be subject to the same interactive data reporting requirements the following year, beginning with fiscal periods ending on or after December 15, 2009.
• All remaining filers using U.S. GAAP, including smaller reporting companies,
• Filers providing financial statements in interactive data format would be required to use the most recent and appropriate list of tags released by XBRL U.S. or the IASCF as required by the EDGAR Filer Manual. Filers also would be required to tag a limited number of document and entity identifier elements, such as the form type, company name, and public float. As with interactive data for the financial statements, these document and entity identifier elements would be formatted using the appropriate list of tags as required by the EDGAR Filer Manual.
• A filer required to provide financial statements in interactive data format to the Commission also would be required to post those financial statements in interactive data format on its corporate Web site on the same day it filed or was required to file the related registration statement or report with the Commission, whichever is earlier.
• The proposed rules would not alter the requirements to provide financial statements and any required financial statement schedules with the traditional format filings.
• Financial statements in interactive data format would be provided as exhibits identified in Item 601(b) of Regulation S-K and Form 20-F.
• Financial statement footnotes and financial statement schedules initially would be tagged individually as a block of text. After a year of such tagging, a filer also would be required to tag the detailed disclosures within the footnotes and schedules.
• Viewable interactive data as displayed through software available on the Commission's Web site, and to the extent identical in all material respects to the corresponding portion of the traditional format filing, would be subject to all the same liability provisions of the federal securities laws as the corresponding data in the traditional format part of the official filing.
• Data in the interactive data file submitted to us generally would be subject to the federal securities laws in a manner similar to that of the voluntary program and, as a result, would be
○ Excluded from the officer certification requirements under Rules 13a-14 and 15d-14 of the Exchange Act;
○ Deemed not filed for purposes of specified liability provisions; and
○ Protected from liability for failure to comply with the proposed tagging and related requirements if the interactive data file either
☐ Met the requirements; or
☐ Failed to meet those requirements, but the failure occurred despite the issuer's good faith and reasonable effort, and the issuer corrected the failure as soon as reasonably practicable after becoming aware of it.
• The proposed rules would require the financial information and document and entity identifier elements to be tagged according to Regulation S-T and the EDGAR Filer Manual.
• The initial interactive data exhibit of a filer would be required within 30 days of the earlier of the due date or filing date of the related report or registration statement, as applicable. In year two, a filer would have a similar 30 day grace period for its first interactive data exhibit that includes detailed tagging of its footnotes and schedules. All other interactive data exhibits would be required at the same time as the rest of the related report or registration statement.
• Filers that do not provide or post required interactive data on the date required would be deemed not current with their Exchange Act reports and, as a result, would not be eligible to use the short forms S-3, F-3, or S-8, or elect under Form S-4 or F-4 to provide information at a level prescribed by Form S-3 or F-3. Similarly, such filers would not be deemed to have available adequate current public information for purposes of the resale exemption safe harbor provided by Rule 144.
• Although we have not proposed at this time to require interactive data for executive compensation disclosure because a definitive list of tags for this purpose is not yet completed, we are soliciting comment on the usefulness to investors and others of such interactive data, as well as the extent of the related costs and associated questions.
• We anticipate that if the proposed rules become effective, companies that are not required to provide interactive data until a later time would have the option to do so earlier.
• We also anticipate that the voluntary program would be modified, if the proposed rules are adopted, to permit investment companies to participate, but to exclude non-investment company participation. As a result, the voluntary program would continue for the financial statements of investment companies that are registered under the Investment Company Act, and business development companies and other entities that report under the Exchange Act and prepare their financial statements in accordance with Article 6 of Regulation S-X. The voluntary program also would continue for the risk/return summary section of mutual fund prospectuses.
For several years XBRL U.S. and its related entities have developed and refined the list of tags to classify and define financial information in accordance with U.S. financial reporting practices and Commission regulations.
Interactive data financial statements using the list of tags for U.S. financial statement reporting have been submitted voluntarily to us by over 75 companies, some of which have done so since the start of the voluntary program approximately three years ago. The list of tags for U.S. financial statement reporting has improved significantly since the original version available for the voluntary program.
With respect to the list of tags for IFRS financial reporting, the IASCF has, over several years, developed a list of tags designed to classify and define financial information in accordance with international accounting standards as promulgated by the IASB. Over the course of the past year, the IASCF has worked to strengthen the development of its list of tags by forming an XBRL Advisory Committee and an XBRL Quality Reporting Team, both consisting of international representatives from investors, auditors, accountants, regulators and others. On March 31, 2008, the IASCF published a near final version of the list of tags for IFRS financial reporting,
As discussed in more detail below, our proposed rules would set forth a phase-in period beginning with domestic and foreign large accelerated U.S. GAAP filers with a worldwide public common equity float above $5 billion as of the end of their most recently completed second fiscal quarter. These large accelerated filers would be subject to the proposed rules beginning with their Securities Act registration statements, periodic reports, and transition reports that contain financial statements for fiscal periods ending on or after December 15, 2008. Although it would not be required, we encourage other U.S. GAAP filers to provide financial information in interactive data format during the phase-in period. We also encourage foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB to provide financial information in interactive data format during the phase-in period. In each instance, these filers' voluntary interactive data submissions would be under the proposed rules instead of the existing rules of the voluntary program.
We are proposing that filers be required to provide the same information in interactive data format that companies have been providing in the voluntary program,
We propose to continue requiring the existing electronic formats now used in filings because we believe it is necessary to monitor the usefulness of interactive data reporting to investors and the cost and ease of providing interactive data before attempting further integration of the interactive data format. However, the proposed rules would treat viewable interactive data as displayed through software available on the Commission's Web site, and interactive data generally,
We expect that the open standard feature of XBRL format will facilitate the development of applications and software, and that some of these applications may be made available to the public for free or at a relatively low cost. The expected continued improvement in this software would give the public increasingly useful ways to view and analyze company financial information. After evaluating the use of the new interactive data technologies, software, and lists of tags, we may consider proposing rules to eliminate financial statement reporting in ASCII or HTML format. Or we may consider proposing rules to require a filing format that integrates ASCII or HTML with XBRL.
We believe XBRL is the appropriate interactive data format with which to supplement ASCII and HTML. Our experience with the voluntary program and feedback from company, audit, and software communities point to XBRL as the appropriate open standard for the purposes of this rule. As a derivative of the XML standard, XBRL data would be compatible with a wide range of open source and proprietary XBRL software applications. As discussed above, many XBRL-related products exist for analysts, investors, public and private companies, and others to more easily create and compare financial data; still others are in development, and that process would likely be hastened by public company reporting using interactive data. Comments on our 2004 concept release and proposed rules in 2004 and 2007 generally supported interactive data and XBRL in particular.
• Should we adopt rules that require each filer's financial statements to be provided in interactive data format? If we do so, should we include a phase-in period or temporary exception for detailed tagging of the financial statement footnotes? Should schedules to the financial statements be tagged? What are the principal factors that should be considered in making these decisions? Is it useful to users of financial information to continue to have, in addition to interactive data, duplicate, human-readable financial statements in ASCII or HTML format?
• What opportunities exist to improve the display of financial statements prepared using interactive data? For example, if the technology is sufficiently developed, should we propose rules to encourage or require a format that embeds interactive data tags in HTML so that the entire set of financial statements can be viewed in a browser? How should these affect any continued requirement to file ASCII- or HTML-formatted financial statements? What obstacles exist to making such improvements in the display of XBRL information?
• Is it appropriate to require public companies to provide interactive data using XBRL? Alternatively, in place of such a requirement, should the Commission instead wait to see whether interactive data reporting by public companies is voluntarily adopted? Without a requirement, would the development of products for producing and using interactive data from private and public companies meet the needs of investors, analysts, and others who seek interactive data? Would a large percentage of public companies provide interactive data voluntarily, and following the same standard, if not required to do so?
• If we do not adopt the proposed rules and instead wait to see whether companies on their own expand their use of interactive data, would such data be less comparable among companies? Is there a “network effect,” such that interactive data would not be useful unless many or all filers provide their financial statements using interactive data? Would the development of software for retail investors to obtain and make use of such data be slowed without a requirement that companies provide interactive data?
• What advantages are there to investors having the company responsible for preparing financial information in interactive data format, as opposed to a model in which third parties independently prepare the
• Do commenters agree that compared to reports using ASCII and HTML, interactive data would require less manually-transferred data? If so, do commenters believe that the proposed rules would result in less human error and therefore contribute to reduced costs?
• If we require interactive data reporting and the proposed rules result in more effective and efficient financial reporting with reduced human error and cost, would fees charged by financial printers or other service providers be likely reduced to reflect such lower costs?
• If we adopt rules requiring interactive data financial reporting, is the XBRL standard the one that we should use? Are any other standards becoming more widely used or otherwise superior to XBRL? What would the advantages of any such other standards be over XBRL?
• Is the XBRL format for interactive data sufficiently developed to require its use at this time with regard to both U.S. GAAP and IFRS as issued by the IASB? If not, what indicators should we use to determine when it has become sufficiently developed to require its use?
• Are vendors likely to develop and make commercially available software applications or Internet products that will be able to deliver the functionality of interactive data to retail investors?
• How important is it that many different types of viewers with varying levels of sophistication and functionality be available to investors? In addition to the free viewer provided on the SEC Web site, are there likely to be other such products available at low or no cost?
• If we require interactive data financial reporting, what are the principal challenges facing the eventual integration of such reporting with the current filing formats, ASCII and HTML, so that filing in all three formats would no longer be necessary?
The proposed rules initially would require interactive data reporting only by domestic and foreign large accelerated filers that use U.S. GAAP and have a worldwide public common equity float above $5 billion as of the end of their most recently completed second fiscal quarter.
Filers under the proposed rules would be required to convert their financial statements into an interactive data file using the list of tags for U.S. financial statement reporting or the IFRS list of tags, in either case as approved for use by the Commission. The submission also would be required to include any supporting files as prescribed by the EDGAR Filer Manual. Interactive data would be required for the entirety of the financial statements, although tagging of the footnotes and schedules by increasing level of detail would be phased in the following year. We are not proposing at this time that filers be required to provide interactive data for their Management's Discussion and Analysis, executive compensation, or other financial, statistical or narrative disclosure. We solicit comment, however, on the advisability of permissible optional interactive data for financial disclosures that are not part of the current lists of tags for U.S. GAAP financial statement reporting and IFRS financial reporting.
We also solicit comment on the usefulness to investors of interactive data of executive compensation and the burden such reporting would have on companies. For example, we solicit comment on whether the scope of interactive data available on the Executive Compensation Reader, which we posted on our Web site on December 21, 2007,
The following tables identify the registration statements and periodic reports that would be required to include interactive data according to the company's filing status.
The proposed
Foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB would be required to provide their initial interactive data submissions in year three of the phase-in period.
The additional phase-in time for all but the largest accelerated filers is intended to permit companies to plan and implement their data tagging with the benefit of the experience of year one filers. It also is intended to enable us to monitor implementation and, if necessary, make appropriate adjustments during the phase-in period. In the case of IFRS filers, the phase-in also would provide the necessary time for development and testing of the list of tags for IFRS financial reporting.
Our multiyear experience with the voluntary program has helped us understand the extent to which a filer would incur additional costs to create and submit its existing financial disclosures in interactive data format. Based on that experience, we believe that the process of converting a filer's existing ASCII or HTML financial statements into interactive data would not impose a significant burden or cost. The voluntary program clearly demonstrated that companies can, if they choose, tag their financial statements using currently available software without need of outside services or consultants; alternatively, they could rely on financial printers, consultants, and software companies for assistance, although they would retain ultimate responsibility for both their financial statements and their tagged data. As discussed in more detail in the cost-benefit analysis below,1
We expect that smaller companies, which generally are disproportionately affected by regulatory costs, also would be able to provide their reports in interactive data format without undue effort or expense. While interactive data reporting involves changes in reporting procedures mostly in the initial reporting periods, we expect that these changes would provide efficiencies in future periods. As a result, there may be potential net savings to the filer, particularly if interactive data become integrated into the filer's financial reporting process. While we recognize that requiring interactive data financial reporting would likely result in start-up expenses for smaller companies, these expenses may be substantially lower than those of larger filers, given that smaller filers tend to have simpler financial statements than larger companies, with fewer elements and disclosures to tag. In addition, we expect that both software and third-party services will be available to help meet the needs of smaller filers. We also intend that the third year phase-in for smaller reporting companies would permit them to learn from the experience of the earlier filers. It would also give them a longer period of time across which to spread first-year data tagging costs.
As noted above,
• Successful testing of the list of tags for U.S. financial statement reporting;
• The capacity of reporting companies to file interactive data using the new list of tags for U.S. financial statement reporting; and
• The ability of the Commission's electronic filing system to provide an accurate human-readable version of the interactive data.
The Progress Report's developed proposal recommends that we phase in financial statements using interactive data by requiring the largest 500 domestic registrants,
We have carefully considered the Committee's thoughtful developed proposal, including the recommended phase-in of 500 initial companies and delayed consideration of non-accelerated and other filers until after two years. We propose a phase-in schedule similar to the one for which the Committee calls.
Although including a larger number of filers in the initial phase-in might increase the overall commercial and analytical value of the interactive data, which in turn would likely increase the supply of software for analyzing and presenting interactive data to analysts and investors, we believe the establishment of a firm schedule for all U.S. GAAP- and IFRS-reporting companies to file their financial statements using interactive data would serve nearly as well to stimulate the further development of interactive data-related software and services while also affording most companies additional time to learn from the experience of others.
We also believe that concurrently adopting a phase-in for non-accelerated filers, smaller reporting companies, and foreign private issuers using IFRS as issued by the IASB would establish an appropriate and measured timeline, which we would be able to monitor and, if necessary, reconsider during the first two years of the phase-in.
• Is the proposed schedule for implementation of interactive data tagging appropriate?
• Should we delay the first required interactive data submissions until the second half of 2009 or later? What benefits would there be to advancing or delaying implementation of the proposed rules? How much lead time do large accelerated filers need to familiarize themselves with interactive data and the process of mapping financial statements using the list of tags for U.S. financial statement reporting or IFRS financial reporting?
• Should the initial submission required by the proposed rules be a periodic report? If so, should it be a Form 10-Q for domestic issuers?
• Instead of a cut-off using a worldwide public common equity float of $5 billion at the end of the issuer's most recently completed second fiscal quarter, would an initial phase-in including all large accelerated filers or large accelerated filers with a smaller public float better accomplish the goals outlined in the release? If we use a public float, should it be $5 billion or some other amount lower or higher than the proposed cut-off, such as $3 billion or $10 billion? Would some other cut-off, or some other schedule be preferable? Would it be better to measure the public float as of a time other than the end of the issuer's most recently completed second fiscal quarter and, if so, when?
• Would the initial phase-in include enough companies to encourage potential vendors of interactive data products and services to invest in the development and marketing of new and improved products and services? If not, how would such a level affect the markets for both filer and investor products and services?
• Should the phase-in schedules differ as between U.S. GAAP non-accelerated and smaller reporting companies and foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB?
• Is the proposed third-year phase-in approach for companies other than large accelerated filers necessary or sufficient for them to familiarize themselves with interactive data and the process of mapping financial statements using the list of tags for U.S. financial statement reporting or IFRS financial reporting?
• Is the proposed third-year phase-in sufficient for smaller reporting companies and foreign private issuers to allocate the necessary resources and meet the proposed requirements, or would a more delayed schedule be appropriate?
• Should smaller reporting companies and foreign private issuers reporting in U.S. GAAP be subject to the proposed rules at all? Should compliance with the proposed rules be solely voluntary for smaller reporting companies or foreign private issuers reporting in U.S. GAAP?
• Would requiring interactive data from foreign private issuers reporting in U.S. GAAP create a disincentive for these issuers to use U.S. GAAP in preparing their financial statements? Is this offset by the proposed requirement that foreign private issuers reporting in IFRS as issued by the IASB use interactive data within three years? Should the requirements extend only to foreign private issuers reporting in U.S. GAAP that file on domestic forms?
• Should foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB be subject to the new rules, as proposed? Should the proposed rules also apply to foreign private issuers that prepare their financial statements in their local GAAP and reconcile to U.S. GAAP for Exchange Act reporting purposes if their home jurisdictions have developed interactive data reporting programs? Would the proposed rules' current exclusion of such issuers create a disincentive for foreign private issuers to use IFRS as issued by the IASB for their Exchange Act reporting?
• Are there extra burdens that foreign private issuers reporting in U.S. GAAP or IFRS as issued by the IASB would incur under the proposed rules? Do any such burdens necessitate a one year or other delay in the proposed phase-in requirement as and when it otherwise would apply to them?
• Do foreign private issuers using foreign filing agents have comparable or
• Should the proposed new rules apply to a Canadian issuer's financial statements prepared in accordance with U.S. GAAP and filed with the Commission under cover of Form 40-F?
• Should we permit or require foreign private issuers filing their annual financial statements using U.S. GAAP also to provide in interactive data format any interim financial information that they furnish on Form 6-K? If so, what factors should we consider in determining whether to require or permit such submissions? Should such a requirement be phased in? What are the answers to these questions if the foreign private issuer uses IFRS as issued by the IASB?
• Should investment companies registered under the Investment Company Act, business development companies or other entities that report under the Exchange Act and prepare their financial statements in accordance with Article 6 of Regulation S-X be subject to the proposed rules? Is the current investment management list of tags sufficiently developed for required use by these companies?
• The Commission recently proposed to accelerate the filing deadline for annual reports filed on Form 20-F by foreign private issuers under the Exchange Act by shortening the filing deadline from 6 months to within 90 days after the foreign private issuer's fiscal year-end in the case of large accelerated and accelerated filers, and to within 120 days after a foreign private issuer's fiscal year-end for all other issuers, after a two-year transition period.
The proposed rules would require interactive data tagging of a filer's complete financial statements and any required financial statement schedules.
As with the voluntary program, the proposed rules would require that the line item descriptions and amounts presented on the face of the financial statements in the traditional format filing be the same as in the interactive data format. Also, the rules would prohibit partial presentation of face financial statements in interactive data format. For example, excluding comparative financial information for prior periods would not be permitted. Unlike the voluntary program, our proposed rules require companies using U.S. GAAP or foreign private issuers using IFRS as issued by the IASB to provide tagged data for the footnotes and schedules to the financial statements. At the time of our adopting release for the voluntary program in 2005, we stated that we recognized technical issues made it difficult to tag the notes to the financial statements. We did, however, provide volunteers with the option of tagging the notes to the financial statements.
The voluntary program adopting release recommended that if participants voluntarily provided footnotes in interactive data format, then they should provide enough detail so that the tagging would be of practical value to users. The release stated that a single tag for the entire group of footnotes in a filing would cover too much information to be useful to the user. We still believe that one tag for the entire group of footnotes would be confusing and provide little benefit. Tagging each footnote separately, however, would allow users the ability to compare footnote disclosure between periods and across filers while minimizing the burden on preparers. We are therefore proposing that the footnote disclosures in the traditional format filing be the same as in the interactive data format. This would be accomplished by tagging the footnotes using four different levels of detail:
(i) Each complete footnote tagged as a single block of text;
(ii) Each significant accounting policy within the significant accounting policies footnote tagged as a single block of text;
(iii) Each table within each footnote tagged as a separate block of text; and
(iv) Within each footnote, each amount (
To allow filers time to become familiar with tagging footnotes, we are proposing that in each filer's first year of interactive data reporting only level (i) would be required. All four levels would be required starting one year from the filer's initial required submission in interactive data. In year two, when a filer would first be required to tag its footnotes and schedules using multiple levels of detail, the filer would be given an additional 30 days beyond the due date or filing date of its report or registration statement to file the interactive data exhibit. Subsequent interactive data exhibits using all of the levels would be required at the same time as the rest of the related report or registration statement. We believe the one-time 30-day grace period would help a filer comply with the more detailed tagging requirements.
We propose requiring these various levels of detailed tagging for the financial statement footnotes after considering the range of needs of investors, analysts, and other consumers of financial information. We believe the block-text tagging required under levels (i) through (iii) would satisfy the need of those who desire disclosures within the context of an entire footnote or an entire table. The detail tagging of
The requirement that in the second year a filer tag separate each amount within a footnote (
To clarify the intent of the rules, we propose to include an instruction to proposed Rule 405 of Regulation S-T stating that the rules require a disclosure format, but do not change substantive disclosure requirements. The rules also would state clearly that the information in interactive data format should not be more or less than the information in the ASCII or HTML part of the related registration statement or report.
In connection with their annual and transition reporting on Forms 10-K or 20-F, filers may be required under existing financial reporting requirements to include certain supplementary financial statement schedules with their financial statements. The form and content of these schedules are governed by Article 12 of Regulation S-X.
We propose that filers also be required to include with their interactive data any financial statement schedules prescribed by Article 12 of Regulation S-X. These financial statement schedules would be tagged using two different levels of detail; only the first level would be required in the first year. Both levels would be required starting one year from the filer's initial required submission in interactive data format. Similar in concept to the tagging approach proposed for the financial statement footnotes, the required levels of detail would be: (i) Each complete financial statement schedule tagged as a block of text; and (ii) each amount (
A filer may revise its previously filed financial statements for a variety of reasons, such as the retrospective application of a new accounting principle or the correction of an error. Our proposed rules would require a filer to provide revised interactive data at the same time it files the revised financial statements with the traditional format filing.
• Are the proposed four levels of detail appropriate for footnote tagging? What alternative footnote disclosure items or criteria do commenters recommend we establish for tagging footnotes? Why would those be more appropriate than what we propose?
• Should we require all four levels for footnotes in the first year instead of using the phase-in approach for the more detailed tagging? Should detailed tagging of a filer's footnotes and schedules not be required until more than one year after its initial interactive data submission, for example, in year three or four?
• Are the proposed two levels of detail appropriate for financial statement schedule tagging? If not, what alternatives would be more appropriate?
• Should we require both levels for financial statement schedules in the first year instead of using the phase-in approach for more detailed tagging?
• Is the most detailed level of tagging too prescriptive, or is it too broad? Would it help to achieve comparability among filers? Would it impose an unnecessary burden on filers in preparing their XBRL data compared to the potential benefit to consumers of data? What problems or obstacles may be encountered in applying the proposed requirement?
• Would the most detailed level of tagging result in the creation of a high number of company-specific extensions? If so, would the additional effort needed to create new extensions diminish once a filer has tagged at this level of detail? Should the tagging requirement instead be only to require detailed tagging to the extent a standard tag already exists in the standard list of tags?
• Does the proposed rule provide adequate and effective guidance on how to tag information in the footnotes to the financial statements? For example, would it be feasible for companies to identify the narrative disclosure required by U.S. GAAP or IFRS as issued by the IASB that needs to be tagged separately? Should it be more principles-based? If so, what should those principles be?
• Do the standards we propose for tagging provide clear enough guidance for preparers so that we can expect to achieve consistency among filers?
• Should schedules to the financial statements be omitted from our proposed rule? If so, why?
• What additional costs and burdens would there be with detailed tagging of the financial statement footnotes and financial statement schedules as opposed to “block” tagging?
• Would investors and other users of tagged data benefit from the tagging of individual amounts (
• Should we require that filers reporting in U.S. GAAP, or in IFRS as issued by the IASB, tag their document and entity
• Is it reasonable to expect that requiring interactive data-formatted financial statements in general or footnotes in particular will not change the discretionary content that companies provide in the traditional format filing? Would the availability of tagged data possibly cause competitive pressures on filers to choose to make more disclosures that are permissible, encouraged, or otherwise not required by Commission regulations? Alternatively, might the availability of tagged data possibly cause filers to choose to curtail such disclosures? What types of disclosures would those be?
• Should transition reports not be subject to the proposed rules? If not, why not?
• Would users of financial information find tagged financial statement schedules useful for analytical purposes?
• Should the proposed rules require interactive data submissions for a filer's
• Should the proposed rules require interactive data submissions for other financial statements that may be provided by filers, including those provided pursuant to Rules 3-05, 3-09, 3-10, 3-14 and 3-16 of Regulation S-X? If so, how should a requirement be phased in?
• Should we provide an opportunity for non-investment company issuers to submit voluntarily interactive data format information other than that which they would be required to submit as interactive data? If so, should we permit such interactive data format information to be subject to provisions governing the proposed required filing of interactive data? Should we instead permit such interactive data format information to be submitted under a modified voluntary program that would apply to such information in a manner similar to the way it applies to XBRL-Related Documents under the current voluntary program?
• Should we require or permit interactive data submissions for executive compensation? Would interactive data of executive compensation be useful to investors? Approximately how much additional cost would interactive reporting of executive compensation require of companies?
• If we were to require or permit interactive data for executive compensation, should all narrative and numerical disclosure required in the traditional electronic filing
• If we were to require or permit interactive data for executive compensation, should we require the same data provided by the Executive Compensation Reader currently available on our Web site?
• If we were to require or permit interactive data for executive compensation, should the interactive data be filed with the proxy statement, which often contains the executive compensation disclosure, or as an amendment to the Form 10-K, which often incorporates the executive compensation disclosure by reference?
• How should a requirement to provide interactive data for executive compensation apply to foreign private issuers?
• Should we require or permit interactive data submissions for other financial, statistical or narrative disclosure, such as beneficial ownership of management and five percent or greater shareholders or tabular disclosure of contractual obligations?
We are proposing that, subject to the phase-in period described above, all registration statements filed under the Securities Act, including initial public offerings, be required to include interactive data when financial statements are included directly in the registration statement, rather than being incorporated by reference. This would include all periods included in the registration statement as required by Regulation S-X and our rules. We believe analysts, investors, the public, and others would benefit from the enhanced ability of interactive data to locate and compare financial data included in registration statements. Under the proposed rules, interactive data would be required for the acquiring company, the filer, but not for the company being acquired, in the context of a business combination. The additional burden of configuring disclosure from traditional electronic format into interactive data format in the context of a registered offering is not anticipated to significantly add to the time or expense of companies filing registration statements.
• Should registration statement financial information be subject to the new rules, as proposed? In particular, should registrants making initial public offerings in year three (and later years) of the phase-in period be required to provide interactive data if, as would be typical, they were not already required to file periodic reports subject to the requirement to submit an interactive data exhibit?
• If we require interactive data, should the proposed rules apply to registration statement financial information based on the size of the registrant (for example, distinguishing between large accelerated filers and smaller reporting companies)?
• Should the proposed rules require filers to include interactive data with respect to all filings of the registration statement when the registration statement is filed multiple times due to amendments? If not, which filings of the registration statement should be subject to the interactive data submission requirement? Should we, for example, limit the Securities Act filings that would require interactive data to those that contain a preliminary prospectus that is circulated?
• Should interactive data be required only in connection with initial public offering registration statements under the Securities Act, rather than, as proposed, all Securities Act registration statements?
• In a registration statement on Form S-4 or F-4, or proxy statement relating to a proposed merger, should interactive data be required for the company being acquired as well as the acquiring company? Should interactive data of the company being acquired be required only if that company already is subject to interactive data reporting under the proposed rules?
• Should we also require interactive data to be provided in connection with Exchange Act registration statements on Form 10 and Form 20-F?
As noted above, interactive data would be required at the same time as the rest of the filing to which it relates. Each company's initial interactive data submission, however, would be permitted as an amendment to a registration statement within 30 days of the date of filing or as an amendment to Form 10-K, 20-F, or 10-Q within 30 days of the due date for filing of the rest of the related report. In addition, as discussed above in Part II.B.3.a, in year two when a filer would first be required to tag its footnotes and schedules using all levels of detail, the interactive data exhibit would be required within 30 days of the due date or filing date of the related report or registration statement, as applicable.
Currently in the voluntary program, filers may provide the interactive data at the time of filing or at any later time, without a deadline.
• Should we permit interactive data information to be provided later than the related filing for the first year, rather than just the first filing? Should we provide a grace period for the first filing as to which the issuer is required to tag financial statement footnotes in detail? Is a grace period not needed?
• Should any grace period either for the first filing or for subsequent filings be for fewer or more than 30 days, such as five, 20 or 45 days? What would the impact of a grace period be on the usefulness of interactive data?
We believe interactive data, consistent with our proposed rules, should be easily accessible for all investors and other market participants. As such disclosure becomes more widely available, advances in interactive data software, online viewers, search engines and other Web tools may in turn facilitate access and usability of the data. Encouraging widespread accessibility to filers' financial information furthers our mission to promote fair, orderly, and efficient markets, and facilitate capital formation. We believe Web site availability of the interactive data would encourage its widespread dissemination, thereby contributing to lower access costs for users. We therefore propose that each filer covered by the proposed rules be required to provide the same interactive data on its corporate Web site, if it has one, that would be required to be provided to the Commission on the earlier of the day it filed or was required to file the related registration statement or report, as applicable.
We believe access to the interactive data on corporate Web sites would enable search engines and other data aggregators to more quickly and cheaply aggregate the data and make them available to investors because the data would be available directly from the filer, instead of through third-party sources that may charge a fee. To help further our goals of decreasing user cost and increasing availability, we do not propose to allow companies to comply with the Web posting requirement by including a hyperlink to the documents available electronically on the Commission's Web site.
We believe this requirement would be consistent with the increasing role that corporate Web sites perform in supplementing the information filed electronically with the Commission by delivering financial and other disclosure directly to investors. For example, we note that since 2003 issuers with corporate Web sites have been required to post on their Web sites beneficial ownership reports filed with respect to their securities on Forms 3, 4, and 5 under Section 16(a) of the Exchange Act.
• Should we adopt rules that require each filer to post interactive data from
• What advantages, if any, would dual Internet and EDGAR availability have for users, search engines, software developers, and others involved in the extraction and processing of financial data? Would it be helpful if our Web site provided the option to download the interactive data submission from our Web site or the issuer's Web site? Would it add a significant burden if an issuer were required to submit with its interactive data the URL that would link specifically to that interactive data as posted on the issuer's Web site or, alternatively, link to a part of the issuer's Web site from which there would be easy access to the interactive data as posted there? What would facilitate the realization of any advantages of Web site posting, for example the use of a standardized URL for interactive data? Would a standardized URL add significant cost to posting?
• Instead of requiring Web site posting, should we require that filers disclose in their registration statements or reports whether or not they provide free access to their interactive data on their corporate Web sites and, if not, why not?
• What impact would be realized by filers that do not currently provide Web sites? Would the proposed rules affect whether filers create or maintain Web sites?
• Would Web site posting decrease the time and cost required for aggregators of financial information and users to access disclosure formatted using interactive data?
• If we require Web site posting of interactive data, should we also require that the Web site include language stating that the entire registration statement, or periodic report also is available for free at the Commission's Web site?
• If we require Web site posting of interactive data, should we require, as proposed, that each filer provide the interactive data on its corporate Web site on the same day as the related filing, instead of at the same time?
To help ensure the accuracy of interactive data in the voluntary program, the data has undergone validation upon receipt by our electronic filing system separate from the normal validation of the traditional format filing.
Complete, accurate, and reliable financial statements and other disclosures are essential to investors and the proper functioning of the securities markets. Our proposed requirement to submit interactive data with registration statements and reports is designed to provide investors with new tools to obtain, review, and analyze information from public filers more efficiently and effectively. To satisfy these goals, interactive data must meet investor expectations of reliability and accuracy. Many factors, including company policies and procedures buttressed by incentives provided by the application of technology by the Commission, market forces and the liability provisions of the federal securities laws, help further those goals.
Building on the validation criteria referenced above for interactive data in the voluntary program, we plan to use validation software to check interactive data for compliance with many of the applicable technical requirements and to help the Commission identify data that may be problematic. For example, we expect the validation software to
• Check if required conventions (such as the use of angle brackets to separate data) are applied properly for standard and, in particular, non-standard special labels and tags;
• Identify, count, and provide the staff with easy access to non-standard special labels and tags;
• Identify the use of practices, including some the XBRL U.S. Preparers Guide contains, that enhance usability;
• Facilitate comparison of interactive data with disclosure in the corresponding traditional format filing;
• Check for mathematical errors; and
• Analyze the way that companies explain how particular financial facts relate to one another.
The availability of interactive data to the staff may also enhance its review of company filings. After the FDIC required submission of interactive data, it reported that its analysts were able to increase the number of banks they reviewed by 10% to 33%, and that the number of bank reports that failed to fully meet filing requirements fell from 30% to 0%. These bank reports require information that is more structured and less varied than the information we would require. As a result, the FDIC's efficiency gains from the use of interactive data likely would be greater than ours.
We believe analysts, individual investors and others outside the Commission that use the interactive data submitted to us also will make use of software and other tools to evaluate the interactive data and, as a result, market forces will encourage companies
With this proposal, we seek the rapid adoption and use of interactive data without imposing unnecessary cost and expense on filers. We therefore propose that the interactive data itself provided to us generally would be subject to a liability regime under the federal securities laws similar to that governing the voluntary program. We also propose that viewable interactive data as displayed through software available on the Commission's Web site, as described above and further discussed below, would be subject to the same liability under the federal securities laws as the corresponding portions of the traditional format filing.
Interactive data would be subject to the following liability-related provisions:
• Deemed not filed or part of a registration statement or prospectus for purposes of sections 11 and 12 of the Securities Act;
• Deemed not filed for purposes of section 18 of the Exchange Act and section 34(b) of the Investment Company Act;
• Not otherwise subject to the liabilities of these sections;
• Subject to other liability under these Acts for the substantive content of the financial disclosures (as distinct from compliance with proposed Rule 405) in the same way and to the same extent as the traditional format part of the related official filing. The content of the financial disclosure refers, for example, to the numerical values in the financial statements or footnotes and the statements in the footnotes. The Rule 405 requirements generally refer to the process of tagging and formatting the content of the financial statements for the interactive data file;
• Deemed filed for purposes of (and, as a result, benefit from) Rule 103 under Regulation S-T;
• Protected from liability under these Acts for failure to comply with the requirements of proposed Rule 405 if the interactive data either:
○ Met the requirements of proposed Rule 405 of Regulation S-T; or
○ Failed to meet those requirements but the failure occurred despite the issuer's good faith and reasonable effort and the issuer corrected the failure as soon as reasonably practicable after becoming aware of it; and
• Excluded from the officer certification requirements under Exchange Act Rules 13a-14 and 15d-14.
None of the proposed liability-related provisions for interactive data submitted to the Commission, however, would affect the application of the anti-fraud provisions under the federal securities laws, whether the interactive data is submitted to the Commission or posted on an issuer's Web site.
Rule 405 is being proposed, in part, under the Commission's authority to specify information required to be submitted to the Commission in, for example, registration statements and periodic reports. To encourage accurate filing of interactive data without fear of making good faith errors, the Commission is proposing Rule 406. Although not expressly addressed in proposed Rule 406, the Commission would have the authority to enforce compliance with proposed Rule 405 because it has the authority to enforce compliance with any of its rules.
We believe these liability-related provisions strike an appropriate balance between avoiding unnecessary cost and expense and encouraging accuracy in light of the nature of the interactive data to which they apply and the additional accuracy incentives that may be provided by our validation software and market forces.
Other aspects of the proposal would supplement the Commission's objective of supplying reliable and accurate information to investors. First, the financial statements and other disclosures in the traditional format part of the related official filing with which the interactive data appear as an exhibit would continue to be subject to the usual liability provisions of the federal securities laws. For example, the traditional format part of the related official filing would continue to be subject to section 10(b) and Rule 10b-5
Second, we propose that the usual liability provisions of the federal securities laws also would apply to human-readable interactive data that is identical in all material respects to the corresponding data in the traditional format filing
We expect that each filer would be in the best position to determine the appropriate manner in which to assure the accuracy of the interactive data it would be required to submit and the viewable interactive data that would result. We also expect that software providers and other private sector third parties would help develop procedures and tools to help in that regard. As an adjunct to those private sector efforts, we plan to make available to filers, on an optional basis, the opportunity to help assure accuracy by making a test submission with the Commission or using software we provide to create viewable interactive data.
A filer would have the opportunity to submit an interactive data exhibit as part of a test submission just as a filer can make test submissions today.
We are not proposing that filers be required to involve third parties such as auditors or consultants in the creation of the interactive data provided as an exhibit to a filer's periodic reports or registration statements, including assurance. We are taking this approach after considering various factors, including:
• The availability of a comprehensive list of tags for U.S. financial statement reporting from which appropriate tags can be selected, thus reducing a filer's need to develop new elements;
• The availability of user-friendly software with which to create the interactive data file;
• The multi-year phase-in for each filer, the first year of which entails the relatively straightforward process of tagging face financial statements, as was done during the voluntary program, and block tagging footnotes and financial statement schedules;
• The availability of interactive data technology specifications, and of other XBRL U.S., and XBRL International resources for preparers of tagged data;
• The advances in rendering/presentation software and validation tools for use by preparers of tagged data that can identify the existence of certain tagging errors;
• The expectation that preparers of tagged data will take the initiative to develop sufficient internal review procedures to promote accurate and consistent tagging; and
• The filer's and preparer's liability for the accuracy of the traditional format version of the financial statements that will also be provided using the interactive data format.
• Do the proposed rules strike an appropriate balance to promote the availability of reliable interactive data without imposing undue additional costs and burdens? If not, what balance of liability will best encourage filers to prepare reliable interactive data without subjecting them to undue fear of mis-tagging? How does the “extensibility” of interactive data,
• What are the risks to investors under the proposed liability rules? Will investors still find the interactive data sufficiently reliable to use it?
• Should interactive data be subject to liability if a filer does not tag its financial information in a manner consistent with the standards approved by the Commission, irrespective of the filer's good faith effort? If the answer is yes, what should the filer's liability be for such errors, and should liability attach even if the mistake is inadvertent? What if the error is the result of negligent tagging practices, but there was no affirmative intent to mislead?
• If interactive data are subject to liability as proposed, is it necessary or appropriate for viewable interactive data to be subject to liability as and to the extent proposed or otherwise? Should the answer depend on the degree of liability to which the interactive data are subject? Should viewable interactive data be subject to liability in a manner or to an extent different than as proposed?
• Should any or all interactive data be encompassed within the scope of officer certifications? Is there any reason to treat interactive data differently from traditional format data in this respect?
• Should any or all interactive data be deemed filed for purposes of Section 34(b) of the Investment Company Act and, if so, should it be regardless of compliance with proposed rule 405 or a filer's good faith and reasonable efforts to comply?
• Should the liability for interactive data be exactly the same as it is for XBRL-Related Documents under the voluntary program?
• Would software be commercially available and reasonably accessible to all required interactive data filers, investors and analysts that would make detection of tagging errors, such as the use of inappropriate tags or improper extensions, easy and cost-effective? If so, would such monitoring by investors and analysts likely discourage the improper use of extensions or negligent conduct in the tagging process?
• Would the use of software to search for and detect any differences between a filer's interactive data and the Commission-approved interactive data tags, financial statement captions, and other attributes depend on the degree of analyst coverage or investor interest?
• Should a rule expressly state that the Commission retains the authority to enforce compliance with proposed Rule 405?
• Should we require the involvement of auditors, consultants, or other third parties in the tagging of data? If assurance should be required, what should be its scope, and should any such requirement be phased in?
• Should we phase in increasing levels of liability over time? Are the proposed limitations on liability necessary and appropriate at the outset, for example, the first year that a company is subject to the interactive data requirement, but inappropriate at a later time? Should we require that interactive data be subject to more liability later?
• Should the validation software, as contemplated, cause an interactive data exhibit with a major error to be held in suspense in the electronic filing system while the rest of the filing would be accepted and disseminated if there were no major errors outside of the interactive data exhibit? In that case, should the validation software hold the entire filing in suspense or reject or accept the entire filing or interactive data exhibit?
As the technology associated with interactive data improves, issuers may integrate interactive data technology into their business information processing. When this integration occurs, the preparation of financial statements may become interdependent with the interactive data tagging process. As this occurs, an issuer and its auditor should evaluate these changes in the context of their reporting on internal control over financial reporting.
SAS 8 (AU Section 550) was issued in December 1975 to address an auditor's consideration of information in addition to audited financial statements and the independent auditor's report on the audited financial statements included in documents that are published by an entity (
The proposed rules would not eliminate or alter existing filing requirements that financial statements and financial statement schedules be filed in traditional format. We believe investors and analysts may wish to use these electronic formats to obtain an electronic or printed copy of the entire registration statement or Form 10-Q, 10-K, or 20-F, either in addition to or instead of disclosure formatted using interactive data. In addition, we propose to no longer require or permit the cautionary disclosure from the voluntary program for required interactive data, which states that investors should not rely on the interactive data information in making investment decisions. We believe that such language would be inconsistent with the proposal that interactive data be part of the related registration statement or report.
• Should the proposed rules eliminate the requirement that the financial information be submitted in traditional format, in addition to interactive data format? Should cautionary language from the voluntary program be eliminated or modified and, if not, why not?
To comply with the proposed rules, filers using U.S. GAAP would be required to tag their financial information using the most recent list of tags for U.S. financial statement reporting, as released by XBRL U.S. and required by the EDGAR Filer Manual.
Regular updates to the list of tags for U.S. financial statement reporting will likely be posted annually and be available for downloading. In addition, interim extensions may be made available for download in order to reflect changes in accounting and reporting standards. To provide companies sufficient time to become familiar with any such updates, we anticipate giving advance notice before requiring use of an updated list of tags. Based on experience to date with the most recent update to the list of tags, we believe that it is sufficiently developed to support the interactive data disclosure requirements in the proposed rules.
Similarly, filers using IFRS as issued by the IASB would be required to tag their financial information using the most recent list of tags for international financial reporting, as released by the IASCF and specified in the EDGAR Filer Manual.
One of the principal benefits of interactive data is its extensibility—that is, the ability to add to the standard list of tags in order to accommodate unique circumstances in a filer's particular disclosures. The use of customized tags, however, may also serve to reduce the ability of users to compare similar information across companies. In order to promote comparability across companies, our proposed rules would limit the use of extensions to circumstances where the appropriate financial statement element does not exist in the standard list of tags. We are also proposing that wherever possible, preparers change the label for a financial statement element that exists in the standard list of tags, instead of creating a new customized tag. For example, the standard list of tags for U.S. GAAP includes the financial statement element “gross profit.” The list does not include “gross margin,” because this is definitionally the same
Under Item 401(c) of Regulation S-T, voluntary filers' interactive data elements must reflect the same information as the corresponding traditional format elements. Further, no data element can be “changed, deleted or summarized” in the interactive data file. We do not propose to change this equivalency standard for financial statements provided in interactive data format as required by the proposed rules.
• Is our focus on comparability appropriate? Instead of stressing ease of financial statement comparability, should our rules permit greater use of customized data tags?
• Should we codify any other principles to encourage comparability without unduly reducing the extensibility of interactive data?
We propose to require that filers provide interactive data in the form of exhibits to the related registration statements or reports.
In addition to both Regulation S-T, which would include the rules we are proposing, and the instructions in our EDGAR Filer Manual, filers may access other sources for guidance in tagging their financial information. These include the XBRL U.S. Preparers Guide; user guidance accompanying tagging software; and financial printers and other service providers. New software and other forms of third-party support for tagging financial statements using interactive data are also becoming widely available.
• What specific guidance should be provided in Regulation S-T for interactive data filers?
• Does the XBRL U.S. Preparers Guide provide useful guidance to promote consistent tagging between periods and among various companies?
• Is the user guidance accompanying tagging software, and the guidance available from financial printers and other service providers helpful for filers to tag their financial statements? What other sources of guidance might prove useful?
We propose that if a filer does not provide the required interactive data submission, or post the interactive data on the company Web site, by the required due date, the filer would be unable to use short form registration statements on Forms S-3, F-3, or S-8.
We believe that precluding the use of short form registration statements during any period of failure to comply would appropriately direct attention to the proposed interactive data reporting requirement. And allowing filers to reestablish their current and timely status by later complying with the interactive data reporting requirement would strike a reasonable balance of negative consequences and recognition that the company's traditional format reports would have been filed.
Consistent with the treatment of other applicable reporting obligations, we propose to provide hardship exemptions for the inability to timely electronically submit interactive data. Rule 201 under Regulation S-T provides for temporary hardship exemptions. Rule 202 under Regulation S-T provides for continuing hardship exemptions.
Rule 201 generally provides a temporary hardship exemption from electronic submission of information, without staff or Commission action, when a filer experiences unanticipated technical difficulties that prevent timely preparation and submission of an electronic filing. The temporary hardship exemption permits the filer to initially submit the information in paper but requires the filer to submit a confirming electronic copy of the information within six business days of filing the information in paper. Failure to file the confirming electronic copy by the end of that period results in short form ineligibility.
We recognize the inherently electronic nature of interactive data. In light of this and the consequences to an issuer of not timely submitting interactive data, we propose to revise Rule 201 to provide a temporary hardship exemption. This exemption would apply without staff or Commission action if a filer experiences unanticipated technical difficulties that prevent the timely preparation and electronic submission of interactive data. The proposed temporary hardship exemption would cause the filer to be deemed current for purposes of incorporation by reference, short form registration, and Rule 144 for a period of up to six business days from the date the interactive data were required to be
Rule 202 permits a filer to apply in writing for a continuing hardship exemption if information otherwise required to be submitted in electronic format cannot be so filed without undue burden or expense. If the staff, through authority delegated from the Commission, grants the request, the filer must file the information in paper by the applicable due date and file a confirming electronic copy if and when specified in the grant of the request.
We propose to revise Rule 202 to provide that a grant of a continuing hardship exemption for interactive data would not require a paper submission and that filer would be deemed current until the end of the period for which the exemption is granted. Rule 202 also would provide that, if the exemption was granted for only a specified period rather than indefinitely, the filer would be deemed current up to the end of that period. If the filer did not electronically submit the interactive data by the end of that period, from the next business day forward the filer would not be deemed current until it did electronically submit the interactive data. Similarly, we propose to revise Rule 202 to provide an essentially mirror-image exemption from the proposed requirement for an issuer that has a corporate Web site to post the interactive data on its Web site.
• Are the consequences for failure to comply with the interactive data submission requirements appropriate?
• Should the proposed rules treat companies that do not comply as not current? Should the proposed rules provide similar treatment whether the failure to comply relates to interactive data submission, or to corporate Web site posting?
• Alternatively, should the proposed rules go further and treat companies that do not comply as not timely?
• Should the proposed rules treat a filer's compliance with interactive data reporting as an express condition to the filer's registration statement's being declared effective?
• Does our proposed rule strike the correct balance of positive and negative consequences when a filer meets its requirements to provide traditional format documents but fails to provide interactive data?
• Do commenters believe that the proposed revisions to the hardship exemptions would be sufficient to cover unanticipated technical difficulties associated with interactive data? If insufficient, why would they be insufficient and how should the hardship exemptions be tailored to address technical difficulties associated with interactive data? For example, would six business days be an appropriate period for the temporary hardship exemption to apply? If not, would a shorter or longer period be appropriate, and why?
We request comment on the specific issues we discuss in this release, and on any other approaches or issues that we should consider in connection with the proposed amendments. We seek comment from any interested persons, including those required to file information with us on the EDGAR system, as well as investors, disseminators of EDGAR data, industry analysts, EDGAR filing agents, and any other members of the public.
The proposed amendments contain “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995, or PRA.
The title for the new collection of information the proposed amendments would establish is “Interactive Data” (OMB Control No. 3235-XXXX). This collection of information relates to already existing regulations and forms adopted under the Securities Act and the Exchange Act that set forth financial disclosure requirements for registration statements and periodic reports. The proposed amendments would require issuers to submit specified financial information to the Commission and post it on their corporate Web sites, if any, in interactive data form. The specified financial information already is and would continue to be required to be submitted to the Commission in traditional format under existing registration statement and periodic report requirements. Compliance with the proposed amendments would be mandatory according to the phase-in schedule previously described.
Form S-1 (OMB Control No. 3235-0065), Form S-3 (OMB Control No. 3235-0073), Form S-4 (OMB Control No. 3235-0324), and Form S-11 (OMB Control No. 3235-0067) prescribe information that a filer must disclose to register certain offers and sales of securities under the Securities Act. Form F-1 (OMB Control No. 3235-0258), Form F-3 (OMB Control No. 3235-0256) and Form F-4 (OMB Control No. 3235-0325) prescribe information that a foreign private issuer must disclose to register certain offers and sales of securities under the Securities Act. Form 10-K (OMB Control No. 3235-0063) prescribes information that a filer must disclose annually to the market about its business. Form 10-Q (OMB Control No. 3235-0070) prescribes information that a filer must disclose quarterly to the market about its business. Form 20-F (OMB Control No. 3235-0288) is used by a foreign private issuer both to register a class of securities under the Exchange Act as well as to provide its annual report required under the Exchange Act.
The information required by the new collection information we propose, would correspond to specified financial information now required by these forms and would be required to appear in exhibits to these forms and on filers' corporate Web sites. The compliance burden estimates for the proposed collection of information are based on the proposed phase-in, beginning with approximately 500 large accelerated filers subject to the rules in the first year, followed by approximately 1,300 more filers in year two and approximately 10,200 more filers in year three.
Based on estimates from the voluntary filer participant questionnaire results,
• Internal burden hours to tag the face financials:
• 125 hours for the first filing under the proposed requirements; and
• 17 hours for each subsequent filing.
• Out-of-pocket cost for software and filing agent services: $6,140 for each filing.
Based on qualitative assessments of time, we estimate that interactive data filers would incur the following average internal burden hours:
• Footnotes
• 7 hours to block tag for each filing made during the first year under the proposed requirements;
• 100 hours to detail tag for the first filing made in the second year under the proposed requirements; and
• 50 hours to detail tag for each subsequent filing.
• Schedules
• 1 hour to block tag for each filing made during the first year under the proposed requirements;
• 10 hours to detail tag for the first filing made in the second year under the proposed requirements; and
• 5 hours to detail tag for each subsequent filing.
• Web site Posting: 4 hours to post all interactive data submissions made during each year.
Based on the number of filers we expect to be phased in each of the first three years under the proposed requirements, the number of filings that we expect those filers to make that would require interactive data
By the fifth year under the proposed requirements, filers to be phased in generally will have been subject to the proposed requirements for at least two years. As a result, filers generally would incur burdens applicable to interactive data filings made after the first filing in which the filer detail tagged footnotes and schedules. Consequently, we estimate that in the fifth year under the proposed requirements, the burden on filers would be 3,743,683 internal hours and $330.9 million in out-of-pocket expenses and would be incurred by 11,893 filers for an average burden per filer of 314.8 internal hours and $27,800 in out-of-pocket expenses.
Regulation S-K (OMB Control No. 3235-0071) specifies information that a registrant must provide in filings under both the Securities Act and the Exchange Act. Regulation S-T (OMB Control No. 3235-0424) specifies the requirements that govern the electronic submission of documents. The proposed changes to these items would add and revise rules under Regulations S-K and S-T. The filing requirements themselves, however, are included in the forms and we have reflected the burden for these new requirements in the burden estimate for the forms. These rules in Regulations S-K and S-T do not impose any separate burden. We assign one burden hour each to Regulations S-K and S-T for administrative convenience to reflect the fact that these regulations do not impose any direct burden on companies.
We solicit comment on the expected Paperwork Reduction Act effects of the proposed amendments, including the following:
• The accuracy of our estimates of the additional burden hours that would result from adoption of the proposed amendments;
• Whether the proposed new collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility;
• Ways to enhance the quality, utility and clarity of the information to be collected;
• Ways to minimize the burden of the collection of information on those who respond, including through the use of automated collection techniques or other forms of information technology; and
• Any effects of the proposed amendments on any other collections of information not previously identified.
Any member of the public may direct to us any comments concerning these burden estimates and suggestions for reducing the burdens. Persons submitting comments on the collection of information requirements should direct their comments to the OMB, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and send a copy of the comments to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303, with reference to File No. S7-11-08. Requests for materials submitted to OMB by the Commission with regard to these collections of information should be in writing, refer to File No. S7-11-08, and be submitted to the Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. OMB is required to make a decision concerning the collection of information between 30 and 60 days after publication of this release. Consequently, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication.
The proposed rules would require submission of interactive data-formatted financial statements and other financial information and the posting of such information on an issuer's corporate Web site, if any, according to a phase-in schedule. The proposed rules likely would result in the benefits and costs described below. We base our belief on an economic analysis of data obtained from several sources, including voluntary program participant responses to a staff-prepared questionnaire, information on the experience of issuers that participated in an interactive data pilot program in Japan (covering a larger sample of issuers), and interviews conducted with parties knowledgeable about interactive data technology in order to learn their views on issues including those that might affect the interpretation of the questionnaire responses.
Interactive data are intended to remove a barrier in the flow of information between issuers and users of information that is conveyed through corporate financial reports. This should enable less costly dissemination of information and thereby improve the allocation of capital. The cost of implementation will depend primarily on the costs of transition by issuers to the new mode of reporting. The magnitudes of these benefits and costs from any individual issuer's adoption of interactive data reporting will depend
The proposed rules have the potential to benefit investors both directly and by facilitating the exchange of information between issuers and the analysts and other intermediaries who receive and process the financial reports of public companies.
Benefits of the proposed rulemaking accrue from the acceleration of market-wide adoption of interactive data format reporting. The magnitudes of the benefits thus depend on the value to investors of the new reporting regime relative to the old reporting regime and on the extent to which the mandated adoption speeds up the market-wide implementation.
Requiring issuers to file their financial statements using the interactive data format would enable investors, analysts, and the Commission staff to capture and analyze that information more quickly and at a lower cost than is possible using the same financial information provided in a static format.
The magnitude of this informational benefit varies, however, with the availability of sophisticated tools that will allow investors to analyze the information. The growing development of software products for users of interactive data is helping to make it increasingly useful to both institutional and retail investors.
Interactive data also could provide a significant opportunity for issuers to automate their regulatory filings and business information processing, with the potential to increase the speed, accuracy, and usability of financial disclosure. This reporting regime may in turn reduce filing and processing costs.
By enabling filers to further automate their financial processes, interactive data may eventually help filers improve the speed at which they generate financial information. For example, with standardized interactive data tags, registration statements and periodic reports may require less time for information gathering and review.
Because a substantial portion of each financial report makes use of the same information, a filer that uses a standardized interactive data format at earlier stages of its reporting cycle may also increase the accuracy of its financial disclosure by reducing the need for repetitive data entry that could contribute human error and enhancing the ability of a filer's in-house financial professionals to identify and correct errors in the issuer's registration statements and periodic reports filed in traditional electronic format.
A filer that uses a standardized interactive data format at earlier stages of its reporting cycle also may increase the usability of its internal financial information. Through interactive data, a filer can dynamically search and analyze what is currently static, text-based internal financial information, facilitating the comparison of financial and business performance across business units and reporting periods. For example, filers that use interactive data may be able to consolidate enterprise financial information more quickly and potentially more reliably across operating units with different accounting systems.
Filers that automate their regulatory filings and business information processing in a manner that facilitates their generation and analysis of internal financial information could, as a result, realize a reduction in costs.
The proposed requirements could benefit investors by making financial markets more efficient in regard to the following:
• Capital formation as a result of public companies being in a better position to attract investor capital because of greater (less costly) awareness on the part of the investors of issuer financial information; and
• Capital allocation as a result of investors being better able to allocate capital among those issuers seeking it because of interactive data reporting facilitating innovations in efficient communication of issuer financial information.
An increase in the efficiency of capital formation is a benefit that may accrue to the extent that interactive data reduces some of the information barriers that make it costly for companies to find appropriate sources of external finance. In particular, smaller public companies are expected to benefit from enhanced exposure to investors. If interactive data financial reporting increases the availability, or reduces the cost of collecting and analyzing corporate financial data, then there could be improved coverage of small companies by analysts and commercial data vendors.
At present, many small companies are not included in commercially available products that provide corporate financial data, possibly due to high data collection costs relative to the value of providing coverage. Their absence may reduce the likelihood that they receive coverage by financial analysts who use commercially available products to assess issuer performance. Hence, if interactive data reporting increases coverage of smaller companies by commercially available financial information products, and this increases their exposure to analysts and investors, then lower search costs for capital could result. In other words, smaller companies could realize a lower cost of capital, or less costly financing.
While an increase in coverage should occur for some issuers, it is possible that less than full coverage will remain in more sophisticated products that provide analysis or reporting items beyond basic financial information. This conclusion is based on an assumption that many commercially available product offerings provide valuable information beyond what is reported in basic financial information, and the costs of providing this additional information for every company may make 100% coverage prohibitive. In particular, the smallest issuers may not offer sufficient market capitalization to make investment worthwhile to larger investors, for whom these commercial products are primarily designed.
So while lower data collection costs are likely to increase the level of coverage that smaller issuers receive from investors and market analysts, there is no certainty that this will extend down to the very smallest set of issuers. As a result, it is possible that the capital-raising benefits of interactive data reporting for some issuers will not be as great as for others. Regardless, we are not aware of any data to suggest that any issuer would be made worse off with respect to analyst and investor coverage as it pertains to capital formation.
An increase in the efficiency of capital allocation may accrue to the extent that interactive data increase the quality of information in financial markets by reducing the cost to access, collect and analyze corporate financial data or improves the content of issuer-reported information.
Information quality in financial markets would likely be higher if interactive data reporting were required than if not, leading to more efficient capital allocation. As a result of the improved utility of information, investors may be able to better distinguish the merits of various investment choices, thereby facilitating capital flow into the favored investment prospects. This outcome is the main tenet of improved market efficiency, whereby providing more widespread access to information concerning the value of a financial asset such as a company's shares results in better market pricing. Consequently, reducing the costs of accessing, collecting and analyzing information about the value of a financial asset facilitates this end.
Requiring companies to provide interactive data would improve the quality of financial information available to end users, and help spur interactive data-related innovation in the supply of financial services products, resulting from a potential increased competition among suppliers of such products due to lower entry barriers as a result of lower data collection costs.
However, we have considered competing views of the informational consequences of interactive data. For example, a requirement to submit interactive data information could decrease the marginal benefit of collecting information and thus reduce the information quality to the extent it reduces third-party incentives to facilitate access to, collect or analyze information. Assuming that markets efficiently price the value of information, the amount of information accessed, collected (or enhanced) and analyzed will be determined by the marginal benefit of doing so.
Another potential information consequence of the proposed requirements may be changes to the precision and comparability of the information disseminated by data service providers since the interactive data requirements would shift the source of data formatting that allows aggregation and facilitates comparison and analysis from end-users to issuers submitting interactive data. At present, data service providers manually key financial information into a format that allows aggregation. As a result, the data service provider makes interpretive decisions on how to aggregate reported financial items so that they can be compared across all companies. Consequently, when a subscriber of the commercial product offered by a data service provider uses this aggregated data, it can expect consistent interpretation of the reported financial items. In contrast, a requirement for issuers to submit interactive data information would require the issuers to independently decide within the confines of applicable requirements which financial “tag” best describes
The content of issuer-reported information may improve because, as previously discussed, an issuer that uses a standardized interactive data format at earlier stages of its reporting cycle may increase the accuracy of its financial disclosure.
The primary cost of the rulemaking is the cost of filers' implementation of the rule, which includes the costs of submitting and posting interactive data. We discuss this cost element extensively below. In addition, because the rule allows an increase in the flow of financial information being reported directly to analysts and investors, there will be a cost of learning on the part of the investors in using and analyzing financial information at the interactive data level.
As for the cost of implementation of the rule, based on currently available data, we estimate the average direct costs of submitting and posting interactive data-formatted financial statements and other information for all issuers under the proposed rules would, based on certain assumptions, be as follows:
The
• Average cost of first submission from voluntary program questionnaire data is $30,933.
• Average cost of second submission is $9,060 (69% average reduction).
• These average cost estimates increase by 20% after removing voluntary program participants in an interactive data-related business (these participants may have skills and incentives specific to interactive data, unrepresentative of other issuers).
• Due to sampling error,
• Smaller financial issuers appear to have less complex financials and labor costs that tend to be 20-30% lower than for other issuers to submit interactive data information.
• There also is some evidence to suggest that the smallest (non-accelerated) issuers might have submission costs or compliance difficulties in excess of other issuers.
This analysis attempts to quantify some of the direct costs that issuers will incur if we require submission and posting of interactive data.
At present, there are 76 issuers that have participated in the voluntary program. Of these, 35 were provided questionnaires on the details of their cost experience, and 22 responses were collected by the time of this analysis. Table 2 summarizes the average aggregate costs, including software and filing agent service costs and an estimated cost for the internal labor hours required to prepare and submit the interactive data format information. The low and high estimates of the cost for internal labor hours represent billing rates of $130 (internal junior accountant) and $250 (external accountant) per hour, respectively.
Although there is a great deal of consistency across the voluntary program questionnaire responses, three considerations become important when extending these questionnaire-based cost estimates from the voluntary program sample to the population of all issuers that would be required to submit interactive data. First, the sample size is small. There are only 22 voluntary program respondents to the questionnaire, representing approximately 0.21% of all issuers that ultimately would be required to submit interactive data.
The second and third factors to consider arise from the fact that the survey respondents may not be representative of the general population of issuers that would comply with a proposed rule. This is known as “sample selection bias.” The first of these factors arises from evidence that many voluntary program survey participants have a business interest in interactive data, such as filing agents, other filing service providers, financial services providers, and other consulting agents. Five of the 22 survey respondents had such an affiliation. These issuers may have incentives and skill sets unrepresentative of the average issuer, and as such, may cause their costs to depart from the likely submission cost of the average issuer if interactive data become required. Indeed, after removing the five respondents with an obvious interactive data related business interest, the average cost estimate increased by 20%. Thus, submission costs appear to be lower for issuers that have an interactive data-related business relative to other issuers.
The other effect of sample selection relates to the size of the respondent companies. The voluntary program questionnaire evidence is based on responses of predominantly large issuers, and their cost experience may not be representative of the smaller issuers. As is evident from Figure 1, voluntary program participants are found among the largest of all issuers, with more than 64% in the largest market size decile, and more than 88% considered to be large accelerated filers (measured as greater than $750 million in market capitalization).
A size bias is plausible, since there are reasons to believe that the reported submission costs vary with the size of the issuer. For instance, larger issuers might have lower interactive data submission costs than smaller issuers, since they have a larger pool of internal resources to draw from, allowing them to more efficiently allocate available skill sets from their labor pools to implement interactive data reporting technology. Moreover, larger organizations might have greater excess capacity in their internal labor pool such that they are better able to absorb the short-term labor needs of “learning” interactive data. If so, the effect of sample selection in this instance may be to underreport the interactive data submission costs for smaller issuers.
Alternatively, smaller issuers could have lower submission costs than larger issuers if their operations are less complex. This reasoning suggests that simpler business operations lead to simpler financial statements, requiring less effort to tag and submit using interactive data. Hence, any reduction in available resources to allocate to interactive data submission may be offset by lesser demand for resources. This view suggests a trade-off in submission costs as issuers become smaller, and as a typical result, less complex.
We have also reviewed evidence from the Japanese interactive data pilot program. Starting in April 2008, Japanese filers are required to report financial statements with their Financial Services Agency (JFSA) using interactive data technology. Before this requirement, 1,233 Japanese companies participated in a pilot program; 768 participants described their interactive data submission experience through a JFSA survey. Unlike the U.S. voluntary program participants, Japanese pilot program participants span a larger issuer size range, including a considerable number of the smallest issuers in the market (see Figure 3).
The survey evidence suggests that smaller Japanese filers required less time to prepare and submit their first interactive data filing than larger Japanese filers, but even so, some of the smallest filers exhibited the greatest compliance difficulty.
While the number of labor hours required for the smallest filers is not greater than that of the largest filers, the smaller filers were far more likely to file late, or “fail” (Figure 3). The JFSA classified firms as “failures” for having not completed their first filing in the time required (
The JFSA indicated that most of the “failures” occurred among filers who underestimated the resources required for their first filing, with many of the failing firms (44%) electing to prepare and submit their documents on their own. In contrast, it is estimated that 87% of pilot program firms used a printing company to prepare and submit their documents. Of the Japanese pilot program participants that were classified as having failed to submit, 69% indicated that they would not have a problem for their next submission.
The results of the JFSA survey yield two relevant conclusions. First, smaller, but not the smallest, issuers are likely to have lower submission costs as a result of fewer labor hours required to submit information using interactive data. Second, these submission cost savings may not accrue to the smallest issuers (
Although the Japanese pilot program findings document an important size-related cost consideration, extrapolating these results to what might be expected in a U.S. interactive data required program poses some risk given the potential differences between Japanese and U.S. regulatory regimes and filing requirements. For instance, implementing required interactive data reporting in the United States may be more complex, as a greater number of accounting concepts can be tagged.
To assess the likelihood that the Japanese survey results can be applied to the proposed program under which interactive data would be required, Form 10-K complexity is examined across issuer size. If reduced complexity in financial reporting is responsible for the lower labor costs among smaller Japanese issuers, then evidence of reduced complexity among Commission issuers as their size decreases would suggest that lower labor costs among small U.S. issuers as well. This analysis uses the number of items reported in a filer's financial document as the measure of document complexity. The evidence in Figure 4 reveals that there is roughly a 15% difference in the number of elements reported by the smallest and largest filers.
The final cost consideration in this section is the scalability of interactive data-related support services and technology. In particular, it is unclear how the market for interactive data support services and technology may change if the Commission required over 10,000 issuers to submit and post interactive data.
The roles of each potential kind of service provider within the interactive data market are likely to develop further and are not yet clear, and there are many potential participants to consider, including the software vendors, financial reporting system providers (
Combining the uncertainty over the source of future interactive data services with increased demand for these services could result in a new equilibrium market price that is different from what is currently reported by voluntary program participants. This price could be higher if the demand for interactive data services increases (from 76 voluntary program participants to more than 10,000 total participants) at a faster rate than the supply for these same services. For example, we are aware that one interactive data service provider offers a basic package to issuers that costs $15,000, and includes all software resources and training required (it suggests 40 hours is needed) for the issuer to submit its first quarterly interactive data information. This price schedule was based on an expectation of servicing as many as 100 voluntary participants in the first year of the program. However, the main pricing concern for the future is whether this or similar products could be scaled upwards to service a much larger market without material (adverse) impact to the stated price. More broadly, if an interactive data requirement resulted in clients subscribing for interactive data services faster than the rate at which these services can be supplied, then a price increase is the natural discriminator in how to allocate limited resources.
The submission costs discussed in this section suggest that a phase-in program that is implemented too quickly could result in higher than necessary submission costs if the supply of interactive data-related resources is constrained, but the effect would likely diminish as a market place for interactive data services develops. Hence, this concern is mitigated to the extent that issuers are phased in at a rate that allows interactive data service suppliers to keep pace with demand.
We solicit comment on all aspects of this cost-benefit analysis, including the identification of any additional costs or benefits or, suggested alternatives to, the proposed rules. Commenters are requested to provide empirical data and other factual support for their views to the extent possible.
We request comment regarding the costs and benefits to investors, companies, analysts, third-party information providers, software providers, filing agents, and others who may be affected by the proposed rules. We are particularly interested in information on the costs and benefits to smaller reporting companies.
In particular, we request comment regarding:
• The differences between start-up costs and the costs of providing interactive data on a continuing basis after the initial preparation;
• The cost to prepare interactive data in block-text and detail for footnotes and schedules to financial statements;
• Differences in interactive data preparation costs due to differences between U.S. GAAP and IFRS as issued by the IASB and the list of tags related to each; and the cost of Web site posting.
Section 23(a)(2) of the Exchange Act
The proposals to require issuers to submit interactive data to the Commission and post it on their corporate Web sites are intended to make financial information easier for investors to analyze while assisting in automating regulatory filings and business information processing. In particular, we believe that the proposed rules would enable investors and others to search and analyze the financial information dynamically; facilitate comparison of financial and business performance across issuers, reporting periods and industries; and, possibly, provide a significant opportunity to automate regulatory filings and business information processing with the potential to increase the speed, accuracy, and usability of financial disclosure. Further, as discussed in detail above, we believe that the proposals may lead to more efficient capital formation and allocation.
We understand that private sector businesses such as those that access financial information and aggregate, analyze, compare or convert it into interactive format have business models and, as a result, competitive strategies that the proposed interactive data requirements might affect. Since interactive data technology is designed to remove an informational barrier, business models within the financial services industry that are currently adapted to traditional format document reporting may change, with possible consequences for the revenue stream of current product offerings due to the competitive effects of such a change. The competitive effects may relate to changes in the accessibility of financial information to investors, the nature of the information that investors receive, and the potential from new entry or innovation in the markets through which financial reports are transmitted from filers to investors. For example, lower entry barriers that result from lower data collection costs may increase competition among suppliers of financial services products and help spur interactive data-related innovation. It is also possible, however, that a requirement to submit interactive data information could decrease the marginal benefit of collecting information and thus cause suppliers of financial services products to produce information that is less robust to the extent the decreased marginal benefit reduces third-party incentives to facilitate access to, collect or analyze information. If markets efficiently price the value of information, the amount of information accessed, collected (or enhanced) and analyzed will be determined by the marginal benefit of doing so.
For the reasons described more fully above, we believe the liability protections for interactive data would be necessary or appropriate in the public interest and consistent with the protection of investors. Moreover, the protections would also be consistent with the purposes fairly intended by the policy and provisions of the Investment Company Act.
We request comment on whether the proposals, if adopted, would promote efficiency, competition, and capital formation or have an impact or burden on competition. Commenters are requested to provide empirical data and other factual support for their views, if possible.
This Initial Regulatory Flexibility Analysis has been prepared in accordance with 5 U.S.C. 603. It relates to proposed amendments that would require issuers to provide their financial statements to the Commission and on their corporate Web sites in interactive data format.
The main purpose of the proposed amendments is to make financial information easier for investors to analyze while assisting in automating regulatory filings and business information processing. Currently, issuers are required to file their registration statements, quarterly and annual reports, and transitional reports in a traditional format that provides static text-based information. We believe that providing the financial statements these filings contain in interactive data format would
• Enable investors and others to search and analyze the information dynamically;
• Facilitate comparison of financial and business performance across issuers, reporting periods and industries; and
• Possibly provide a significant opportunity to automate regulatory filings and business information processing with the potential to increase the speed, accuracy, and usability of financial disclosure.
We are proposing the amendments under sections 7, 10, 19(a) and 28 of the Securities Act,
The proposed amendments would affect issuers that are small entities. Exchange Act Rule 0-10(a)
All issuers subject to the proposed rules would be required to submit financial information to the Commission in interactive data format and, if they have a corporate Web site, post the interactive data on their Web site. We believe that, in order to submit financial information in interactive data format, issuers in general and small entities in particular likely would need to prepare and then submit the interactive data by expending internal labor hours in connection with either or both of
• Purchasing, learning and using software packages designed to prepare financial information in interactive format; and
• Hiring and working with a consultant or filing agent.
We believe that issuers would incur relatively little cost in connection with the requirement to post the interactive data on the issuer's corporate Web site because the requirement applies only to issuers that already have a corporate Web site.
We believe that the proposed amendments would not duplicate, or overlap or conflict with, other federal rules.
The Regulatory Flexibility Act directs us to consider significant alternatives that would accomplish the stated objective, while minimizing any significant adverse impact on small entities. In connection with the proposed amendments, we considered several alternatives, including the following:
• Establishing different compliance or reporting requirements or timetables that take into account the resources available to small entities;
• Further clarifying, consolidating or simplifying the proposed requirements;
• Using performance rather than design standards; and
• Providing an exemption from the proposed requirements, or any part of them, for small entities.
We believe that, as to small entities, differing compliance, reporting or non-phase-in timetable requirements, a partial or complete exemption from the proposed requirements or the use of performance rather than design standards would be inappropriate because these approaches would detract from the long-term completeness and uniformity of the interactive data format financial information database. Less long-term completeness and uniformity would reduce the extent to which the proposed requirements would enable investors and others to search and analyze the information dynamically; facilitate comparison of financial and business performance across issuers, reporting periods and industries; and, possibly, provide a significant opportunity to automate regulatory filings and business information processing with the potential to increase the speed, accuracy, and usability of financial disclosure. We note, however, that small entities would not be subject to the proposed requirements until year three of the phase-in and, as all other issuers, would not be required to tag in detail the footnotes and schedules to their financial statements until their second year subject to the requirements.
We are considering whether further clarifying, consolidating or simplifying the proposed interactive data submission and posting requirements would be appropriate. Based in part on our experience with the voluntary program, we believe that the proposed requirements are sufficiently clear and straightforward (although, we seek comment on this).
We encourage comments with respect to any aspect of this Initial Regulatory Flexibility Analysis. In particular, we request comments regarding:
• The number of small entities that may be affected by the proposed amendments;
• The existence or nature of the potential impact of the proposed amendments on small entities as discussed in this analysis; and
• How to quantify the impact of the proposed amendments.
We ask those submitting comments to describe the nature of any impact and provide empirical data supporting the extent of the impact. These comments will be considered in the preparation of the Final Regulatory Flexibility Analysis, if the proposed amendments are adopted, and will be placed in the same public file as comments on the proposed amendments themselves.
For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, a rule is “major” if it has resulted, or is likely to result in:
• An annual effect on the economy of $100 million or more;
• A major increase in costs or prices for consumers or individual industries; or
• Significant adverse effects on competition, investment or innovation.
We request comment on whether our proposals would be a “major rule” for
• The potential effect on the U.S. economy on an annual basis;
• Any potential increase in costs or prices for consumers or individual industries; and
• Any potential effect on competition, investment or innovation.
We are proposing the amendments outlined above under sections 7, 10, 19(a) and 28 of the Securities Act,
Reporting and recordkeeping requirements, Securities.
For the reasons set out in the preamble, we propose to amend Title 17, Chapter II of the Code of Federal Regulations as follows:
1. The authority citation for part 229 continues to read in part as follows:
15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 777iii, 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78
2. Amend § 229.601 by revising the exhibit table in paragraph (a) and by revising paragraph (b)(100) and adding paragraph (b)(101) to read as follows:
(a) * * *
(b) * * *
(100)
(101)
(i)
(A) A large accelerated filer (§ 240.12b-2 of this chapter) that had an aggregate worldwide market value of the voting and non-voting common equity held by non-affiliates of more than $5 billion as of the last business day of its most recently completed second fiscal quarter that prepares its financial statements in accordance with generally accepted accounting principles as used in the United States and the filing contains financial statements of the registrant for a period that ends on or after December 15, 2008;
(B) A large accelerated filer not specified in paragraph (b)(101)(i)(A) of this Item that prepares its financial statements in accordance with generally accepted accounting principles as used in the United States and the filing contains financial statements of the registrant for a period that ends on or after December 15, 2009;
(C) A filer not specified in paragraph (b)(101)(i)(A) or (B) of this Item that prepares its financial statements in accordance with generally accepted accounting principles as used in the United States and the filing contains financial statements of the registrant for a period that ends on or after December 15, 2010; or
(D) A foreign private issuer (§ 240.3b-4(c) of this chapter) that prepares its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and the filing contains financial statements of
(ii)
(A) Prepares its financial statements
(1) In accordance with either
(a) Generally accepted accounting principles as used in the United States; or
(b) International Financial Reporting Standards as issued by the International Accounting Standards Board; and
(2) Not in accordance with Article 6 of Regulation S-X (17 CFR 210.6-01
(B) Is not required to be submitted to the Commission under paragraph (b)(101)(i) of this Item.
(iii)
3. The authority citation for part 230 continues to read in part as follows:
15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78
4. Amend § 230.144 by revising paragraph (c)(1) to read as follows:
(c) * * *
(1)
5. The authority citation for part 232 continues to read in part as follows:
15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77z-3, 77sss(a), 78c(b), 78
6. Amend § 232.11 by adding definitions for “Interactive Data File”, “
(1) Are displayed when an Interactive Data File is converted from machine-readable computer code into human-readable text through software the Commission provides; and
(2) Are displayed through such conversion identically in all material respects to the corresponding financial statements, financial statement schedules and financial statement footnotes in the Related Official Filing.
7. Amend § 232.201 by:
a. Revising paragraph (a) introductory text;
b. Amending paragraph (b) by revising the headings to Notes 1 and 2;
c. Adding paragraph (c).
The revisions and additions read as follows:
(a) If an electronic filer experiences unanticipated technical difficulties preventing the timely preparation and submission of an electronic filing, other than a Form 3 (§ 249.103 of this chapter), a Form 4 (§ 249.104 of this chapter), a Form 5 (§ 249.105 of this chapter), a Form ID (§§ 239.63, 249.446, 269.7 and 274.402 of this chapter), a Form TA-1 (§ 249.100 of this chapter), a Form TA-2 (§ 249.102 of this chapter), a Form TA-W (§ 249.101 of this chapter), a Form D (§ 239.500 of this chapter) or an Interactive Data File (§ 232.11 of this chapter), the electronic filer may file the subject filing, under cover of Form TH (§§ 239.65, 249.447, 269.10 and 274.404 of this chapter), in paper format no later than one business day after the date on which the filing was to be made.
(b) * * *
* * *
* * *
(c) If an electronic filer experiences unanticipated technical difficulties preventing the timely preparation and
(1) Submission of an Interactive Data File (§ 232.11) as an exhibit as required by either Item 601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter) or Item 101 of the Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter), the electronic filer still can timely satisfy the requirement to submit the Interactive Data File in the following manner:
(i) Substitute for the Interactive Data File in the required exhibit a document that sets forth the following legend:
IN ACCORDANCE WITH THE TEMPORARY HARDSHIP EXEMPTION PROVIDED BY RULE 201 OF REGULATION S-T, THE DATE BY WHICH THE INTERACTIVE DATA FILE IS REQUIRED TO BE SUBMITTED HAS BEEN EXTENDED BY SIX BUSINESS DAYS; and
(ii) Submit the required Interactive Data File no later than six business days after the Interactive Data File originally was required to be submitted.
(2) Posting on its corporate Web site of an Interactive Data File as required by either Item 601(b)(101) of Regulation S-K or Item 101 of the Instructions as to Exhibits of Form 20-F, the electronic filer still can timely satisfy the requirement to post the Interactive Data File by so posting the Interactive Data File within six business days after the Interactive Data File was required to be submitted to the Commission.
Electronic filers unable to submit or post, as applicable, the Interactive Data File under the circumstances specified by paragraph (c), must comply with the provisions of this section and cannot use Form 12b-25 (§ 249.322 of this chapter) as a notification of late filing. Failure to submit or
8. Amend § 232.202 by:
a. Revising paragraphs (a) introductory text, (a)(2), (b)(2), and (b)(3);
b. Revising paragraph (c);
c. Revising paragraph (d) and;
d. Revising the headings to Notes 1, 2, and 3 to the section; and
e. Adding Note 4 to the section.
The revisions and additions read as follows:
(a) An electronic filer may apply in writing for a continuing hardship exemption if all or part of a filing, group of filings or submission, other than a Form ID (§§ 239.63, 249.446, 269.7, and 274.402 of this chapter) or a Form D (§ 239.500 of this chapter), otherwise to be filed or submitted in electronic format or, in the case of an Interactive Data File (§ 232.11), to be posted on the electronic filer's corporate Web site, cannot be so filed, submitted or posted, as applicable, without undue burden or expense. Such written application shall be made at least ten business days before the required due date of the filing(s), submission(s) or posting of the proposed filing, submission or posting date, as appropriate, or within such shorter period as may be permitted. The written application shall contain the information set forth in paragraph (b) of this section.
(1) * * *
(2) If the Commission, or the staff acting pursuant to delegated authority, denies the application for a continuing hardship exemption, the electronic filer shall file or submit the required document or Interactive Data File in electronic format or post the Interactive Data File on its corporate Web site, as applicable, on the required due date or the proposed filing or submission date, or such other date as may be permitted.
(b) * * *
(1) * * *
(2) The burden and expense to employ alternative means to make the electronic submission or posting, as applicable;
(3) The reasons for not submitting electronically the document, group of documents or Interactive Data File or not posting the Interactive Data File, as well as the justification for the requested time period.
(c) If the request is granted with respect to:
(1) Electronic filing of a document or group of documents, not electronic submission or posting of an Interactive Data File, then the electronic filer shall submit the document or group of documents for which the continuing hardship exemption is granted in paper format on the required due date specified in the applicable form, rule or regulation, or the proposed filing date, as appropriate and the following legend shall be placed in capital letters at the top of the cover page of the paper format document(s):
IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS (specify document) IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION.
(2) Electronic submission of an Interactive Data File, then the electronic filer shall substitute for the Interactive Data File in the exhibit in which it was required a document that sets forth one of the following legends, as appropriate:
IN ACCORDANCE WITH A CONTINUING HARDSHIP EXEMPTION OBTAINED UNDER RULE 202 OF REGULATION S-T, THE DATE BY WHICH THE INTERACTIVE DATA FILE IS REQUIRED TO BE SUBMITTED HAS BEEN EXTENDED TO (specify date); or
IN ACCORDANCE WITH A CONTINUING HARDSHIP EXEMPTION OBTAINED UNDER RULE 202 OF REGULATION S-T, THE INTERACTIVE DATA FILE IS NOT REQUIRED TO BE SUBMITTED.
(3) Web site posting by an electronic filer of its Interactive Data File, the electronic filer need not post on its Web site any statement with regard to the grant of the request.
(d) If a continuing hardship exemption is granted for a limited period of time for:
(1) Electronic filing of a document or group of documents, not electronic submission or posting of an Interactive Data File, then the grant may be conditioned upon the filing of the document or group of documents that is the subject of the exemption in electronic format upon the expiration of the period for which the exemption is granted. The electronic format version shall contain the following statement in capital letters at the top of the first page of the document: THIS DOCUMENT IS A COPY OF THE (specify document) FILED ON (DATE) PURSUANT TO A RULE 202(d) CONTINUING HARDSHIP EXEMPTION.
(2) Electronic submission or posting of an Interactive Data File, then the grant may be conditioned upon the electronic submission and posting, as applicable, of the Interactive Data File that is the subject of the exemption upon the expiration of the period for which the exemption is granted.
* * *
* * *
* * *
Failure to submit or post, as applicable, the Interactive Data File as required by Rule 405 by the end of the continuing hardship exemption if granted for a limited period of time, will result in ineligibility to use Forms S-3, S-8, and F-3 (§§ 239.13, 239.16b and 239.33 of this chapter) and constitute a failure to have filed all required reports for purposes of the current public information requirements of Rule 144(c)(1) (§ 230.144(c)(1) of this chapter).
9. Amend § 232.305 by revising paragraph (b) to read as follows:
(b) Paragraph (a) of this section does not apply to HTML documents, Interactive Data Files (§ 232.11) or XBRL-Related Documents (§ 232.11).
10. Amend § 232.401(a) by adding a new first sentence to read as follows:
(a) Only an electronic filer that is an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1
11. Amend § 232.402 by removing the phrase “Public Utility Act,” from the first sentence of paragraph (b).
12. Reserve § 232.403 and § 232.404.
13. Add § 232.405 to read as follows:
1. Sections 405 and 406 of Regulation S-T (§§ 232.405 and 232.406) apply to electronic filers that submit or post Interactive Data Files. Item 601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter) and Item 101 of the
2. Section 405 imposes content, format, submission and Web site posting requirements for an Interactive Data File, but does not change the substantive content requirements for the financial and other disclosures in the Related Official Filing (§ 232.11).
3. Section 406 addresses liability related to Interactive Data Files.
(a)
(1) Comply with the content, format, submission and Web site posting requirements of this section;
(2) Be submitted only by an electronic filer either required or permitted to submit an Interactive Data File as specified by Item 601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter) or Item 101 of the Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter), as applicable, as an exhibit to a form that contains the disclosure required by this section;
(3) Be submitted in accordance with the EDGAR Filer Manual and, as applicable, either Item 601(b)(101) of Regulation S-K or Item 101 of the Instructions as to Exhibits of Form 20-F; and
(4) Be posted on the electronic filer's corporate Web site, if any, in accordance with, as applicable, either Item 601(b)(101) of Regulation S-K or Item 101 of the Instructions as to Exhibits of Form 20-F.
(b)
(1) The complete set of the electronic filer's financial statements (which includes the face of the financial statements and all footnotes); and
(2) All schedules set forth in Article 12 of Regulation S-X (§§ 210.12-01-210.12-29) related to the electronic filer's financial statements.
It is not permissible for the Interactive Data File to present only partial face financial statements, such as by excluding comparative financial information for prior periods.
(c)
(1)
(i)
(ii)
(iii)
(A)
(B)
(2)
(d)
(1) Each complete footnote must be block-text tagged;
(2) Each significant accounting policy within the significant accounting policies footnote must be block-text tagged;
(3) Each table within each footnote must be block-text tagged; and
(4) Within each footnote, each amount (
(e)
(1) Each complete financial statement schedule must be block-text tagged; and
(2) Within each financial statement schedule, each amount (
(f)
(1) Any large accelerated filer (§ 240.12b-2 of this chapter) that had an aggregate worldwide market value of the voting and non-voting common equity held by non-affiliates of more than $5 billion as of the last business day of its most recently completed second fiscal quarter that prepares its financial statements in accordance with generally accepted accounting principles as used in the United States, if none of the financial statements for which an Interactive Data File is required is for a
(2) Any large accelerated filer not specified in paragraph (f)(1) that prepares its financial statements in accordance with generally accepted accounting principles as used in the United States, if none of the financial statements for which an Interactive Data File is required is for a period that ends on or after December 15, 2010;
(3) Any filer not specified in paragraph (f)(1) or (2) that prepares its financial statements in accordance with generally accepted accounting principles as used in the United States, if none of the financial statements for which an Interactive Data File is required is for a period that ends on or after December 15, 2011; and
(4) Any foreign private issuer (§ 240.3b-4(c) of this chapter) that prepares its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, if none of the financial statements for which an Interactive Data File is required is for a period that ends on or after December 15, 2011.
(g)
Item 601(b)(101) of Regulation S-K specifies the circumstances under which an Interactive Data File must be submitted as an exhibit and be posted to the issuer's corporate Web site, if any, and the circumstances under which it is permitted to be submitted as an exhibit, with respect to Forms S-1 (§ 239.11 of this chapter), S-3 (§ 239.13 of this chapter), S-4 (§ 239.25 of this chapter), S-11 (§ 239.18 of this chapter), F-1 (§ 239.31 of this chapter), F-3 (§ 239.33 of this chapter), F-4 (§ 239.34 of this chapter), 10-K (§ 249.310 of this chapter) and 10-Q (§ 249.308a of this chapter). Similarly, Item 101 of the Instructions as to Exhibits of Form 20-F specifies the circumstances under which an Interactive Data File must be submitted as an exhibit and be posted to the issuer's corporate Web site, if any, and the circumstances under which it is permitted to be submitted as an exhibit, with respect to Form 20-F. Item 601(b)(101) of Regulation S-K and Item 101 of the Instructions as to Exhibits of Form 20-F both prohibit submission of an Interactive Data File by an issuer that prepares its financial statements in accordance with Article 6 of Regulation S-X (17 CFR 210.6-01
14. Add § 232.406 to read as follows:
(a)
(b)
(c)
(1) Will be deemed to comply with Rule 405 if:
(A) The electronic filer makes a good faith and reasonable attempt to comply with Rule 405; and
(B) As soon as reasonably practicable after the electronic filer becomes aware that the Interactive Data File does not comply with Rule 405, the electronic filer amends the Interactive Data File to comply with Rule 405.
(2) That complies or is deemed to comply with Rule 405 is not subject to liability under any provision of the Securities Act, Exchange Act, Trust Indenture Act and Investment Company Act or the rules and regulations under those Acts for failure to comply with Rule 405.
(3) In addition to paragraphs (c)(1) and (c)(2),
(A) Is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 and 12 of the Securities Act (15 U.S.C. 77k and 77
(B) Is deemed filed for purposes of (and thereby benefits from the liability protection provided by) Item 103 of Regulation S-T (§ 232.103); and
(C) Other than as stated in subparagraph (c)(3)(A), is subject to liability for the substantive content of the financial and other disclosures, as distinct from its compliance with Rule 405, under the Securities Act, Exchange Act, Trust Indenture Act, and Investment Company Act and the rules and regulations under those Acts in the same way and to the same extent as the Related Official Filing.
15. The authority citation for part 239 continues to read in part as follows:
15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77sss, 78c, 78
16. Amend § 239.13 by revising paragraph (a)(8) to read as follows:
(a) * * *
(8)
(i) Filed with the Commission all required electronic filings, including electronic copies of documents submitted in paper pursuant to a hardship exemption as provided by Rule 201 or Rule 202(d) of Regulation S-T (§ 232.201 or § 232.202(d) of this chapter); and
(ii) Submitted electronically to the Commission and posted on its corporate Web site, if any, all Interactive Data Files required to be submitted and posted under either Item 601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter) or Item 101 of the Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter) during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement on this Form.
17. Amend Form S-3 (referenced in § 239.13) by revising paragraph I.A.8 and adding paragraphs I.A.8(a) and I.A.8(b) of the General Instructions to read as follows:
The text of Form S-3 does not and this amendment will not appear in the Code of Federal Regulations.
I. * * *
A. * * *
8.
(a) Filed with the Commission all required electronic filings, including electronic copies of documents submitted in paper pursuant to a hardship exemption as provided by Rule 201 or Rule 202(d) of Regulation S-T (§ 232.201 or § 232.202(d) of this chapter); and
(b) Submitted electronically to the Commission and posted on its corporate Web site, if any, all Interactive Data Files required to be submitted and posted under either Item 601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter) or Item 101 of the Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter) during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement on this Form.
18. Amend § 239.16b by revising paragraph (b) to read as follows:
(a) * * *
(b)
(1) Filed with the Commission all required electronic filings, including electronic copies of documents submitted in paper pursuant to a hardship exemption as provided by Rule 201 or Rule 202(d) of Regulation S-T (§ 232.201 or § 232.202(d) of this chapter); and
(2) Submitted electronically to the Commission and posted on its corporate Web site, if any, all Interactive Data Files required to be submitted and posted under either Item 601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter) or Item 101 of the Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter) during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement on this Form.
19. Amend Form S-8 (referenced in § 239.16b) by revising paragraph A.3 and adding paragraphs A.3(a) and A.3(b) of the General Instructions to read as follows:
The text of Form S-8 does not and this amendment will not appear in the Code of Federal Regulations.
A. * * *
1. * * *
2. * * *
3.
(a) Filed with the Commission all required electronic filings, including electronic copies of documents submitted in paper pursuant to a hardship exemption as provided by Rule 201 or Rule 202(d) of Regulation S-T (§ 232.201 or § 232.202(d) of this chapter); and
(b) Submitted electronically to the Commission and posted on its corporate Web site, if any, all Interactive Data Files required to be submitted and posted under either Item 601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter) or Item 101 of the Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter) during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement on this Form.
20. Amend § 239.33 by revising paragraph (a)(6) to read as follows:
(a) * * *
(6)
(i) Filed with the Commission all required electronic filings, including electronic copies of documents submitted in paper pursuant to a hardship exemption as provided by Rule 201 or Rule 202(d) of Regulation S-T (§ 232.201 or § 232.202(d) of this chapter); and
(ii) Submitted electronically to the Commission and posted on its corporate Web site, if any, all Interactive Data Files required to be submitted and posted under either Item 601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter) or Item 101 of the Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter) during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement on this Form.
21. Amend Form F-3 (referenced in § 239.33) by revising paragraph I.A.6 and adding paragraphs I.A.6(i) and I.A.6(ii) of the General Instructions to read as follows:
The text of Form F-3 does not and this amendment will not appear in the Code of Federal Regulations.
I. * * *
A. * * *
6.
(i) Filed with the Commission all required electronic filings, including electronic copies of documents submitted in paper pursuant to a hardship exemption as provided by Rule 201 or Rule 202(d) of Regulation S-T (§ 232.201 or § 2.202(d) of this chapter); and
(ii) Submitted electronically to the Commission and posted on its corporate Web site, if any, all Interactive Data Files required to be submitted and posted under either Item 601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter) or Item 101 of the Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter) during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement on this Form.
22. The authority citation for part 240 continues to read in part as follows:
15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78
23. Amend § 240.13a-14 by revising paragraph (f) to read as follows:
(f) The certification requirements of this section do not apply to
(1) An Interactive Data File, as defined in Rule 11 of Regulation S-T (§ 232.11 of this chapter); or
(2) XBRL-Related Documents, as defined in Rule 11 of Regulation S-T.
24. Amend § 240.15d-14 by revising paragraph (f) to read as follows:
(f) The certification requirements of this section do not apply to:
(1) An Interactive Data File, as defined in Rule 11 of Regulation S-T (§ 232.11 of this chapter); or
(2) XBRL-Related Documents, as defined in Rule 11 of Regulation S-T.
25. The authority citation for part 249 continues to read in part as follows:
15 U.S.C. 78a
26. Amend Form 20-F (referenced in § 249.220f) by revising paragraph 100 and adding paragraph 101 at the end of “Instructions as to Exhibits” to read as follows:
The text of Form 20-F does not and this amendment will not appear in the Code of Federal Regulations.
100.
101.
(a) Required to be submitted to the Commission and posted on the registrant's corporate Web site, if any, in the manner provided by Rule 405 of Regulation S-T (§ 232.405 of this chapter) if the Form 20-F is an annual report and the registrant is not specified by paragraph (c) of this Instruction 101 and is:
(i) A large accelerated filer (§ 240.12b-2 of this chapter) that had an aggregate worldwide market value of the voting and non-voting common equity held by non-affiliates of more than $5 billion as of the last business day of its most recently completed second fiscal quarter that is a foreign private issuer (§ 240.3b-4(c) of this chapter) that prepares its financial statements in accordance with generally accepted accounting principles as used in the United States and the filing contains financial statements of the registrant for a period that ends on or after December 15, 2008;
(ii) A large accelerated filer not specified in paragraph (a)(i) of this instruction but is a foreign private issuer that prepares its financial statements in accordance with generally accepted accounting principles as used in the United States and the filing contains financial statements of the registrant for a period that ends on or after December 15, 2009;
(iii) A filer not specified in paragraph (a)(i) or (ii) of this instruction that is a foreign private issuer that prepares its financial statements in accordance with generally accepted accounting principles as used in the United States and the filing contains financial statements of the registrant for a period that ends on or after December 15, 2010; and
(iv) A foreign private issuer that prepares its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and the filing contains financial statements of the registrant for a period that ends on or after December 15, 2010.
(b) Permitted to be submitted to the Commission in the manner provided by Rule 405 of Regulation S-T (§ 232.405 of this chapter) if the registrant:
(i) Prepares its financial statements
(A) In accordance with either
(1) Generally accepted accounting principles as used in the United States; or
(2) International Financial Reporting Standards as issued by the International Accounting Standards Board; and
(B) Not in accordance with Article 6 of Regulation S-X (17 CFR 210.6-01
(ii) Is not required to be submitted to the Commission under paragraph (a) of this Instruction 101.
(c) Not permitted to be submitted to the Commission if the registrant prepares its financial statements in accordance with Article 6 of Regulation S-X (17 CFR 210.6-01
27. Amend Form 6-K (referenced in § 249.306) by revising paragraph (5) to General Instruction C to read as follows:
The text of Form 6-K does not and this amendment will not appear in the Code of Federal Regulations.
C. * * *
(5)
By the Commission.
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h), the United States hereby publishes the public comment received on the proposed Final Judgment in
In the matter of: United States of America, Plaintiff, v. Abitibi-Consolidated Inc. and Bowater Inc., Defendants.
Judge: Collyer, Rosemary M.; Deck type: Antitrust.
Pursuant to the requirements of the Antitrust Procedures and Penalties Act (“APPA” or “Tunney Act”), 15 U.S.C. 16(b)-(h), the United States hereby files the Comment received from members of the public concerning the proposed Final Judgment in this case and the Response by the United States to the Comment. The United States will move the Court for entry of the proposed Final Judgment after the Comment and this Response have been published in the
The United States filed a civil antitrust Complaint under Section 15 of the Clayton Act, 15 U.S.C. 25, on October 23, 2007, alleging that the merger of Abitibi-Consolidated Incorporated (“Abitibi”) and Bowater Incorporated (“Bowater”) would violate Section 7 of the Clayton Act, 15 U.S.C. 18. Simultaneously with the filing of the Complaint, the United States filed a proposed Final Judgment and an Asset Preservation Stipulation and Order (“Stipulation”) signed by plaintiff and defendants consenting to the entry of the proposed Final Judgment after compliance with the requirements of the Tunney Act. Pursuant to those requirements, the United States filed a Competitive Impact Statement (“CIS”) in this Court on October 23, 2007, published the proposed Final Judgment and CIS in the
On January 29, 2007, Abitibi and Bowater announced plans to merge into a new company to be called AbitibiBowater Incorporated (“AbitibiBowater”). Over the next nine months, the United States Department of Justice (the “Department”) conducted an extensive, detailed investigation into the competitive effects of the proposed transaction. As part of this investigation, the Department obtained substantial documents and information from the merging parties and issued 37 Civil Investigative Demands to third parties. In response, the Department received and considered more than 150,000 pages of material. The Department conducted more than 60 interviews with customers, competitors and other individuals with knowledge of the industry. The sole commenter here, the Newspaper Association of America (the “NAA”), represents newspaper publishers in the United States. During the course of the Department's investigation into the proposed merger, the NAA shared with the investigative staff its concerns about the impact of the proposed merger on competition; the investigative staff carefully analyzed its concerns and submissions, as well as the data, market facts and opinions of other knowledgeable parties.
The Department concluded that the combination of Abitibi and Bowater likely would lessen competition in the North American newsprint market. Newspapers are printed on newsprint, the lowest quality and generally the least expensive grade of groundwood paper. Newspaper publishers, who buy more than 80 percent of all newsprint sold in the United States, have no close substitutes to use for printing newspapers because of newsprint's price and physical characteristics. Because publishers' newsprint presses are optimized to use newsprint, switching to another grade of paper would be costly. A small but significant increase in price likely would not cause customers to switch sufficient newsprint tonnes to other products or otherwise curtail their newsprint usage so as to render the increase unprofitable.
As explained more fully in the Complaint and CIS, the merger of Abitibi and Bowater would substantially increase concentration and lessen competition in the production, distribution and sale of newsprint in North America. After conducting a detailed analysis of the merger, the Department filed its Complaint alleging competitive harm in the newsprint market in North America and sought a remedy that would ensure that such harm is prevented.
The proposed Final Judgment in this case is designed to preserve competition in the production, distribution and sale of newsprint in North America. It requires the divestiture of a newsprint mill that manufactures newsprint for sale in North America. Specifically, the proposed Final Judgment directs a sale of Abitibi's Snowflake, Arizona, newsprint mill (“Snowflake,” or the “Snowflake mill”) to a purchaser acceptable to the United States.
In the Department's judgment, divestiture of the Snowflake mill to a qualified purchaser would remedy the violation alleged in the Complaint because the Snowflake mill, located in northeastern Arizona, is one of the most efficient and profitable newsprint mills in North America. Plans to improve the mill's efficiency in coming years with investments in energy and machinery are already underway. Snowflake's size and cost position ensure that its divestiture to a competitor of the
Upon the publication of the Comment and this Response, the United States will have fully complied with the Tunney Act and will move for entry of the proposed Final Judgment as being “in the public interest.” 15 U.S.C. 16(e), as amended.
The Tunney Act states that, in making that determination, the Court shall consider:
(A) the competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration of relief sought, anticipated effects of alternative remedies actually considered, whether its terms are ambiguous, and any other competitive considerations bearing upon the adequacy of such judgment that the court deems necessary to a determination of whether the consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the relevant market or markets, upon the public generally and individuals alleging specific injury from the violations set forth in the complaint including consideration of the public benefit, if any, to be derived from a determination of the issues at trial.
As the United States Court of Appeals for the District of Columbia Circuit has held, under the APPA a court considers, among other things, the relationship between the remedy secured and the specific allegations set forth in the government's complaint, whether the decree is sufficiently clear, whether enforcement mechanisms are sufficient, and whether the decree may positively harm third parties.
[t]he balancing of competing social and political interests affected by a proposed antitrust consent decree must be left, in the first instance, to the discretion of the Attorney General. The court's role in protecting the public interest is one of insuring that the government has not breached its duty to the public in consenting to the decree. The court is required to determine not whether a particular decree is the one that will best serve society, but whether the settlement is “
Court approval of a consent decree requires a standard more flexible and less strict than that appropriate to court adoption of a litigated decree following a finding of liability. “[A] proposed decree must be approved even if it falls short of the remedy the court would impose on its own, as long as it falls within the range of acceptability or is `within the reaches of public interest.' ”
Moreover, the Court's role under the APPA is limited to reviewing the remedy in relationship to the violations that the United States has alleged in its complaint, and does not authorize the Court to “construct [its] own hypothetical case and then evaluate the decree against that case.”
In its 2004 amendments, Congress made clear its intent to preserve the
During the 60-day comment period, the United States received one Comment, from the NAA. That Comment is attached to this memo. After reviewing the Comment, the United States continues to believe that the proposed Final Judgment is in the public interest. The Comment includes concerns relating to whether the proposed Final Judgment adequately remedies the harms alleged in the Complaint. The United States addresses these concerns below and explains how the remedy is appropriate.
The NAA is an association whose members include daily and Sunday newspapers in the United States who purchase a significant proportion of North America's newsprint production. In its Comment of January 2, 2008, the NAA expressed concerns relating to whether the proposed Final Judgment adequately remedies the alleged harms. The NAA argued in its Comment that the Court should not enter the proposed Final Judgment without a hearing for two reasons: (1) the newly merged AbitibiBowater, despite its agreement to divest the Snowflake mill, “has already begun to exercise the market power created by the merger to anticompetitively raise newsprint prices to North American newsprint customers”; and (2) the United States “has not provided the Court with any factual or economic analysis to demonstrate that the proposed remedy will eliminate the incentive for AbitibiBowater to reduce industry capacity and raise prices to North American newsprint customers.” (NAA Comment at 2.)
The NAA notes that a little more than five weeks following the merger that created AbitibiBowater, the combined firm announced that it would remove 600,000 metric tonnes of newsprint capacity from the North American market and would raise newsprint prices by $60 per metric tonne, to be implemented in three $20 price increases. The NAA further notes that “[m]ost” North American newsprint manufacturers not only joined AbitibiBowater's price increase but also implemented a “previously stalled” price increase of $25 per metric tonne. The NAA estimated that, taken together, these two price increases constitute a 15 percent price increase as compared to the pre-merger, October 2007, price for newsprint. The NAA also noted that, at the time AbitibiBowater announced the removal of 600,000 metric tonnes of newsprint capacity from the North American market, it also announced that “more mills could close in Canada later [in 2008].” (Comment at 7.)
The NAA claims that these post-merger actions by AbitibiBowater demonstrate that the United States “severely underestimated the risk that the merger posed to competition in the North American newsprint market and severely underestimated the incentive and ability of the merged firm to remove capacity from the market to raise the price of newsprint well above competitive levels.” (Comment at 7.) Accordingly, the NAA contends that a “significantly larger divestiture” than the Snowflake mill is required to prevent “the substantial anticompetitive price increases that are already occurring and will continue to occur as a result of the merger.” (Comment at 7.)
The NAA concedes that in the Complaint, the United States “correctly identifies the competitive harm produced by the merger.” (Comment at 9.) The NAA argues, however, that the United States has not provided the Court with a factual or legal analysis to demonstrate that the divestiture of the Snowflake mill will “eliminate the incentive to reduce industry capacity and raise prices to North American newsprint customers,” and thus has provided the Court with no basis by which to determine if the proposed remedy is in the public interest. (Comment at 9.) Specifically, the NAA argues that, other than noting that Snowflake is “among the largest and most profitable mills in the United States,” the United States “provided no further explanation for its decision that Snowflake was both a sufficient remedy and the best solution, no detail regarding under what `circumstances' this conclusion was reached, and no scale against which it measured Snowflake as the best alternative.” (Comment at 17.)
The NAA contends that the proposed Final Judgment should not be entered because the United States has not explained to the Court “why the remedy it proposes restores or preserves competition.” (Comment at 19.) In particular, the NAA criticizes the United States for failing to reference in the Complaint or CIS what the NAA describes as historical anticompetitive behavior of Abitibi and Bowater, and it contends that absent such references, it is impossible for the Court to determine if and how much of a factor such conduct played in the United States' evaluation and settlement of the merger. The NAA also criticizes the United States for failing to discuss the anticipated effects of alternative remedies actually considered.
The divestiture of the Snowflake mill adequately remedies the harm alleged in the Complaint. In negotiating this remedy, the United States carefully considered the capabilities and economic viability of the Snowflake mill as well as other assets of the merging parties; the extent of industry excess capacity; the history of declining demand for newsprint, and the forecasts for that decline to continue; the costs of
The United States and the NAA employed the same general economic model to examine the competitive effects of the merger. Accurate data about prices, manufacturing costs, the elasticity of demand and other factors can allow economists to model whether merging firms have an added incentive to exercise market power by reducing capacity after a merger. The United States and the NAA both attempted to determine whether the merger will cause the combined AbitibiBowater to eliminate newsprint capacity earlier than Abitibi and Bowater would have if they had remained independent competitors.
Although the United States and the NAA used a similar framework to model competition, the results differed significantly because of several important differences in the data. First, the United States had more complete and accurate data. Unlike the NAA, the United States was able to use a compulsory process to gather information. See, e.g., 15 U.S.C. 1311-14 (empowering the Antitrust Division to subpoena documents and take oral testimony). In this case, the United States had access to extensive and mill-by-mill data on sales (including exports), production volumes, capacities and costs. The NAA, on the other hand, had to rely on less accurate and publicly available information relating to mill capacities, prices and costs in assessing the profitability of and competitors' likely response to a post-merger price increase. Second, the United States conducted its own analysis of the effect of price changes on the demand for newsprint, using confidential information, in addition to considering estimates provided by others. Based upon its analysis, the United States believes that the estimate used by NAA understates the sensitivity of newsprint consumption to changes in price. In other words, the United States believes that if the price for newsprint rose, customers would purchase less newsprint than the NAA estimates. Third, the United States and the NAA viewed 2007 differently. While the NAA assumed that the newsprint market in 2007 was in equilibrium—which would allow that year's prices to be used as a reference point from which to measure future changes—the United States' investigation revealed that much of 2007 was a period of instability. Unexpectedly large declines in demand for newsprint created excess capacity and caused prices to fall dramatically. The fact that AbitibiBowater and other firms responded to declining demand for newsprint by closing mills that were consistently losing money is discussed in further detail in the following section.
The United States is confident that at the time it negotiated the proposed Final Judgment the divestiture of the Snowflake mill was in the public interest, based upon the best information available at that time. The United States remains confident that the divestiture of the Snowflake mill is in the public interest and adequately remedies the harms alleged in the Complaint.
The NAA's argument, that the Snowflake mill divestiture is insufficient to prevent the combined firm from exercising market power by shutting additional capacity in order to raise prices, assumes that the combined firm's post-merger capacity reductions are the result of the merger. The NAA's suggestions to the contrary events since the filing of the proposed Final Judgment appear to be unrelated to any exercise of market power. The ongoing sharp decline in demand for newsprint in North America, increases in the prices of key inputs into the production of newsprint, and the continued decline in the value of the United States dollar all have disrupted the supply and demand equilibrium for newsprint. Industry observers expect disruptions to continue as North American demand for newsprint declines. Manufacturers will respond by intermittently closing capacity, which will cause the market price to lurch from one equilibrium to another as it adjusts to these shocks to supply. Thus, in a market with declining demand, prices can be expected to fall when the decline in demand creates excess supply and increase when unprofitable capacity is closed in response to that decline in demand. In the remainder of this section, we will discuss the effects of these trends on the newsprint market and show that a careful analysis suggests that the NAA's claims are unfounded.
Demand for newsprint in the North American market “has declined over the last several years at a rate of approximately 5 to 10 percent per year because of a significant decline in demand for newspapers. * * * This decline in the demand for newsprint is projected to continue, and the resulting excess newsprint capacity will likely lead Defendants and their competitors to close, idle or convert more newsprint mills.” (Complaint at ¶ 17;
The pressure to close inefficient capacity also intensified in 2007 because the prices of key production inputs—specifically, recycled fiber, wood pulp and energy—rose sharply. This increase in input costs has raised the costs of all producers and put upward pressure on the price of newsprint. Further, the United States dollar has lost value relative to the Canadian dollar, which has the effect of raising the costs of Canadian producers of newsprint—the bulk of North American newsprint capacity is located in Canada—and hence the price of newsprint.
Finally, the adjustment of the newsprint market to these disruptive market conditions will not be instantaneous or smooth. Because newsprint mills have very significant fixed costs and relatively smaller incremental costs, newsprint manufacturers may not be able to respond to declining demand by gradually withdrawing capacity. The market therefore can be expected to swing between periods of overcapacity and shortage as companies retire paper machines or entire paper mills. As these swings occur, there will not be smooth changes to the industry's overall capacity or its price levels. For example, while the price of newsprint has risen in the past six months, it is at the time of this filing at or below its lowest level in 2006 when input prices were lower. Further, the United States' investigation
In summary, the NAA's conclusion that recent newsprint capacity closures and price increases necessarily are anticompetitive actions driven by the merger is misguided and fails to account for significant market facts affecting the supply and demand equilibrium of the North American newsprint market.
The proposed Final Judgment provides an effective and appropriate remedy for the antitrust violation alleged in the Complaint, and its entry, therefore, will be in the public interest. The purpose of Tunney Act review is not for the Court to engage in an “unrestricted evaluation of what relief would best serve the public,”
Subsections (A) and (B) of 15 U.S.C. 16(e)(1) set forth a number of factors for courts to consider when assessing the competitive impact of proposed final judgments. Many of those factors are not at issue here.
The NAA questions whether the United States has adequately demonstrated to this Court that the divestiture eliminates AbitibiBowater's post-merger incentive to reduce capacity and raise prices to North American newsprint customers. It has. As explained previously, the United States conducted an extensive investigation and compiled comprehensive data on market shares, costs of production, estimations of rest-of-industry newsprint capacity and future reductions in newsprint demand gathered from public and non-public sources. This data was used in an economic model to determine if the merger would cause an anticompetitive increase in newsprint prices.
The NAA further contends that the United States “has left the Court entirely in the dark with absolutely no basis for making a meaningful comparison between a Snowflake-only divestiture and any alternative course of action, including a full trial on the merits.” (Comment at 18.) This is incorrect; in the CIS the United States addressed both alternatives. (CIS at 10-11.) As the United States noted in the CIS, a full trial on the merits would require significant time and expense, and the outcome would be uncertain. In light of such uncertainty, the United States' decision to take an adequate and available remedy and forgo the risk of trial is well within “the reaches of the public interest.”
Similarly, the United States need not rehearse every permutation of possible divestiture in order to demonstrate to this Court that the divestiture of Snowflake would adequately address the competitive harm alleged in the Complaint. The competitive harm that the United States alleged—and that the NAA acknowledges—is AbitibiBowater's incentive and ability to raise newsprint prices above competitive levels in the North American market. Any divestiture that removes either the combined firm's incentive or its ability to raise prices above competitive levels would therefore be an adequate remedy. Given AbitibiBowater's ownership of all or part of 19 paper mills in the United States and Canada (
Finally, the NAA suggests that the proposed Final Judgment should not be entered because Abitibi and Bowater previously had engaged in anticompetitive conduct of the sort alleged in the Complaint, which it alleges the United States did not properly account for in negotiating the proposed Final Judgment. This suggestion is misplaced for two reasons. First, as mentioned earlier, the United States spoke with a number of market participants, including the NAA, and examined historical data on prices and costs in the course of its investigation. The evidence does not support the NAA's claims that the parties' prior behavior was in fact anticompetitive. Second, the NAA's allegations about the parties' prior behavior are irrelevant because the prior behavior does not address whether, after Snowflake is divested, AbitibiBowater will have the incentive and ability to unilaterally raise price above competitive levels. (And as the United States has already explained, the answer to this question is likely to be “no.”)
Ultimately, in making its public interest determination, the district court “must accord deference to the government's predictions about the efficacy of its remedies.”
The issues raised in the NAA's public Comment were among the many considered during the United States' extensive and thorough investigation. The United States has determined that the proposed Final Judgment as drafted provides an effective and appropriate remedy for the antitrust violations alleged in the Complaint, and is therefore in the public interest. The United States will move this Court to enter the proposed Final Judgment after the Comment and Response are published.
I hereby certify that on April 18, 2008, I caused a copy of the foregoing Response of Plaintiff United States to Public Comments on The Proposed Final Judgment in this matter to the following individuals by electronic mail:
In its Explanation of Consent Decree Procedures, the Justice Department requests the Court to enter the proposed Final Judgment settling
The Newspaper Association of America (“NAA”) is an association whose membership includes most of the daily and Sunday newspaper publishers in the United States. NAA represents the newsprint customers most significantly affected by the merger of Abitibi and Bowater and the provisions of the proposed Final Judgment.
In its Competitive Impact Statement, the Justice Department asserts that the divestiture of the Snowflake mill “would adequately address the likelihood that the proposed merger substantially would reduce competition for newsprint in the United States.”
In these Comments, the NAA makes two separate but related arguments explaining why it believes the Court should reject the Justice Department's request to approve the proposed Final Judgment without a hearing. (1) The newly merged AbitibiBowater, despite its agreement to divest the Snowflake mill, has already begun to exercise the market power created by the merger to anticompetitively raise newsprint prices to North American newsprint customers. This post-settlement exercise of market power by AbitibiBowater shows that the proposed Final Judgment is not in the public interest. (2) Even without the post-settlement evidence of anticompetitive conduct by AbitibiBowater, there would still be ample grounds to reject the proposed remedy. The Justice Department has not provided the Court with any factual or economic analysis to demonstrate that the proposed remedy will eliminate the incentive for AbitibiBowater to reduce industry capacity and raise prices to North American newsprint customers (the injury charged in the Complaint). Each argument, standing on its own, provides sufficient grounds for the
If the proposed Final Judgment is entered without modification, the newly merged AbitibiBowater will have the ability and incentive to unilaterally engage in anticompetitive conduct to raise newsprint prices above competitive levels to U.S. daily newspapers and other North American newsprint customers. The Court should reject the Justice Department's request to enter the proposed Final Judgment and conduct a hearing into this matter to determine a remedy sufficient to prevent the harm to competition and the economic harm to U.S. daily newspapers and other North American newsprint customers that will otherwise result from the merger and from the inadequate divestiture remedy as contained in the proposed Final Judgment.
On November 8, 2007, the Justice Department published in the
Newspaper publishers do not have alternatives to newsprint to turn to when newsprint prices rise. The Complaint states that “newspaper publishers have no close substitutes to use for printing newspapers,”
In recent years, the U.S. newspaper industry has experienced declining circulation and advertising revenue. As a result, North American demand for newsprint has also declined, leading to excess newsprint capacity. The decline in newsprint demand is projected to continue.
In order to remedy the anticompetitive effects that the Justice Department concluded would otherwise result from the merger, the Department obtained the agreement of Abitibi and Bowater to divest Abitibi's Snowflake, Arizona newsprint mill.
The Justice Department's prediction that the Snowflake divestiture would be sufficient to eliminate the incentive and ability of the merged firm to exercise market power by strategically removing newsprint capacity from the market to raise the price of newsprint has already been proven wrong. North American newsprint producers, including Abitibi and Bowater, had been trying to implement a $25 per tonne price increase since September of this year. Until November, newspaper publishers were successful in resisting the price increase.
The combined AbitibiBowater is seeking to “leverage the North American (newsprint) price up to the price in Europe and not the other way around,” according to AbitibiBowater President and CEO David Paterson.
These post-settlement actions by AbitibiBowater show that the Justice Department severely underestimated the risk that the merger posed to competition in the North American newsprint market and severely underestimated the incentive and ability of the merged firm to remove capacity from the market to raise the price of newsprint well above competitive levels. It is evident that a significantly larger divestiture is required to prevent the substantial anticompetitive price increases that are already occurring and will continue to occur as a result of the merger.
These comments are timely submitted pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(e) (known as the “Tunney Act”), on behalf of the Newspaper Association of America (“NAA”). NAA members are the primary purchasers of newsprint. NAA has approximately 2,000 members, representing a broad range of newspaper-related companies ranging from independent, small market, and family owned publishers to the large newspaper chains. These members account for approximately 90 percent of the paid daily and Sunday newspaper circulation in the United States. U.S. daily newspapers are the primary purchasers of newsprint produced by North American newsprint mills and account for about 80 percent of the newsprint consumed in the U.S. and about 70 percent of the newsprint consumed in North America.
Newsprint is an essential and irreplaceable input for newspapers. Because newsprint is second only to labor as a cost for newspapers, higher newsprint prices have a direct impact on the ability of newspaper companies to serve their customers, newspaper readers and newspaper advertisers. When confronted with newsprint price increases, newspapers are forced to restrict their use of newsprint by reducing their circulation, withdrawing from more distant geographic areas, ending editions, and reducing the size and number of pages published. The impact of these changes adversely impacts the interest of the public, with less news available in print to the millions of newspaper readers and less information available in print for the electorate. At price levels equal to the prevailing prices in Europe, $200 per tonne above the pre-settlement October 2007 price, some newspapers will be unprofitable and at risk of failure.
This memorandum and the attached Economic Analysis
NAA members are the primary victims that the Complaint identifies as suffering competitive injury from the transaction and on whose behalf the Government seeks relief. NAA agrees with the Justice Department that the alleged harm to competition identified in the Complaint is accurate,
But while the Complaint correctly identifies the competitive harm produced by the merger, the remedy in the proposed Final Judgment fails to satisfy even the most deferential standard for Tunney Act review. The Justice Department has not provided the Court with any factual or economic analysis to demonstrate that the proposed remedy will eliminate the incentive to reduce industry capacity and raise prices to North American newsprint customers (the injury charged in the Complaint). Recent events have already proven that the remedy set forth in the proposed Final Judgment is woefully inadequate to prevent the injury charged in the Complaint. Hence, reviewing the remedy “in relationship to the violations that the United States has alleged in its Complaint,”
“The antitrust laws [* * *] were enacted for the protection of competition, not competitors.”
As is discussed in the attached Economic Analysis, the economic model appropriate to evaluate the current merger as well as prior anticompetitive conduct by Abitibi and Bowater is the dominant firm model.
[The dominant firm] model posits that all competitors but one in an industry act as a “competitive fringe,” which can economically satisfy only part of total market demand. The remaining competitor acts as a monopolist with respect to the portion of total industry demand that the competitive fringe does not elect to supply. This model might apply, for example, in a homogeneous product industry in which the fringe competitors are unable to expand output significantly.
One consequence of AbitibiBowater's incentive and ability to act as the dominant firm in the North American newsprint market is that the merged firm will likely close at least some capacity that is more efficient than some of the capacity of the fringe firms.
For instance, Pulp & Paper Week reported that newsprint industry analyst Claudia Shank of JP Morgan believes that AbitibiBowater's announced capacity closures for the first quarter of 2008 “together with Abitibi-Bowater's
On the other hand, if the Justice Department had successfully blocked this merger, a separate Abitibi and Bowater would likely have considerably less incentive and ability to engage in joint dominant behavior than the current merged AbitibiBowater.
The basic premise of the antitrust laws is to protect competition and consumers, not competitors. As interpreted by the courts and by Congress, the antitrust laws are not intended to protect inefficient suppliers to a market. Because the Justice Department is asking the Court to enter a proposed consent decree that would provide no remedy for the customer-victims of AbitibiBowater's dominant firm behavior and that would likely permit the survival of inefficient capacity of fringe firm competitors that would otherwise be forced to close down in a competitive newsprint market, the Justice Department has an obligation to explain the basis for its decision to the Court. By asking the Court to accept with no further analysis or explanation the Department's claim that the Snowflake divestiture will remedy the competitive harms alleged in the Complaint, the Department puts the Court in the position of having no basis upon which to determine if the proposed remedy (a) is adequate to address these competitive problems, (b) is consistent with the Justice Department's own prior positions, or (c) is in accordance with the well established standards of the antitrust laws, all of which are relevant to the determination of “public interest.”
As is discussed above, shortly after Abitibi and Bowater reached their agreement with the Justice Department in October to divest the Snowflake mill and settle the case, the newly merged firm proceeded to announce significant capacity closures and to initiate a substantial price increase. Most other North American newsprint manufacturers quickly matched AbitibiBowater's announced price increase.
During and immediately prior to the period when the merger was being reviewed by the Justice Department,
Between 2002 and 2006, the pricing analysis in the White Paper demonstrates that Abitibi and Bowater jointly acted as a dominant firm, strategically removing newsprint capacity from the market to significantly raise the newsprint industry operating rate, and, thus, increasing the price of newsprint above competitive levels. Due to these strategic capacity closures, the price of newsprint during that period increased by a total of 49 percent despite a steady decline in consumption by North American newsprint customers. The economic White Paper and the two Supplements, presented to the Justice Department during the course of its investigation, extensively document and analyze this joint dominant firm behavior by Abitibi and Bowater.
Earlier mergers in the North American newsprint industry, especially the Abitibi-Donohue merger in 2000 and the Bowater-Alliance merger in 2001, created both the incentive and ability for Abitibi and Bowater to jointly engage in this anticompetitive conduct. Economic analysis in papers and presentations by representatives of NAA and the U.S. newspaper industry submitted to the Justice Department in 2000 and 2001 forecasted that these two mergers, if not challenged, would have significant anticompetitive results. The Justice Department took no action against either of these two earlier mergers and, as predicted by the economic analyses submitted to the Department, the two mergers enabled Abitibi and Bowater to engage in the anticompetitive conduct that occurred
Prior anticompetitive conduct is a highly relevant factor in most merger investigations, according to the Guidelines Commentary:
Facts showing that rivals in the relevant market have coordinated in the past are probative of whether a market is conducive to coordination. Guidelines § 2.1. Such facts are probative because they demonstrate the feasibility of coordination under past market conditions. Other things being equal, the removal of a firm via merger, in a market in which incumbents already have engaged in coordinated behavior, generally raises the risk that future coordination would be more successful, durable, or complete.
As previously noted, the Tunney Act requires that a court determine whether entry of the proposed Final Judgment “is in the public interest.”
The Justice Department lists two alternative remedies to the one it chose: (1) A full trial on the merits, and (2) “a number of divestiture alternatives.”
Critically, the Justice Department also failed to account for the actual “anticipated effects” of the alternatives. Determining “anticipated effects,” such as whether a transaction will result in one firm having the unilateral power to profitably raise prices or close capacity without being restrained by other competitors in the market, or whether a transaction will result in the market becoming more conducive to competitors coordinating on price, is the essential element of any merger investigation. Yet, here, even though the Court is required to consider it, the Justice Department remains silent. How can the Court determine if the Justice Department chose an acceptable alternative as opposed to one so weak as to provide no meaningful relief? Is the Court expected to take on faith that this alternative is a viable one? The Court is given no support that would assist it in reaching a conclusion that the Justice Department's chosen alternative is in the public interest. If the recent actions by AbitibiBowater are placed on the scale, the Justice Department's silence fails to meet any reasonable burden of proof to establish that its chosen alternative is sufficient to meet the standard that the proposed remedy is “in the public interest.”
The divestiture required under the proposed Final Judgment fails to restore the competition lost by the combination of North America's two largest newsprint producers.
The Justice Department has an obligation to explain to the Court why the remedy it proposes restores or preserves competition. The formal policy guidance of the Antitrust Division regarding merger remedies is contained in the Antitrust Division Policy Guide to Merger Remedies.
The Horizontal Merger Guidelines “describe the analytical framework and specific standards normally used by the [Justice Department] in analyzing mergers.”
The Guidelines identify two analytical frameworks for assessing
A merger may diminish competition because the “merging firms may find it profitable to alter their behavior unilaterally following the acquisition by elevating price and suppressing output.”
The Complaint states that the combined post-merger share of newsprint held by AbitibiBowater is “over 40 percent.”
Given these market circumstances, which are highly conducive to the unilateral exercise of market power, the Justice Department fails to explain to the Court why the divestiture of just the Snowflake mill will be sufficient to prevent the merged firm from exercising market power. As noted above, the Snowflake mill represents only 3 percent of North American newsprint capacity. The divestiture of the Snowflake mill would reduce AbitibiBowater's North American newsprint capacity share from about 40 percent to about 37 percent. The Justice Department fails to explain to the Court how reducing AbitibiBowater's capacity share from 40 percent to a slightly smaller share of 37 percent, a difference of 3 percent, will be sufficient to restore the market to competitive conditions. In the absence of a convincing explanation, the Court should reach the conclusion that the Justice Department's assertion that the divestiture of the Snowflake mill will be sufficient to prevent unilateral anticompetitive conduct by AbitibiBowater is simply wrong.
In the Justice Department's November 2000 challenge to Georgia-Pacific's proposed acquisition of Fort James Corporation, the two parties were the two largest producers of “away-from-home” tissue products. Georgia-Pacific's capacity share of “away-from-home” parent tissue rolls was 11 percent and Fort James' capacity share was 25 percent. The combined share of the two companies in the “away-from-home” parent tissue roll market would have been 36 percent. The Justice Department challenged the merger using the same basic theory applied here—unilateral effects. The Justice Department's investigation revealed that the industry was operating at nearly full capacity, that the capacity could not be quickly expanded, and that demand for parent rolls was relatively inelastic with respect to price. These factors combined to create the likelihood that, after the merger, Georgia-Pacific would act as a dominant firm by restricting output of parent rolls and thereby forcing up prices for away-from-home tissue products. As a result, the Justice Department settled the case by a consent decree requiring the complete divestiture of Georgia-Pacific's parent tissue roll capacity share of 11 percent.
Nothing in the Competitive Impact Statement for the AbitibiBowater merger explains or even suggests to the Court why a divestiture comparable to that in the Georgia-Pacific/Fort James merger is not required for this merger.
The Justice Department's action in the Georgia-Pacific/Fort James merger strongly suggests that significantly more capacity needs to be divested by AbitibiBowater to ensure that the merged firm will not have the incentive and ability to unilaterally exercise market power.
U.S. newspaper publishers, the primary victims who will bear the cost of the conduct challenged in the Complaint and the inadequate Snowflake mill divestiture, see the proposed divestiture as ineffective and inadequate. The Justice Department has not provided the Court with sufficient information with which the Court can enter an informed judgment that the remedy proposed by the Justice Department is “in the public interest.” Furthermore, events subsequent to the Justice Department's settlement of the Abitibi-Bowater merger have already demonstrated that the proposed Final Judgment does not remedy the public interest harms presented to the Court in the Complaint.
The Court should not enter the proposed Final Judgment. NAA requests that the Court conduct a hearing to determine the amount of divestiture sufficient to prevent the anticompetitive effects that will otherwise result from this merger and the inadequate proposed Final Judgment.
Submitted on behalf of the Newspaper Association of America by Alan L. Marx, King & Ballow, Union Street Plaza 1100, 315 Union Street, Nashville, TN 37201, (615) 259-3456,
AbitibiBowater unveiled the first phase of its long-awaited post-merger rationalization plan and announced the closure of four money-losing mills in Canada in the first quarter 2008. A total of 600,000 tonnes/yr of newsprint capacity and 400,000 tonnes/yr of commercial printing papers will be removed.
AbitibiBowater said more mills could close in Canada later next year, and added that it wanted to reopen its Canadian union contracts to “explore ways to reduce overall labor costs and provide enhanced flexibility in the workplace.” Salaried employees would also be asked to take cuts.
Under what it called “phase one of an action plan to address company challenges,” AbitibiBowater will permanently close its Belgo mill in Shawinigan, QC, and Dalhousie, NB, mill, and indefinitely idle its Donnacona, QC, and Mackenzie, BC, paper mills.
Additionally, the company will permanently close its previously idled Fort William mill in Thunder Bay, ON, and Lufkin, TX, paper mills, as well as paper machine 3 at its Gatineau, QC, mill. The previously idled operations run total capacity of about 650,000 tonnes/yr.
Execution is key. “(AbitibiBowater) has done what I expect them to do and be really aggressive, but the issue is going to be execution,” said one newsprint buyer contact with a major U.S. publishing group. “It is going to be impossible to take out 600,000 tonnes on Jan 1 and people will be looking to see how much comes out in February and March. That will be the test.”
The reaction from Wall Street analysts was broadly favorable. Citibank analyst Chip Dillon said the newsprint capacity reduction figure was double his expectations. JPMorgan's Claudia Shank said that while she believes another 300,000 tonnes/yr would need to come out next year, the closures, together with AbitibiBowater's indication that it could cut more capacity in mid 2008, provided second- and third-tier producers some additional “breathing room” and limit closures from the broader industry before the second half of next year.
“AbitibiBowater will probably say ‘We've done our part’ to get ahead of the curve and gain momentum on the pricing front,” an analyst in Canada said. “But the market is looking for a million tonnes (of newsprint reductions) year-over-year so more capacity will have to be taken out if the market is going to be in balance in 2008.”
While AbitibiBowater did not disclose the number of jobs that would be lost by its restructuring, the Communication, Energy and Paperworkers Union of Canada (CEP) estimated at least 1,000 workers could be eliminated in Canada.
CEP wants forestry “summit.” The CEP called for an emergency summit of union and industry leaders in the forestry sector.
“Today's 1,000 or more victims in the mills in Dalhousie, Shawinigan, Donnacona, and Mackenzie bring the job losses in the sector to over 20,000 in the past two to three years,” said CEP pres Dave Coles.
AbitibiBowater pres/CEO David Paterson said management had been very transparent with employees about their mills.
Under phase two of the plan, which starts immediately, AbitibiBowater will continue reviewing all operations.
More Canadian mills at risk. Company chmn John Weaver said several mills in eastern Canada were under particular pressure from high fiber, energy, and labor costs, and the company planned to involve government, communities, and labor to make the mills competitive at dollar parity. Decisions would be taken in the second quarter of 2008 and closures could start by mid-2008, he said.
AbitibiBowater has increased its merger synergies target to $350 million from $250 million. It is also targeting another $500 million in asset sales, which could include overseas mills, non-core facilities, U.S. timberlands, and its Snowflake, AZ, newsprint mill, which it agreed to divest in return for U.S. Dept of Justice approval of the Abitibi-Consolidated/Bowater merger.
Proceeds from the sales will go towards the company's three-year, $1-billion debt-reduction target.
• Citing rising costs and “difficuit market conditions,” AbitibiBowater told customers that it would increase prices on its AbiBow high-bright product line by $65/ton effective Jan. 1. The increase applies to all basis weights, calipers, and finishes of Book, Book Cream, Select, Sert, and Form products. Separately, Blue Heron announced a $35/tonne ($31.75/ton) high-bright increase for its reBrite product range, also effective Jan. 1.
U.S. daily newspaper publishers face a New Year's perfect storm, with producers who account for more than 80% of North American production slating $60/tonne first quarter price hikes and AbitibiBowater closing 600,000 tonnes/yr of newsprint capacity, contacts said last week.
The price increases will be phased in monthly increments of $20/tonne in January, February and March.
AbitibiBowater, which with 5.7 million tonnes/yr of capacity accounts for about 45% of all North American newsprint production, initiated the hike.
Among companies that contacts said would keep prices consistent with AbitibiBowater are White Birch, Kruger, SP Newsprint, Catalyst, Tembec, and Blue Heron. Other producers are still considering a price hike, contacts said last week.
In addition to the 1Q 2008 hike almost all North American newsprint producers will seek this month to implement a $25/tonne fall increase that many producers have been trying to apply since September.
Publishers start to panic. “There is a general panic in the market right now. Supply has tightened up and (producers) are really pushing this December hike. I'm sure there are (publishers) who have been particularly aggressive in the past that are going to get stuck and be told to pay or buy somewhere else,” said one publisher contact.
One contact with a large supplier said the $25 hike had managed to gain traction in November. “Things happened in the back half of the month” buying sources conceded, saying that newsprint producers did have the strength to move November's price “a little bit.”
Pulp & Paper Week's November Price Watch had showed newsprint prices on U.S. East and West coasts holding flat at $560/tonne.
Suppliers are in dire need for higher prices given the current 10.4% year-to-date decline in North American demand, strong Canadian dollar and high input costs.
“I've never before seen such a confluence of bad things on this side of the business. To save a dollar on production is a Herculean task,” said one producer contact in Canada.
Sign of modest improvement. According to the latest Pulp and Paper Products Council data, the North American supply-demand balance improved modestly in October, with production falling almost in line with overall demand.
The biggest barometer for newsprint consumption, the U.S. dailies, showed an 11.4% fall. But adjusting for four Sundays in October 2007 compared with five in October last year, the decline was closer to 7-8%.
More significantly, overall inventories fell to 1.13 million tonnes, their lowest level since December 1979, after a two-month 242,000 tonnes or 18% plunge. Exports rose 29.0% in October, but those extra 49,000 tonnes were more than offset by a 69,000 tonnes drop in domestic shipments.
Gloomy economic outlook. With the economy sagging and the outlook for newspaper advertising looking increasingly gloomy, contacts say capacity cuts remain the only answer if mills are going achieve the 95% operating rates that historically lead to higher prices.
RISI economists say that despite higher exports, North American mills will have to shut 800,000 tonnes/yr of capacity by the end of next year (relative to third quarter 2007) if they are to push operating rates above the 95% mark in 2008.
• With plans to eliminate 38,000 tonnes of newsprint production, Catalyst Paper last week extended the shutdown of PM 1 at its Elk Falls newsprint mill in Campbell River, BC, and keep the PM down for the entire first quarter because of a shortage of fiber. PM 1 was shut in September due to a fiber shortage. The company said the mill has been hurt by a coastal fiber strike that recently ended and a weak U.S. lumber market, Canadian Press said. In addition, the mill's kraft pulp line and white-top linerboard PM will also shut 18 days between Dec. 16 and Jan. 2—and could be shut for longer periods depending on fiber availability. PMs 2 and 5 will be shut Dec. 23, and restart Jan. 2 and Jan. 6, respectively.
• Japan's Oji Paper plans to hike the price of newsprint exports by $50/tonne effective
• Germany's Palm Paper received planning permission to construct a 400,000 tonnes/yr recycled newsprint mill at King's Lynn in eastern England, which would expand Palm's UK production to 550,000 tonnes/yr. Ecco Newsprint, which has plans for a recycled mill of its own at Middlesbrough in the north of the country, also has planning permission but has not yet begun construction. The UK currently imports about 1.2m tonnes of newsprint and exports 1.5m tonnes of waste paper annually.
Any doubts about AbitibiBowater's determination to regain profitability and retire a billion dollars in debt within three years were dispelled last week when pres/CEO David Paterson told analysts at the Citi Investment Research Basic Materials Symposium: “Our need is to leverage the North American (newsprint) price up to the price in Europe and not the other way around.”
Newsprint prices in Europe were close to $200/tonne higher than in the USA in November.
AbitibiBowater, the worlds largest newsprint maker, accounts for about 45% of all North American newsprint production capacity.
Paterson said the company's $25/tonne fall price increase was in place, and he anticipated that the company's recently announced $60/tonne first quarter hike would be implemented entirely.
A presentation slide showed the effect of a $25/tonne increase was an additional $126.8 million in operating income.
The benefit to AbitibiBowater's bottom line from shuttering loss-making Canadian newsprint capacity was explained by CFO William Harvey, who said production costs for the entire 600,000 tonnes/yr slated for closure were $60/tonne higher than the company average.
Most North American producers expect the closures to save the struggling North American newsprint industry, and have joined AbitibiBowater's call for a $60/tonne increase in the first quarter of 2008 implemented in three $20/tonne monthly increments.
Upward price pressure. “AbitibiBowater's capacity closures will obviously provide the upward pressure for an extended price recovery in 2008, as operating rates soar past the magic 95% threshold generally needed for prices to rise,” said senior RISI economist Kevin Conley. “Without AbitibiBowater's bold move, operating rates and prices would have continued to languish at low levels until the highest-cost mills could no longer survive, eventually leading to the inevitable
European producers are also addressing overcapacity, and Europe's largest newsprint producer, Norske Skog, said that it would decide by Feb. 7 how to permanently close 300,000-400,000 tonnes/yr of newsprint capacity.
“We now see 1.4 to 1.5 million tonnes of announced capacity removals in Europe and North America in just the past 10 weeks,” said Citi analyst Chip Dillon, who told investors in a research note that he expected a recovery in U.S. newsprint prices to close almost all of the gap with European prices over the next 12-18 months.
Dismaying prospect for publishers. What a $60/tonne hike and imminent closure of 5% of North American newsprint capacity portends for U.S. daily newspapers had publishers shaking their heads.
“There is a sense of inevitability that seems to be recognized by most on the publishing side. There's a sense of resignation in their voices that hasn't been there before,” said one contact with a major metropolitan daily.
“It's a very different world from just a month ago. We certainly did not have these kind of increases in our plans for 2008, so if they are implemented we would have to find ways to use less newsprint,” said another contact with a major publishing group.
Newspaper publishers have their own business issues which have largely brought about the decline in North American newsprint demand to under nine million tonnes in 2007, from a peak of slightly more than 13 million tonnes in 1999 and more than ten million tonnes as recently as 2005.
Only 2.9% of the 11.4% drop in North American newsprint demand this year is due to lighter basis weights and reduced web widths, according to the Pulp and Paper Products Council. Of the rest, 2.2% is attributed to falling circulation and 6.3% to lost advertising. The bulk of the lost advertising is in real estate and automotive sectors, neither of which show signs of a rebound anytime soon.
2008 a challenging year. “From a fiscal standpoint 2008 will be a challenging year almost without precedent for publishers. It's an alignment of circumstances and realities that none of us have ever seen before,” said one publishing source.
But while the domestic market for newsprint is undeniably shrinking, the global market is still growing. Industry consultant Dave Allan told RISI's 2nd annual Latin American Pulp & Paper Outlook Conference in Sao Paulo, Brazil, last week that world demand showed flat growth in 2007 only because of North America's 10% plunge.
Allan said he expected North American demand decline would slow to 2.5% by the end of 2008, and that global demand would see a 2%/yr upturn and grow at close to 1.0 million tonnes/yr in 2008 and 2009.
AbitibiBowater, which like some other North American producers is growing its overseas exports, sees its key destinations as Europe, Latin America and the Middle East and India. Chmn John Weaver said last week that because the company's Canadian export mills were located on ocean ports, the cost of bulk shipments to Europe were comparable with shipments to North American destinations.
• Members of Canada's largest pulp and paper union, the Communications, Energy & Paperworkers union (CEP) want to go to the bargaining table a year earlier than scheduled to tackle the issue of mill closures and job losses. The measure was adopted last week by delegates representing AbitibiBowater paper workers and will go to a conference of eastern Canada union Locals early next year. The CEP opposes reopening negotiated contracts to cut wages and benefits but says there are ways the union could help cut costs that do not involve concessions.
Trenchant publisher resistance to a $25/tonne fall newsprint price increase that persisted as late as mid-November vanished toward the end of the month, and the hike went in “like a hot knife through butter” in December, sources said last week.
Contacts said the market was tightening and order books filling up due to some newspaper buyers trying to stock up ahead of next year's fresh round of price increases and some commercial printers switching to newsprint because of a shortage of specialty grades.
The price of 30-lb standard newsprint on the U.S. East and West Coasts increased to $585/tonne this month, up $15 from a revised $570/tonne in November, according to Pulp & Paper Week. The revised November level represented a $10/tonne increase. The price of 27.7 lb newsprint was $625/tonne in December, up from $610/tonne in November.
Newspaper publishers' rapid change of heart came after the combination of AbitibiBowater's larger than expected 600,000 tonnes/yr of newsprint capacity cuts along with a $60/tonne first quarter price increase, contacts said. Analysts believe the closures remove sufficient newsprint capacity to match North American market demand—at least temporarily—in the first quarter.
70% 1Q price recovery? AbitibiBowater accounts for about 45% of all North American newsprint capacity, and producers that account for almost all the rest also announced $60/tonne hikes. If these are successfully implemented, by the end of March suppliers will have recovered $85 of the past year's $115/tonne price drop.
“You've got to take your hat off to this guy. He's determined to show value to his shareholders and gained the upper hand very quickly, while we are going to be fighting for our lives,” remarked one publisher contact, referring to AbitibiBowater CEO David Paterson.
Both buyers and sellers expected that 2008 would bring higher newsprint prices and many contacts believed suppliers would seek a second price hike later in the year.
Three years of increases? “If you are not building 10% price increases into your budget for the next three years you are foolish. Suppliers are pretty cocky right now and there's no sympathy for publishers,” commented a buyer contact with a major U.S. newspaper group.
“I think what is going to drive (AbitibiBowater's) decisions is their income statements and balance sheets, and I think they would tell you they have been too deferential to their customers historically—to their own detriment,” said one contact.
“There's 800,000 tonnes compared to 2007 that will be closed and I'd say the odds are 50-50 or better that we will get north of $700/tonne in 2008, because even with a $150 increase Canadian mills are not going to make money with the dollar at parity,” said a producer contact in Canada.
Consumption will be key. “When you start hearing big numbers thrown out, there is a tendency by some publishers to panic, but my concerns are how many tonnes are really coming out and will consumption continue to fall at the same rate we have seen this past year,” said one big U.S. newsprint buyer. “Seeing a company like Kruger that rarely takes downtime closing 100,000 tonnes will curl your toes, but how much consumption is going to fall is more important from my point of view.”
Publishers in Canada would be hurt less by higher newsprint prices because the stronger Canadian dollar has shrunk their newsprint costs to the lowest level in almost two decades.
“AbitibiBowater has shown what should be done to get the price up to a level where they can make a dollar or two, but at the same time I don't think U.S. publishers can afford to pay the price,” said a contact with a major Canadian publisher. “I am pretty sure they will cut the size (of U.S. newspapers) and at the end of the day demand is going to go down big time—another million tonnes I'm sure.”
Dailies will shrink page size. Supplier sources also said they anticipated consumption cutbacks, but said that given the 6% demand drop in 2006 and near 11% drop in 2007, producers would have difficulty increasing conservation significantly in the first quarter.
“I think it's a given that everybody will go to 44-in. webs as quickly as they can, cut out what they can from editorial, and make the standard U.S. newspaper page 11 inches. That will cut demand 6-8%,” said one supplier contact.
Still, AbitibiBowater has said it is ready to shutter more mills in eastern Canada if they cannot be made competitive.
“Their goal is to align capacity with demand, and whatever that entails in terms of demand decline they are committed to matching that,” noted one U.S. publisher source.
But although suppliers are desperate to push prices higher, some producers are wary of them going too high.
AbitibiBowater's weight and the world. “There has to be an upper limit. At $550/tonne, or even $600 or $625, we don't have any issues with imports. But at $675, $700, or $725 we will see Chinese tonnes here. It's one thing for AbitibiBowater to carry the North American market on its back, but it's another to carry the whole world,” remarked one producer contact in Canada.
• Europe's Holman Paper intends to close 150,000 tonnes/yr. of standard newsprint
• Norway's Norske Skog, the world's second-largest newsprint producer behind AbitibiBowater, may spin off its Asian operations. The company said it has been looking into a separate stock market listing for its South Korean, Chinese, and Thai mills, which run capacity of 1.6 million tonnes/yr. or a quarter of the company's total. Some of Norske's investors want the company to sell its Asian operations to reduce debt, but Norske has ruled out selling the mills outright, saying the price would not reflect their value in a market currently suffering from significant overcapacity, according to a Financial Times report.
On January 29, 2007, Abitibi-Consolidated, Inc. (“Abitibi”) and Bowater Incorporated (“Bowater”) announced that they had reached an agreement to merge the two companies.
2. Abitibi and Bowater are the two largest newsprint producers in North America. The combination of these two firms will create a newsprint producer three times larger than the next largest North American newsprint producer. After the merger, the combined firm will have the incentive and ability to withdraw capacity and raise newsprint prices in the North American newsprint market.
3. Unless the proposed transaction is enjoined, Defendants' merger will substantially lessen competition in the production and sale of newsprint, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
19. The proposed transaction would combine Defendants' large share of newsprint capacity, thereby expanding the quantity of newsprint sales over which the merged firm would benefit from a price increase. This would provide the merged firm with an incentive to close capacity sooner than it otherwise would to raise prices and profit from the higher margins on its remaining capacity.
At the same time the Complaint was filed, DOJ also filed a proposed Final Judgment (“PFJ”) which, if approved by the Court, would settle DOJ's case against defendants Abitibi and Bowater. As a condition of the settlement, the defendants are required to sell Abitibi's Snowflake, Arizona newsprint mill (“Snowflake mill”) to an acquirer acceptable to DOJ.
Prior to the completion of the merger, Abitibi's share of North American (“NA”) newsprint capacity was about 25 percent and Bowater's share was about 16 percent.
In its Competitive Impact Statement (“CIS”),
The combination enhances Defendants' incentives to exercise market power because the merged firm will control a greater base of capacity over which the merged firm would benefit from an increase in newsprint prices after strategically closing, idling, or converting some of its capacity. Without Snowflake's capacity, the merged firm would not be of sufficient size to be able to recoup the losses from such strategic closures through increases in prices on its remaining newsprint production. The divestiture of Snowflake would adequately address the likelihood that the proposed merger substantially would reduce competition for newsprint in the United States.
It is evident that DOJ has concluded that with a capacity share of about 40 percent, the merged firm would have the incentive and ability to unilaterally engage in anticompetitive conduct to raise the price of newsprint but that with a slightly smaller capacity share, about 37 percent, the merged firm would lose that incentive and ability. DOJ provides no information or analysis in the CIS or any other document it filed with the Court to support this claim.
We have been asked by the Newspaper Association of America (“NAA”) and its attorneys to provide an economic antitrust analysis of the Snowflake divestiture to determine whether that divestiture will likely be sufficient to eliminate the anticompetitive effects that would otherwise result from the
The NAA is an association whose membership includes newspaper chains of all sizes and independent, small market, and family-owned newspaper publishers. The NAA is headquartered in Arlington, Virginia. NAA members account for nearly 90 percent of the daily newspaper circulation in the U.S.
As discussed in more detail below, less than six weeks after its agreement to divest the Snowflake mill, AbitibiBowater announced plans to remove a large amount of capacity from the newsprint market and, at about the same time, initiated a significant newsprint price increase. Additional AbitibiBowater capacity closures leading to further price increases appear likely in 2008. The CIS claims that “[w]ithout Snowflake's capacity, the merged firm would not be of sufficient size to be able to recoup the losses from such strategic closures through increases in prices on its remaining newsprint production.”
Even without this recent price-increasing action by AbitibiBowater, there already existed substantial evidence that the merger would likely provide AbitibiBowater with significant market power and that the divestiture of just the Snowflake mill would be unlikely to prevent AbitibiBowater from exercising that market power. As documented and analyzed in the White Paper and in Supplement 1 to the White Paper, Abitibi and Bowater jointly acted as a dominant firm over the period 2002 to 2006 to strategically remove newsprint capacity from the market to raise the price of newsprint, the same type of anticompetitive strategic behavior alleged in Paragraphs 2 and 19 of the Complaint and described on page 6 of the CIS. Neither the Complaint nor the CIS, however, mentions this prior anticompetitive behavior. In our opinion, a history of prior anticompetitive conduct in the market affected by a merger is relevant to merger analysis in two main respects: (1) It provides both support and a justification for the filing of the Complaint; and (2) in cases that are settled with a consent decree, it allows the Court and other interested parties to more accurately evaluate the adequacy of a proposed remedy. By failing to mention the prior anticompetitive conduct of Abitibi and Bowater in the North American newsprint market, DOJ has deprived the Court of information highly relevant to an evaluation of the adequacy of the Snowflake divestiture.
The Complaint and CIS also ignore the significant decline in newsprint prices during the period the proposed merger was under review by DOJ, a period of approximately 9 months. Abitibi and Bowater did not engage in strategic behavior during this period or in the months leading up to their merger announcement. It is plausible that Abitibi and Bowater suspended their strategic capacity closures to maximize the likelihood of a favorable merger review by avoiding conduct that DOJ would likely find anticompetitive. It is also plausible that the incentive and ability of AbitibiBowater to jointly engage in strategic behavior had been significantly weakened by previous capacity closures over the period 2002 to 2006, which led to the decision to merge. The decline in newsprint prices during the merger review period is also information highly relevant to an evaluation of the Snowflake divestiture, information which DOJ did not provide in any of the documents it filed with the Court.
To summarize, from 2002 to 2006, Abitibi and Bowater jointly engaged in strategic dominant firm behavior causing newsprint prices to rise significantly above competitive levels. During DOJ's review of the proposed merger, Abitibi and Bowater suspended their joint strategic dominant firm behavior and, as a result, newsprint prices declined significantly. Shortly after Abitibi and Bowater agreed to divest the Snowflake mill, the newly merged AbitibiBowater resumed the dominant firm behavior by announcing significant newsprint capacity closures and initiating significant newsprint price increases. This resumption of strategic dominant firm behavior was made possible by the merger and was not deterred by the Snowflake divestiture.
The type of anticompetitive effect alleged in Paragraphs 2 and 19 of the Complaint and described on page 6 of the CIS is called a “unilateral effect.” That is, a unilateral effect results if the merger provides the merged firm with the incentive and ability to unilaterally engage in anticompetitive conduct without the need to coordinate with non-merging firms in the market.
A dominant firm model is a model of unilateral conduct often applied in circumstances where the product is relatively homogeneous and where there is a single dominant firm with a relatively large capacity share and a “competitive fringe” consisting of a number of firms with relatively small capacity shares. These characteristics apply to the newsprint industry.
While we have no direct knowledge of the model or models used by DOJ to analyze the competitive effects of the proposed merger of Abitibi and Bowater, the allegations in Paragraphs 2 and 19 of the Complaint and described on page 6 of the CIS are consistent with an application of the dominant firm model. See Appendix A below for additional discussion of merger analysis, unilateral effects, and the dominant firm model.
The method by which AbitibiBowater could unilaterally raise newsprint prices is straightforward. In the newsprint industry, newsprint prices increase at industry operating rates of about 95 percent and above. At industry operating rates below 95 percent, newsprint prices are likely to remain constant or decline.
A firm with a sufficiently large capacity share would have the incentive and ability to unilaterally remove capacity from the market to raise the price of newsprint if the increased profit from the price increase on its remaining capacity exceeds the loss in profit from the closed capacity. DOJ's Complaint and CIS are evidently based on the theory that a merger creating a firm with about a 40
An argument that the merger will provide AbitibiBowater with the incentive and ability to strategically close capacity to raise the price of newsprint is not based solely on a theoretical model. The White Paper and Supplement 1 to the White Paper submitted to DOJ document and analyze prior anticompetitive conduct of Abitibi and Bowater that occurred between the third quarter of 2002 and the third quarter of 2006. See the following sections of the White Paper for this analysis:
See also the following section from Supplement 1 to the White Paper:
As explained in these analyses, Abitibi and Bowater jointly acted as a dominant firm to strategically remove newsprint capacity from the NA market to raise the price of newsprint to NA customers significantly above competitive levels during this four-year period. During this four-year period of strategic capacity closures, NA newsprint prices steadily increased by an aggregate of 49 percent between the third quarter of 2002 and the third quarter of 2006 despite a steady decline in the consumption of newsprint by U.S. newspapers. These newsprint price increases were far in excess of the price increases for closely-related uncoated groundwood specialty grades during this period.
Earlier mergers in the NA newsprint industry, especially the Abitibi-Donohue merger in 2000 and the Bowater-Alliance merger in 2001, created both the incentive and ability for Abitibi and Bowater to jointly engage in this anticompetitive conduct. In papers and presentations to the DOJ staff submitted on behalf of the NAA and the U.S. newspaper industry, Economists Incorporated explained in 2000 and 2001 that these two mergers, if not challenged, would have significant anticompetitive results. DOJ took no action against either of these two earlier mergers and, as predicted by Economists Incorporated, the two mergers enabled Abitibi and Bowater to engage in the anticompetitive conduct that occurred between 2002 and 2006.
Despite its obvious relevance to an evaluation of the adequacy of DOJ's settlement with Abitibi and Bowater, this prior history of anticompetitive conduct by Abitibi and Bowater is not mentioned in the CIS, Complaint or PFJ. This is surprising since the documentation of prior anticompetitive conduct would strengthen the grounds for DOJ's challenge of the merger.
The Commentary on the Horizontal Merger Guidelines (“Merger Guidelines Commentary”), jointly published by DOJ and the Federal Trade Commission, explains why evidence of prior anticompetitive effects by finns in a relevant market is probative to the agencies' evaluation of a merger of two firms in that market.
Facts showing that rivals in the relevant market have coordinated in the past are probative of whether a market is conducive to coordination. Guidelines § 2.1. Such facts are probative because they demonstrate the feasibility of coordination under past market conditions. Other things being equal, the removal of a firm via merger, in a market in which incumbents already have engaged in coordinated behavior, generally raises the risk that future coordination would be more successful, durable, or complete.
Two DOJ cases are cited to illustrate the significance of prior anticompetitive conduct in DOJ's merger analysis and, in each of these cases, the anticompetitive conduct was described in the complaint challenging the merger.
Abitibi and Bowater began their merger discussions in June 2006, which culminated in their joint merger announcement on January 29, 2007.
Between September 2006 and October 2007, Abitibi and Bowater did not engage in joint dominant firm behavior despite a decline in NA newsprint prices of about 17 percent. It is plausible that Abitibi and Bowater suspended their joint dominant firm behavior during this period for two reasons: (1) Abitibi and Bowater wanted to maximize their chances of a favorable merger review by DOJ by avoiding conduct that DOJ would likely construe as anticompetitive; and (2) their ability and incentive to jointly engage in strategic capacity closures had been significantly weakened by their previous strategic capacity closures over the period 2002 to 2006. It is also plausible that a weakened incentive and ability to engage in joint dominant firm behavior led to the decision to merge.
From the trade press commentary during the merger review period, it is apparent that newsprint industry analysts and newsprint competitors of Abitibi and Bowater were waiting for the merger to be completed in anticipation that a merged AbitibiBowater would increase NA newsprint prices by shutting down enough newsprint capacity to create a tight market. It is also apparent that these same analysts and competitors believed that Abitibi and Bowater would not take any significant actions to remove capacity from the market until after their merger review was completed.
The following quotation is typical of comments that appeared in the trade press during the merger review period. “No one will close any capacity because they figure AbitibiBowater will do it for them. And Abitibi kind Bowater will figure they can't be too aggressive on pricing or close capacity until their deal closes, said one contact.”
Less than five weeks after the filing of the Complaint and MFJ, AbitibiBowater announced the removal of about 600,000 metric tonnes of capacity from the NA newsprint market
In addition, AbitibiBowater's announced capacity closures have permitted the successful implementation of a previously announced $25 per metric tonne price increase.
These post-settlement events are captured in headlines from the trade press newsletter Pulp & Paper Week during the first three weeks of December 2007 following the capacity closure announcement of AbitibiBowater on November 29, 2007 and the $60 per metric tonne newsprint price increase initiated by AbitibiBowater.
“AbitibiBowater plans to shut down one million tonnes/yr of capacity in 1Q; expects more closures could follow in 2Q,” December 3, 2007, p. 1.
“Most North American newsprint makers join $60/tonne 2008 hike,” December 3, 2007, p. 2.
“Newsprint giant AbitibiBowater embraces industry leadership, eyes $200/tonne North American newsprint price increase,” December 10, 2007, p. 1.
“Publisher resistance to $25/tonne North American newsprint increase collapses; producers looking to fast track recovery,” December 17, 2007, p. 1.
In comments reported in Pulp & Paper Week, RISI economist Kevin Conley explains the cause and effect between AbitibiBowater's capacity closures and the increase in newsprint prices. “AbitibiBowater's capacity closures will obviously provide the upward pressure for an extended price recovery in 2008, as operating rates soar past the magic 95% threshold generally needed for prices to rise. Without AbitibiBowater's bold move [to remove 600,000 metric tonnes of newsprint capacity from the market] operating rates and prices would have continued to languish at low levels until the highest-cost mills could no longer survive, eventually leading to the inevitable closures needed to balance the North American market.”
The combined AbitibiBowater is seeking to “leverage the North American (newsprint) price up to the price in Europe and not the other way around,” according to AbitibiBowater President and CEO David Paterson.
In the CIS, DOJ asserts that “[w]ithout Snowflake's capacity, the merged firm would not be of sufficient size to be able to recoup the losses from such strategic closures through increases in prices on its remaining newsprint production.” These strategic closures announced by AbitibiBowater less than five weeks after the filing of the Complaint, CIS, and PFJ show that DOJ seriously misjudged the incentive and ability of the merged firm to strategically close capacity despite the agreement to divest the Snowflake mill. Furthermore, based on comments by AbitibiBowater, additional strategic capacity closures will likely occur later in 2008.
In August 2000, Georgia-Pacific announced plans to acquire Fort James. At the time of the acquisition Georgia-Pacific was a broadly-based forest products company and Fort James was the largest manufacturer of tissue paper in the United States. Both companies operated paper mills that produced parent tissue rolls used to make tissue products sold to commercial customers (known as “away-from-home” tissue products). At the time of the proposed acquisition, Fort James and Georgia-Pacific were the two largest producers of parent tissue rolls in NA. Fort James' share of NA parent tissue role capacity was 25 percent and Georgia-Pacific's share was 11 percent for a combined capacity share of 36 percent.
On November 21, 2000, DOJ filed a complaint challenging the merger in the
As described in the competitive impact statement for the Georgia-Pacific/Fort James merger, the theory DOJ relied upon to challenge the proposed acquisition of Fort James by Georgia-Pacific in the NA tissue parent roll market merger appears to be based on the same basic theory of unilateral anticompetitive conduct DOJ used in its challenge of the Abitibi-Bowater merger.
Georgia-Pacific has approximately 11 percent of North American capacity for the production of AFH tissue, and Fort James has approximately 25 percent. Hence, the acquisition would result in Georgia-Pacific accounting for approximately 36 percent of available North American AFH parent roll capacity. This increase in industry capacity controlled by Georgia-Pacific would give it sufficient capacity to profit from the increase in price caused by a unilateral reduction in output after this merger.
It is evident that DOJ concluded that the combination of firms with a 26 percent capacity share and an 11 percent capacity to create a firm with a 36 percent capacity share would give Georgia-Pacific the incentive and ability to unilaterally exercise market power in the NA parent tissue roll market. It is also evident that DOJ concluded that the divestiture of Georgia-Pacific's entire 11 percent of its NA parent tissue roll capacity share was necessary to eliminate Georgia-Pacific's incentive and ability to engage in unilateral strategic behavior. The divestiture left Georgia-Pacific with a capacity share of 25 percent in the NA parent tissue roll market.
Nothing in the Abitibi-Bowater CIS explains the great disparity between the divestiture required to settle the Abitibi-Bowater merger and the divestiture required to settle the Georgia-Pacific/Fort James merger. The prior recent and well-documented unilateral anticompetitive conduct of Abitibi and Bowater (unacknowledged by DOJ in the Complaint and CIS) makes this disparity all the more puzzling.
If the former Bowater's newsprint capacity, which accounts for 16 percent of NA newsprint capacity according to the Complaint, were divested, the merged firm (AbitibiBowater) would have a NA newsprint capacity share of 25 percent. This divestiture would be comparable to the divestiture DOJ required to settle the Georgia-Pacific/Fort James merger, which left Georgia-Pacific with a 25 percent capacity share in the NA parent roll tissue market.
Based on the economic analysis contained in this memorandum and the economic analyses we have previously submitted to DOJ, we conclude that the Snowflake divestiture will not be sufficient to eliminate the anticompetitive effects of the merger and that a substantially larger divestiture is needed to ensure that AbitibiBowater no longer has the incentive and ability to engage in the type of anticompetitive conduct alleged in Paragraphs 2 and 19 of the Complaint and described on page 6 of the CIS.
In determining the competitive effects of a merger, DOJ utilizes the analytical framework set out in the U.S. Department of Justice and Federal Trade Commission (“FTC”) Horizontal Merger Guidelines (“Merger Guidelines”).
Section 2 of the Merger Guidelines describes two general types of anticompetitive effects that potentially could result from a merger: (1) Unilateral effects and (2) coordinated interaction. The Merger Guidelines Commentary describes these anticompetitive effects as follows:
A horizontal merger is likely to lessen competition substantially through coordinated interaction if it creates a likelihood that, after the merger, competitors would coordinate their pricing or other competitive actions, or would coordinate them more completely or successfully than before the merger. A merger is likely to lessen competition substantially through unilateral effects if it creates a likelihood that the merged firm, without any coordination with non-merging rivals, would raise its price or otherwise exercise market power to a greater degree than before the merger.
Paragraph 2 of DOJ's Complaint against Abitibi and Bowater alleges that
After the merger, the combined firm will have the incentive and ability to withdraw capacity and raise newsprint prices in the North American newsprint market.
Paragraph 19 of DOJ's Complaint against Abitibi and Bowater alleges that
The proposed transaction would combine Defendants' large share of newsprint capacity, thereby expanding the quantity of newsprint sales over which the merged firm would benefit from a price increase. This would provide the merged firm with an incentive to close capacity sooner than it otherwise would to raise prices and profit from the higher margins on its remaining capacity.
While DOJ has not disclosed the economic models it used in its investigation of the Abitibi-Bowater merger, these allegations in Paragraphs 2 and 19 of the Complaint are consistent with a unilateral effects theory of competitive harm, specifically a unilateral effects theory of competitive harm based on the application of a dominant firm model. The Merger Guidelines Commentary describes the application of the dominant firm model as follows:
The Agencies' analysis of unilateral competitive effects draws on many models developed by economists. The simplest is the model of monopoly, which applies to a merger involving the only two competitors in the relevant market. One step removed from monopoly is the dominant firm model. That model posits that all competitors but one in an industry act as a “competitive fringe,” which can economically satisfy only part of total market demand. The remaining competitor acts as a monopolist with respect to the portion of total industry demand that the competitive fringe does not elect to supply. This model might apply, for example, in a homogeneous product industry in which the fringe competitors are unable to expand output significantly.
In our opinion, a dominant firm model is the appropriate model to assess the competitive effects of the Abitibi-Bowater merger. In our submissions to DOJ, we described our application of the dominant firm model to this merger.
Based on our application of the dominant firm model, we predicted that, under a wide range of dominant firm capacity shares and other assumptions, the merged firm would have both the incentive and ability to remove capacity from the market to raise the price of newsprint. In particular, we were able to show that under a wide range of assumptions the dominant firm would hypothetically be able to close newsprint capacity to raise newsprint prices well above competitive levels at dominant firm capacity shares well below 37 percent.
The results of our application of the dominant firm model are consistent with the observed joint dominant firm behavior of Abitibi and Bowater during the period 2002 to 2006 as discussed in Section B.2. above and with the observed dominant firm behavior of the newly-merged AbibitiBowater as discussed in Section B.4 above.
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1. Introduction.
2. Summary of Our Analysis and Our Main Conclusions.
3. A Note on Our Sources.
1. Introduction.
2. A Description of Newsprint and Uncoated Groundwood Specialty Grades.
3. Product Market Definition.
4. Geographic Market Definition.
1. Analysis of the Increase in Concentration in the NA Newsprint Market Based on Estimated 2006 Capacity.
2. Analysis of the Increase in Concentration in the East of the Rockies Newsprint Market Based on Estimated 2006 Capacity.
1. The Increase in Concentration in the NA Newsprint Market 1995-2005 as Described by Abitibi and Bowater.
2. Concentration in the NA Newsprint Market in 1995.
3. Acquisitions and Exits of NA Newsprint Manufacturers since 1995.
4. Analysis of the Reduction of Newsprint Capacity in North America 1995 to 2006.
1. Introduction.
2. NA Demand (Quantity Purchased) 1999-2006.
3. Causes of the Decline in NA Newsprint Demand 1999-2006.
4. Projected NA Newsprint Demand 2006-2008.
5. Production, Shipments and Operating Rates of NA Newsprint Mills 1999-2006.
6. The Price of Newsprint per Metric Tonne (Eastern U.S., 30 lb.) 1999 to 2006 by Quarter.
1. Introduction.
2. Presentation by John Weaver, President and CEO of Abitibi, at the Citigroup Conference in December 2006.
3. Presentation by David Paterson, President and CEO of Bowater, at the Citigroup Conference in December 2006.
4. Presentation by John Weaver, President and CEO of Abitibi, at the Credit Suisse First Boston Investment Analysts Conference in March 2004.
5. Interview of John Weaver Titled “Tighter supply/demand balance boosts newsprint hike prospects says Abitibi's Weaver.”
1. Introduction.
2. Chart G1: Shares of NA Newsprint Capacity by Manufacturer 2002 arid 2006.
3. Chart G2: Permanent Reduction of NA Newsprint Capacity by Manufacturer During the Period 2002-2006.
4. Chart G3: Percentage of Total NA Permanent Newsprint Capacity Reduction by Manufacturer During the Period 2002-2006.
5. Chart G4. Permanent Reduction of Newsprint Capacity Over the Period 2002-2006 as a Percentage of Own 2002 NA Capacity by Manufacturer.
1. Introduction.
2. Article by Harold M. Cody Titled “New Paradigm: Newsprint Demand Falls, Prices Soar.”
3. Three Articles by RISI Senior Economist Andrew Battista Analyzing the Strategy of Abitibi and Bowater to Shut Down Capacity to Maintain High Operating Rates and Increasing Prices.
1. Introduction.
2. The Adverse Impact of the Increases in Input Prices and the Appreciation of the Canadian Dollar Has Fallen More Heavily on Producers of Uncoated Groundwood Specialty Grades Than on Producers of Newsprint.
3. Comparing Quarterly Prices tbr Newsprint and Uncoated Groundwood Grades from 3Q 1999 Though 4Q 2006.
4. Abitibi's Variable Costs to Produce Newsprint and Uncoated Groundwood Specialty Grades Have Been Relatively Constant for the Period 2001-2005.
5. Applying the Percentage Price Changes for the Uncoated Groundwood Specialty Grades to the 3Q 1999 Price of Newsprint to Determine the Effect on Newsprint Revenues from Sales to NA Customers.
Economists Incorporated has been asked by the Newspaper Association of America (“NAA”), an association of U.S. daily newspapers, to prepare an economic analysis of the likely competitive effects of the proposed Abitibi-Bowater merger in the North American (“NA”) newsprint market (“White Paper”) with the intent to provide that analysis to the U.S. Department of Justice to assist the department in its investigation of the proposed merger.
The objective of this White Paper is to analyze the economic effects of the proposed merger of Abitibi and Bowater and to identify any anticompetitive consequences of the proposed merger.
In Section A below, we summarize our analysis and main conclusions of each section. Sections A, B, C, D, and K have attachments containing data and analysis related to the analysis in the section.
The last subsection of Section A contains a table of contents to the White Paper. Attachment A to Section A provides a list of the Internet addresses of newsprint manufacturers and other Web sites most frequently cited in the White Paper.
This section provides a summary of our analysis and our main conclusions reached in Sections B through L.
In Section B, we conclude that the relevant product market is newsprint and that the relevant geographic market is NA. We also provide some evidence that East of the Rockies may be a relevant geographic market.
Our analysis shows that new Chinese capacity is likely to be largely if not entirely absorbed in Asia over the next couple of years and will not have a significant impact on the NA market. That is also the expectation of Abitibi, Bowater, and the PPPC. If there is an effect on the NA newsprint market from the new Chinese capacity, it is likely to be indirect. Some NA mills may be displaced from some Asian accounts by the new Chinese capacity. However, the effect on the NA newsprint market of any displacement is not likely to be significant. Abitibi and Bowater, who
Attachment B to Section B provides additional analysis of the relation between uncoated groundwood specialty grades and newsprint. One analysis compares prices of four uncoated groundwood grades with the price of newsprint. A second analysis shows the estimated combined Bowater and Abitibi capacity share of several uncoated groundwood specialty segments.
In Section C, we identify all of the suppliers to the NA newsprint market and estimate their 2006 newsprint capacity by mill. Based on estimated 2006 capacity, we show that the combined Abitibi-Bowater would have a capacity share of 45.0%. The premerger HHI is 1,380, the change in the HHI that would result from the merger is 962 and the post-merger HHI is 2,342. According to § 1.51(c) of the Merger Guidelines, markets with post-merger HHIs above 1,800 are highly concentrated and that HHIs of this magnitude create the presumption that the merger would be “likely to create or enhance market power or facilitate its exercise.”
Based on estimated 2006 capacity, we also calculate capacity shares and HHIs for a possible East of the Rockies relevant newsprint market. We show that the combined Abitibi-Bowater would have a capacity share of 54.3%. The pre-merger HHI is 1,876, the change in the HHI that would result from the merger is 1,445 and the post-merger HHI is 3,321.
Attachment C to Section C contains tables showing 2006 estimated capacity by NA mill and the capacity share and HHI calculations for the NA newsprint market and the East of the Rockies market.
Due primarily to acquisitions by Abitibi and Bowater between 1995 and 2001, the NA newsprint market was transformed from an unconcentrated market in 1995 to a highly concentrated market in 2000 with Abitibi's acquisition of Donohue in April 2000. Bowater's acquisition of Alliance in 2001 and Norske Skog's acquisition of Pacifica, also in 2001, further increased concentration in an already highly concentrated market. This section analyzes the mergers and increase in concentration that occurred between 1995 and 2006.
Both John Weaver, President and CEO of Abitibi, and David Paterson, President and CEO of Bowater, have made presentations to investment analyst conferences describing the significant consolidation in the NA newsprint market and the roles of Abitibi and Bowater in achieving that consolidation. Slides from their presentations illustrating the increase in consolidation are included in this section.
This section also shows that there has been a 20.7% reduction in NA newsprint capacity between 1995 and 2006. Most of that reduction has occurred since 2002. Of the 16 firms that remain in the NA newsprint market today, Abitibi and Bowater combined account for 83.6% of that capacity reduction and Catalyst accounts for 15.9%. The other 13 firms account for 0.5%.
Attachment D to Section D contains tables showing how Abitibi and Bowater significantly increased their shares of newsprint capacity between 1995 and 2001 and tables showing that Abitibi and Bowater account for most of the reduction in NA newsprint capacity between 1995 and 2006, which primarily occurred after 2002.
This section provides charts showing annual and quarterly data concerning NA newsprint demand and supply from 1999 through 2006. Almost all of the data are from standard industry sources PPPC and RISI. Chart E7 in Section E shows a steady decline in quarterly NA newsprint demand (quantity purchased) between 1999 and 2006. The chart also shows quarterly newsprint prices (30 lb., Eastern U.S.) over that same period. Chart E7 shows that while NA newsprint demand (quantity purchased) fell 18.0% between the third quarter of 2002 and the third quarter of 2006, the price of news print increased an aggregate of 49.0% over that same period.
Section E also analyzes the causes of the decline in newsprint consumption over time by U.S. daily newspapers. We conclude that the primary causes are declining newspaper circulation, declining advertising lineage, and newspaper efforts to reduce the consumption of newsprint by reducing the width of newspaper pages, by switching to lower basis weight paper, and by moving some content to the newspaper Web site. Declining circulation and advertising lineage should be regarded as exogenously shifting the newspapers' demand curve for newsprint downward. These declines are unrelated to the price of newsprint. While newspaper efforts to conserve on newsprint are largely in reaction to increasing newsprint prices, they should be regarded as efforts to permanently shift the demand curve for newsprint downward. If the price of newsprint drops significantly, it is improbable that newspapers will respond by increasing the width of newspaper pages or return content to the newspaper that was placed on Web sites. As long as the relative prices for higher and lower basis weight paper remain approximately the same, as seems likely, newspapers will have no incentive to switch back to higher basis weight paper.
As noted above, the price of newsprint increased 49.0% from the third quarter of 2002 to the third quarter of 2006 while the demand for newsprint (quantity demanded) declined 18.0%. Since the reductions in newsprint demand were largely caused by exogenous factors, the price of newsprint would be expected to decline holding the supply curve constant. However, the supply was not held constant during this period. Abitibi and Bowater responded to continual downward shifts in the demand curve by indefinitely idling and permanently closing their own capacity. Each downward shift in the demand curve was met with an upward shift in the supply curve sufficient to maintain maximum practical NA newsprint industry operating rates. At maximum practical operating rates price increases can successfully be imposed as they were throughout this four-year period by Abitibi and Bowater. The remaining firms in the industry generally followed the announced price increases of Abitibi and Bowater within a month or two.
John Weaver, President and CEO of Abitibi, has been describing this strategy in slide show presentations at investment analyst conferences since 2003. David Paterson, who became President and CEO of Bowater in April 2006, discussed this strategy at an investment analysts' conference in December 2006. Section F documents the AbitibiBowater strategy to use their control of capacity to raise the price of newsprint through an analysis of relevant slides presented and described by Weaver and Paterson at investment analyst conferences. This section also contains excerpts from an interview of Weaver that relate to this strategy.
Section G contains an analysis of permanent newsprint capacity reduction in NA between 2002 and 2006. The analysis shows that 18.0% of NA newsprint capacity was removed from the market between the end of 2000 and the end of 2006. Abitibi and Bowater combined were responsible for 80.0% of the permanent capacity removals and Catalyst was responsible for 7.3%. Of manufacturers that remain in the market today, Abitibi and Bowater combined account for 89.4% of the total capacity removals and Catalyst accounts for 8.1%. The other 13 remaining firms account for 2.5% of the capacity removals.
Through these permanent capacity removals, Abitibi reduced its own capacity by 30.7% and Bowater reduced its own capacity by 24.0%. Catalyst also reduced its newsprint capacity by a significant proportion—22.7%. The other 13 newsprint manufacturers that remain in the market today reduced their capacity by a combined 1.0%.
The Abitibi-Bowater strategy to use their control of capacity to raise newsprint prices is well known within the newsprint industry. Every newspaper newsprint buyer that we talked to described the Abitibi-Bowater strategy. This section analyzes four articles by two newsprint experts. These articles accurately describe the Abitibi-Bowater
Between the third quarter of 1999 and the second quarter of 2001, newsprint prices increased 30.2% as shown in Section E6. Abitibi's permanent capacity removals immediately before and during that period were a significant cause of the price increases. Abitibi removed 450,000 metric tonnes of newsprint capacity from the market in 1999 or almost 3% of NA capacity. In conjunction with its acquisition of Donohue in April 2000, Abitibi announced that it would remove an additional 400,000 metric tonnes of newsprint capacity from the market during 2000 and 2001. Section I documents Abitibi's permanent newsprint capacity removals between 1999 and 2001.
Over the last four years there have been significant increases in energy, fiber, and transportation costs faced by NA newsprint manufacturers. Newsprint mills in Eastern Canada have been especially hard hit. In addition, the appreciation of the Canadian dollar relative to the U.S. dollar has effectively raised the cost of Canadian newsprint mills while lowering the cost of U.S. newsprint mills.
In this section, we compare the price of newsprint from the third quarter of 1999 to the second quarter of 2006 with the prices of four uncoated groundwood specialty grades. We find that the quarterly prices for newsprint as a percentage of its price in 3Q 1999 were significantly higher than the quarterly prices for three of the four uncoated groundwood specialty grades over the period 4Q 1999 to 2Q 2006. Based on these results, it is implausible that the increases in newsprint prices were caused by the increases in input prices. We find that the price trend of one uncoated groundwood specialty grade was similar to that of newsprint. It appears that Abitibi and Bowater are the dominant providers of that grade as well.
Section J presents a slide from an Abitibi presentation showing that Abitibi's variable cost of newsprint production has been virtually flat between 2001 and 2005. Since all or nearly all of the newsprint price increases over the period 2002 to 2006 were led by Abitibi, it seems unlikely that increases in Abitibi's input costs are a plausible justification for the price increases.
In Section J, we also calculate quarterly newsprint revenues over the period 3Q 1999 to 2Q 2006 based on actual NA newsprint consumption and actual newsprint prices. We then apply the quarter to quarter percentage price changes for each of the four uncoated groundwood specialty grades to the 3Q 1999 newsprint price and multiply the resulting adjusted newsprint prices by actual NA demand. For the three grades with percentage changes in prices significantly below the percentage changes in newsprint prices, total revenues over the period are reduced by $4.7 billion to $7.4 billion.
Based on our analysis in Sections B through J, we conclude that Abitibi and Bowater have acted as a joint dominant firm since at least the end of 2002 and perhaps since 2000. Abitibi and Bowater have jointly used capacity closures to raise the price of newsprint well above competitive levels. By removing capacity from the newsprint market in a timely way Abitibi and Bowater have been able to maintain maximum practical operating rates for the newsprint industry which has directly led to the price increases.
Section K presents a theoretical dominant firm model which formally explains the joint behavior of Abitibi and Bowater. Using current data, we use the dominant firm model to predict whether it would be profitable for a merged Abitibi-Bowater to further increase the price of newsprint through additional capacity closures. We show that it would be profitable for the merged firm to close additional capacity to achieve a 5% price increase.
Attachment K of Section K is a technical appendix in which the equations of the dominant firm model are formally derived.
Based on our analysis in Sections B through J, we conclude that the joint strategy of Abitibi and Bowater to close NA newsprint capacity to raise the price of newsprint is anticompetitive and has caused significant economic harm to U.S. daily newspapers and other NA purchasers of newsprint.
We predict that if the proposed merger is allowed to proceed, the ability of the merged entity to pursue the Abitibi-Bowater strategy of closing capacity to raise the price of newsprint will be strengthened. The market power of the merged firm will be more effectively employed than Abitibi and Bowater were able to do as separate but coordinating firms. The possibility that one of the two firms would stop coordinating, resulting in a price decrease, will be eliminated once the two firms are merged. The merged entity will have an increased incentive and ability to use its control over capacity to raise the price of newsprint significantly above competitive levels. Newsprint consumers, whom the antitrust laws are designed to protect, will suffer additional significant competitive harm.
In conducting our analysis of the competitive effects of the proposed AbitibiBowater merger, we relied on a wide variety of newsprint industry sources. Amongst the most important sources for data and other information concerning the NA newsprint industry are RISI and the Pulp and Paper Products Council (“PPPC”). RISI is the leading source of information about the pulp, paper, and forest products industries in NA and worldwide. The PPPC is a private organization that compiles demand and supply data and conducts forecasts for North American producers of pulp and paper products, including manufacturers of newsprint. We also relied on information that Abitibi and Bowater make publicly available on their Web sites as well as similar information on the Web sites of other newsprint manufacturers. We interviewed a number of U.S. newspaper newsprint buyers who gave us their perspective on the NA newsprint market and the likely competitive effects of the proposed merger. The NAA also provided us with data.
The principles of product and geographic market definition are set out in the U.S. Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”) Horizontal Merger Guidelines (“Merger Guidelines”).
The main focus of this analysis is on the production and sale of newsprint in NA, but in applying the methodology of the Merger Guidelines to a provisional newsprint product market, it is necessary to consider demand and supply substitution possibilities regarding closely related uncoated groundwood specialty grades. While we do not reach any firm conclusions on relevant product markets within the uncoated groundwood specialty grade segment, we provide considerable information about the grade structure of that segment and the manufacturers of uncoated groundwood specialty grades in this section.
Newsprint is used to print newspapers, inserts, flyers and other advertising materials. In the U.S., the main purchasers of newsprint are newspaper publishers (both daily and non-daily) and commercial printers. In 2006, U.S. daily newspapers accounted for 80.0% of the U.S. consumption of newsprint.
Newsprint is the lowest quality and least expensive uncoated groundwood paper. The main ingredient of newsprint is groundwood pulp, also known as mechanical pulp, recycled fiber (old newspapers (ONP) and old magazines (OMG)), or a combination of groundwood pulp and recycled fiber. Chemical pulp is usually added to the pulp furnish to improve runnability on printing presses.
Although newsprint must meet the exacting standards of modem printing presses, it is a commodity grade. About half the newsprint sold in NA today has a basis weight of 30 lb. (48.8 grams per square inch) and about half has a basis weight of 27.7 lb. (45.0 grams per square inch). Over the last four or five years newspapers have been gradually switching from the heavier basis weight newsprint to the lighter basis weight newsprint.
To evaluate demand and supply substitution possibilities in a provisional newsprint market, it is necessary to describe in some detail the similarities and differences between newsprint and higher quality and higher value uncoated groundwood specialty grades. See Attachment B for (a) a comparison of the price of newsprint with the prices of four uncoated groundwood specialty grades and (b) Abitibi-Bowater HHIs based on estimated 2006 capacity and capacity shares by manufacturer for uncoated groundwood specialty grade segments.
Newsprint is a type of uncoated groundwood paper, but to distinguish newsprint from other uncoated groundwood grades, the paper industry refers to the other uncoated groundwood grades as uncoated groundwood specialty grades or higher value uncoated groundwood grades. Uncoated groundwood paper is also referred to as uncoated mechanical paper.
RISI estimated the 2006 NA capacity of uncoated groundwood specialty grades as 6,915,000 metric tonnes or somewhat more than half of 2006 NA newsprint capacity.
There are significant similarities in the production process for newsprint and the production processes for uncoated groundwood specialty grades. Indeed, many machines that currently produce uncoated groundwood specialty grades were formerly newsprint machines. The main ingredient of newsprint and uncoated groundwood specialty grades is pulp produced from some combination of groundwood pulp, recycled fiber, and chemical pulp. The grades vary by brightness, gloss, basis weight, opacity, and strength. Generally, newsprint has the lowest value combination of these characteristics. Higher value uncoated groundwood specialty grades are glossier and brighter than newsprint.
Slide 13 below, which is from Abitibi's presentation of financial results for Q1 2006 in June 2006, shows uncoated and coated printing paper grades.
A graph appearing in this comment is not able to be reprinted here. Copies of the comment with the graph are available at the Department of Justice Antitrust Division Web site,
The slide is titled “Paper Spectrum” and states that “Two key properties, brightness and gloss, define paper grade groups.” The blue ovals in Slide 13 represent printing paper products produced by Abitibi. The blue ovals also identify the main uncoated groundwood specialty grades. The white ovals identify coated groundwood grades (all of coated #5 and some of coated #4) and coated free sheet grades (some of coated #4 and all of coated #3).
The uncoated groundwood specialty grades can be divided into two categories: Glossy and non-glossy. The glossy grades are distinguished primarily by their degree of glossiness. The non-glossy grades are distinguished primarily by their degree of brightness. These distinctions are apparent in Slide 13.
Newsprint is a non-glossy grade. Newsprint is the least bright and, with the exception of the bulky book grade (ABIbook), the least smooth of the non-glossy grades. In terms of smoothness and brightness, the bulky book grade is closest to newsprint followed by the directory grade and the Hi-Brite grade (ABIbrite). Bulky book paper is typically used for paperback books and coloring books. Directory paper is somewhat brighter and smoother than newsprint and is also lighter (basis weight typically 22.1 lb. vs. 30 lb. or 27.1 lb. for newsprint) and is used primarily for the printing of telephone directories. The typical brightness of newsprint is 58. The brightness of Hi-Brite grades ranges from 65 to 75. Hi-Brite grades are used for printing inserts and flyers and in other similar commercial printing applications. The brightness of Super Hi-Brite grades (Abitibi grades EO, IO, and AO) ranges from 75 to 85.
The glossy uncoated groundwood specialty grades are supercalendered (SC) and soft nip calendered (SNC) grades. The gloss in SC and SNC grades is produced by adding clay fillers to the pulp furnish. After the SC paper roll comes off of the paper machine, gloss and smoothness are imparted to the paper by running the paper through a series of rolls called supercalenders. The gloss of SNC paper is typically achieved by an on-machine soft-nip calender. Slide 13 shows several SC grades (SCA, SCB+, SCB) which vary primarily by the degree of glossiness. SC and SCN grades are used in printing inserts, flyers, and catalogs. SC grades are also used in printing magazines.
Slide 23 below is from the presentation of John Weaver, President and CEO of Abitibi, to a Credit Suisse First Boston Global Basics investment analysts conference on March 4, 2004.
Slide 12 below is from the presentation at the announcement of the AbitibiBowater merger.
A graph appearing in this comment is not able to be reprinted here. Copies of the comment with the graph are available at the Department of Justice Antitrust Division Web site,
Assuming a hypothetical monopolist of newsprint imposed “a ‘small but significant and nontransitory’ increase in price”, would current newsprint customers switch in sufficient numbers to other paper grades to defeat the attempted price increase?
(1) Newsprint is the lowest quality and least expensive uncoated groundwood grade. Newsprint is designed to run on the printing presses of daily newspapers. We are unaware of any daily newspaper that has responded to increases in the price of newsprint in the past by switching to a higher quality and higher priced uncoated groundwood specialty grade. We believe it is implausible that in the future newspapers will switch to any higher quality and higher priced uncoated groundwood specialty grade if there is a relative increase in the price of newsprint. Every newspaper newsprint buyer we talked to said that if the price of newsprint rose 5% to 10% following the proposed merger they would have no alternative but to pay the increased price. They said they could not switch to other types of paper nor could they turn to suppliers outside of NA for any significant quantity of newsprint.
(2) Estimates of the elasticity of demand for newsprint have consistently been quite low (i.e., consistently quite inelastic). A 2004 study estimated that the U.S. demand
(3) Over the period 2002 to 2006, average annual newsprint prices rose a total of 42.6%. Over that same period the consumption by U.S. daily newspapers declined by 13.6%. The ratio of the percentage decline in newsprint consumption by U.S. daily newspapers to the percentage increase in the price of newsprint was 0.32.
(4) As shown in Table B1 in Attachment B, the prices of three major uncoated groundwood specialty grades are significantly above the price of newsprint even before the reduction in printing surface due to the switch to a heavier basis weight is taken into account. Taking the reduction in printing surface into account, as a newsprint customer rationally would, a buyer of 30.0 lb. newsprint who switched to 35 lb. SCB, Hi-Brite 65, or SCA, would face an equivalent price increase per metric tonne of 30.0 lb. newsprint ranging from 34.0% to 47.0% based on February 2007 prices.
In Section C below we identify NA capacity to produce newsprint by manufacturer mill. This capacity participates in the NA newsprint market. According to the Merger Guidelines, it is also necessary to identify those firms that could participate in the NA newsprint market through a supply response.
The antitrust agencies' methodology for determining whether such capacity should be included is described in “§ 1.32 Firms That Participate Through Supply Response” of the Merger Guidelines. § 1.32 notes that the agencies “will identify other firms [or capacity] not currently producing or selling the relevant product in the relevant area as participating in the relevant market if their inclusion would more accurately reflect probable supply responses. These firms are termed ‘uncommitted entrants.’ These supply responses must be likely to occur within one year and without the expenditure of significant sunk costs of entry and exit, in response to a ‘small but significant and nontransitory’ price increase.” § 1.32 further notes that “[i]f a firm [or capacity] has the technological capability to achieve such an uncommitted supply response, but likely would not (e.g., production would render such a response unprofitable), that firm [or capacity] will not be considered to be a market participant.”
The most likely type capacity for inclusion as a participant in the newsprint market would be uncoated groundwood specialty grades produced on so-called “swing” machines. The next most likely type of capacity would be newsprint machines that have been converted to the exclusive production of groundwood specialty grades without the expenditure of capital funds to rebuild the machine, to add or reconfigure pulping capability, or add off-machine finishing equipment. In cases where the conversion of a newsprint machine to an uncoated groundwood specialty grade has required a significant expenditure of capital funds, it is the least likely that that capacity should be included as a participant in the newsprint market. Similar analytical considerations apply to uncoated groundwood specialty machines that have never produced newsprint.
A certain amount of newsprint is produced on so-called “swing” machines. That is, the same machine is used to produce both newsprint and one or more higher quality and higher priced uncoated groundwood specialty grades. For example, some manufacturers may be able to produce Hi-Brite grades and Directory paper on the same machine as newsprint. It is likely that Bulky Book paper can also be produced on the same machine as newsprint. The Catalyst 2006 annual report, p. 9, states that “Capacities in the above table can vary as the Company is able to switch production between products, particularly newsprint, directory, and machine-finished [i.e., Hi-Brite] uncoated grades.”
Bowater's 2005 Annual Report states on p. 4 that it has newsprint and uncoated groundwood swing machines at the following mills: Calhoun, TN, Thunder Bay, ON, Gatineau, QC, and Dalhousie, NB. Abitibi's 2005 Annual Report, p. 10, indicates that Abitibi may have swing newsprint machines at its Belgo, QC, Iroquois Falls, ON, and Grand Falls, NL mills. Since the annual report does not provide a capacity breakdown by machine, it cannot be determined from the table on p. 10 which, if any, of the machines at these mills are producing both newsprint and uncoated groundwood paper. The annual report also indicates that Abitibi's Fort William mill in Thunder Bay, ON has a newsprint and uncoated groundwood swing machine. The mill's only paper machine is shown with a capacity of 107,000 metric tonnes for newsprint and 38,000 metric tonnes for uncoated groundwood grades.
The PPPC 2003 NA Newsprint Capacity Survey (March 3, 2003) states on p. 2 that at the time of the survey there were 17 machines in NA that were classified as “swing” machines. The PPPC noted that the
As the Merger Guidelines suggest, it would be necessary to determine if it would be profitable to switch the capacity on swing machines used to make uncoated groundwood specialty grades to newsprint production in the event of an increase in the price of newsprint. If it would be profitable, then the capacity of the swing machine used to make uncoated groundwood specialty grades should be included as participating in the newsprint market through a supply response. If it would not be profitable, then that capacity would not be included. We are aware of no publicly-available information that could be used to address this issue.
In contrast to the use of swing machines to produce both newsprint and uncoated groundwood specialty grades, some newsprint manufacturers have converted newsprint machines to the production of higher quality and higher priced uncoated groundwood grades (e.g., SC grades). That is, these machines are no longer used to manufacture newsprint. In some cases, these machine conversions required significant investment expenditures and non-trivial down times. To the extent that it would not be profitable to produce newsprint on a converted newsprint machine “in response to a ‘small but significant and nontransitory’ price increase,” the capacity of that machine should not be regarded as participating in the market (supply response within one year) or as en entrant (entry within two years). See § 1.32 as discussed above and “§ 3 Entry Analysis” of the Merger Guidelines. In some cases, however, it may be profitable to produce newsprint on a converted newsprint machine “in response to a ‘small but significant and nontransitory’ price increase.” This analysis can also be applied to machines that have never produced newsprint but are used to produce closely related uncoated groundwood specialty grades.
Below we provide two examples of recent conversions by Abitibi from newsprint to uncoated groundwood specialty grades. In 2005, Abitibi removed about 118,000 metric tonnes of newsprint capacity by converting a newsprint machine at its Shawinigan (Belgo). QC mill to Hi-Brite production. The conversion consisted of an increase in bleaching capacity at the Belgo mill. The cost was about C$15 million.
In 2003 and 2004, Abitibi converted about 170,000 metric tonnes of newsprint capacity at its Alma, QC mill to the production of Super Hi-Brites. The total cost of the conversion exceeded C$200 million. The conversion likely included an expansion of bleaching capacity and a rebuild of the paper machine. It seems unlikely that this machine would be used to produce newsprint under any foreseeable circumstances.
In 2002, Great Northern Paper rebuilt its No. 11 uncoated groundwood specialty machine at its Millinocket, ME at a cost of $103 million. After the mill was sold to Katahdin in 2003, the new owners made additional improvements to the machine to enable it to produce high quality SCA and SCA+ paper for magazines and catalogs. The machine was down 17 months before being restarted in 2004. Part of this downtime was due to the bankruptcy of Great Northern.
Referring to Slide 13 in Section B.2.b.(1) above, the most likely capacity to be converted to the production of newsprint in the event of a relative increase in the price of newsprint would be Directory, Bulky Book, and Hi-Brite. The machines used to produce these grades are technically closest to the machines used to produce newsprint. As discussed above, the machines used to produce SC grades and Super Hi-Brite grades have been significantly upgraded from newsprint machines or from lower quality uncoated groundwood grades. It seems unlikely that it would be profitable to use these machines to produce newsprint even if the price of newsprint were increased significantly.
Directory paper is sold under one- to three-year contracts that specify both price and volume. About 80% to 90% of directory paper is sold under contract. The other 10% to 20% is sold on the spot market. The main buyers of Directory paper are RBOCs and independent publishers of telephone directories. The demand for Directory paper has shown strong growth since 2004 and contract price increases of 10% are expected in 2007.
As shown in Table B-7 in Attachment B, Abitibi and Bowater control 76.5% of the NA Hi-Brite capacity and 100% of the Hi-Brite capacity East of the Rockies. Abitibi and Bowater also appear to control most of the Bulky Book capacity although we were not able to obtain a Bulky Book capacity figure for Bowater.
There are at least three machines producing uncoated groundwood specialty grades that have been designed specifically to produce those grades. These are high-speed, high-capacity machines use to produce high-quality SC paper. These machines are owned by Stora Enso and Madison paper. It is highly unlikely that these machines would ever be used to produce newsprint under any conceivable circumstances.
Based on our analysis in Section B.3.a. above of the likelihood of demand substitution in the event of a relative increase in the price of newsprint, we conclude that the relevant product market is no larger than newsprint.
Current newsprint suppliers are participants in the NA newsprint market.
Abitibi and Bowater also control a very large portion of Bulky Book and Hi-Brite, the next most likely capacity to participate in the NA newsprint market, and control virtually all of that capacity East of the Rockies.
Several of the newspaper newsprint buyers we interviewed said that they were unaware of any newsprint machine that had been converted to production of uncoated groundwood specialty grades that had subsequently been converted back to the production of newsprint. Given the steady decline in the NA demand for newsprint since at least 1999 this is not a surprising result. As shown in Section E2 below, NA demand (quantity purchased) for newsprint has declined every year from 1999 to 2006 for a total decline of 25.5% over that period.
We conclude that the participants in the NA newsprint market are the current NA newsprint producers. These 16 NA newsprint producers are identified in Tables C1 and C2 attached to Section C1.
The methodology for geographic market definition is described in § 1.2 of the Merger Guidelines. The methodology is similar to the methodology used to define relevant product markets.
Absent price discrimination, the Agency will delineate the geographic market to be a region such that a hypothetical monopolist that was the only present or future producer of the relevant product at locations in that region would profitably impose at least a “small but significant and nontransitory” increase in price, holding constant the terms of sale for all products produced elsewhere. That is, assuming that buyers likely would respond to a price increase on products produced within the tentatively identified region only by shifting to products produced at locations of production outside the region, what would happen?
In this section we consider whether the relevant geographic market is narrower or broader than our provisional geographic market of NA.
There is evidence that the relevant market may be narrower than NA. Based on interviews with buyers of newsprint for newspaper publishers, newsprint mills located West of the Rockies rarely ship to customers located East of the Rockies and vice versa.
We do not have the information necessary to determine if newsprint sold to customers located East of the Rockies is a relevant geographic market for the purposes of assessing the competitive effects of the merger. Primary sources of information on whether such a geographic market can be properly defined would include West Coast newsprint mills and customers located East of the Rockies. An analysis of comparative freight rates from West Coast mills and mills located East of the Rockies to East of the Rockies newsprint customers would also be useful in determining whether there is a relevant East of the Rockies market. For the purposes of calculating capacity shares and HHIs in Section C below, it is assumed that East of the Rockies is a relevant geographic market.
There has been considerable speculation in the trade press concerning the likely impact of new Chinese newsprint capacity on NA purchasers of newsprint and NA newsprint mills. While some buyers of newsprint have shown an interest in newsprint from China, it appears from press reports that the only newsprint that they have bought from Chinese mills is for test runs. There is no current indication that they intend to buy significant amounts of newsprint from China within the next one to two years. To the extent that there are imports of newsprint from China in the near-term, it is likely that the phenomena will be short-lived.
If there is an effect of the new Chinese capacity on NA newsprint mills, it will likely be on the displacement of export sales from NA mills to current customers located in Asia. It is likely that the new Chinese newsprint capacity will be largely absorbed in Asia over the next several years.
Imports of newsprint into NA have not been a significant source of supply for NA newspaper publishers and other NA purchasers of newsprint. In 1999, imports accounted for only 3.3% of NA newsprint purchases.
In the latter part of the 1990s, there was an increase in NA imports to about 555,000 metric tonnes in 1998 (about 4.3% of NA consumption).
There were a number of unique circumstances that accounted for the increase in imports from South Korea to NA. These include (1) significant new efficient capacity coming on line in South Korea; (2) a very steep devaluation of the South Korean won relative to the U.S. dollar; (3) a significant recession in South Korea and Asia which reduced Asian demand for newsprint; and (4) strikes at newsprint mills in British Columbia which removed about 1 million metric tonnes of annual newsprint capacity from the NA market.
Imports from Russia also increased during the latter part of the 1990's though not as significantly as imports from South Korea. Newspaper publishers found that newsprint from Russian mills was unreliable both in terms of quality and delivery. As a consequence, imports from Russia declined to a low level by 2000.
Martine Hamel, head of market research for the PPPC, estimates growth in newsprint demand for all regions of the world over the period 2006 to 2008.
Slide 36 below from Martine Hamel's presentation shows the forecast growth of Chinese demand for newsprint. Chinese newsprint demand is projected to increase by 3.1% in 2006, 8.7% in 2007, and 14.0% in 2008.
Slide 37 shows growing demand in the rest of Asia (excludes Japan, South Korea, and China). The projected demand growth in China and the rest of Asia
Slide 42 below from Martine Hamel's presentation shows that virtually all of the growth in global newsprint capacity over the period 2005-2008, is expected to come from the installation of new Chinese capacity. This growth in Chinese newsprint capacity is partially offset by reductions in NA newsprint capacity.
Martine Hamel of the PPPC also estimates that exports from Asia to other regions of the world will total 60,000 metric tonnes per year over the period 2005 to 2008.
We expect that many of these exports from Asia would be to regions other than NA since, as shown in Slide 39 above, demand in those regions is growing while demand in NA is decreasing significantly. To the extent there were exports from Asia in 2005 and 2006, these exports did not have a significant impact on the NA newsprint market since imports into NA in 2005 and 2006 actually declined each year from the prior year.
Slide 49 also shows exports from Asia during the period 1996 to 1999 at a rate of 360,000 metric tonnes per year. For five of the six years 1995 to 2000, Asian newsprint capacity increased by a greater percentage than is projected for the three years 2006 to 2008. As was discussed above, this capacity came on line at the same time that the Asian region was undergoing a steep economic decline and steep decline in the demand for newsprint. The new Chinese capacity is coming on line at a time of significant growth in demand for newsprint in China and in the rest of Asia. See Slides 36 and 37 above. This significant projected growth in newsprint demand increases the likelihood that the new Chinese capacity will be absorbed in Asia over the next several years. This projected growth was undoubtedly a major factor in the PPPC's forecast of 60,000 metric tonnes of exports per year from Asia for the period 2005-2008, compared to the much higher export total of 360,000 metric tonnes per year from Asia that occurred over the period 1996-1999.
The heads of Abitibi and Bowater also expect that the new Chinese capacity will be absorbed in Asia over the next several years.
John Weaver, President and CEO of Abitibi, gave a presentation to Citigroup's 11th Annual Global Pulp & Forest Products Conference on December 7, 2006 (“Citigroup Conference”). During the Q&A that followed his slide show presentation, Weaver was asked about the impact of the new Chinese newsprint capacity on the global and NA newsprint markets.
Weaver begins his response by saying that “There will be a trend in the international market in [2007] but it won't be China.” He said that he does not know of any deal that a publisher has signed that is not a trial. He said that there had been only 242 tonnes of imports from China so far in 2006.
“So I don't really expect to see any significant imports of Chinese paper to North America [in 2007],” he said. He also said that based on most of the calculations he has seen, including those by Abitibi, “it's hard to see the economic benefit of the Chinese coming.”
He said that he does expect there will be some Chinese exports. He specifically mentions that Abitibi has seen Chinese exports in India. He said, “I really feel that the phenomena of Chinese oversupply may be short-lived.” He gives several reasons. He mentions 1.7% growth in global newsprint demand. He also says that the Chinese government recently announced that they would close their smaller polluting newsprint mills in 2007 and 2008, which would reduce the amount of Chinese newsprint capacity.
David Paterson, President and CEO of Bowater, also gave a presentation at the 2006 Citigroup Conference. Paterson addressed the issue of new Chinese capacity during his slide show presentation (Slides 14 and 15).
He asks, “Where will those Chinese tonnes go as they start up and come into the market?” Paterson said Bowater believes they will flow into Asia and that there will be some coming into NA. He said that U.S. newspapers were talking openly about importing newsprint from China into the east coast and the west coast of the U.S. But, he said, “Having said that, I think most of the tonnes will show up in places like Singapore, Malaysia, India, Brazil. These are all high growth markets.” He said that newsprint consumption in India was up 17% so far this year. He said that Bowater sees the Chinese in India and that Chinese newsprint sales are growing.
He said, “There is room for those tonnes to go. It will be a difficult 12 to 18 months as they find a home.” He said there were also other forces affecting Chinese tonnage, primarily Chinese demand as well as the change in their tariff system. He said if the government does what it said it is going to do and eliminates tariff protection for exports, then high-cost Chinese capacity will start shutting down.
In their audio remarks, both Weaver and Paterson, emphasized the export opportunities for NA newsprint manufacturers created by the global growth in the demand for newsprint. Abitibi and Bowater foresee a healthy increase in overseas shipments in 2007 due to the projected growth in newsprint demand in other regions. Abitibi and Bowater account for about 70% of total exports from NA to overseas locations. In a news report, Weaver said he expected Abitibi to increase its offshore shipments by 10% in 2007 and Paterson anticipated a 5% to 6% increase in offshore shipments from NA.
Several of the newspaper newsprint buyers we talked to indicated that they had tested Chinese newsprint but that they had no immediate plans to purchase newsprint from Chinese mills. Factors that they cited were an unknown track record, the lack of a relationship, the need to assure reliability of delivery and quality, and the need to assure service. While price is an extremely important factor to a newsprint buyer, another important factor is the need to assure an adequate and reliable supply of newsprint at all times since newspapers print on a daily basis.
The buyers emphasized the need to develop a very close relationship with their suppliers. Buyers emphasized that it would take several years of low-volume purchases to establish the trust and track record needed to increase their level of purchases.
Several buyers believed that if Chinese newsprint were shipped to the U.S., it would only be economically feasible to ship the paper to west coast ports to supply newspaper printing plants located close to the docks.
We conclude that the geographic market is no larger than NA. It is possible that the relevant geographic market may be narrower than NA. Some evidence suggests that there may be a relevant East of the Rockies geographic market. To conclude that there is a relevant East of the Rockies market it would be necessary to determine if West of the Rockies newsprint mills could profitably ship newsprint to East of the Rockies customer locations in response to a “small but significant and nontransitory” increase in price in sufficient quantities to make the price increase unprofitable.
While there is new Chinese newsprint capacity that has come on line recently, it appears that that capacity will be largely absorbed in Asia over the next couple of years. There may be some limited sales to U.S. publishers by Chinese mills over the next couple of years. Most publishers we talked to showed little interest in buying newsprint from Chinese mills. They placed great emphasis on trust, reliability and a close relationship with their newsprint suppliers. Currently they have no relationship with any of the Chinese mills and believe that establishing the trust and reliability necessary to buy more than nominal amounts of newsprint would take at least a couple of years if not longer.
If there is to be an effect on the NA newsprint market from the new Chinese newsprint capacity, it would likely be an indirect one. It is possible that some NA suppliers who currently export to Asia will be displaced from some of their customers by the new Chinese capacity. If so, that would create excess capacity at their NA mills used to supply the Asian market. As discussed above, however, Abitibi and Bowater expect newsprint exports from NA to increase, not decrease. The export growth opportunities that Abitibi and Bowater expect to be able to take advantage of should be available to other NA mills that export newsprint, including those that may be displaced from Asian customers by the new Chinese capacity.
According to § 1.51(b) of the DOJ/FTC Horizontal Merger Guidelines (“merger guidelines”) the NA newsprint market is currently moderately concentrated. Based on estimated 2006 NA newsprint capacity, the pre-merger HHI is 1,380. If the merger is consummated, the change in the HHI would be 962 and the post-merger HHI would be 2,342.
According to § 1.51(c) of the merger guidelines, markets with post-merger HHIs above 1,800 are highly concentrated and HHIs of the magnitude shown in Chart C1 create the presumption that the merger would be “likely to create or enhance market power or facilitate its exercise.” This section of the merger guidelines states in part that:
Where the post-merger HHI exceeds 1800, it will be presumed that mergers producing an increase in the HHI of more than 100 points are likely to create or enhance market power or facilitate its exercise. The presumption may be overcome by a showing that factors set forth in Sections 25 of the Guidelines make it unlikely that the merger will create or enhance market power or facilitate its exercise, in light of market concentration and market shares.
Pre-merger, Abitibi has a 27.4% market share based on estimated 2006 capacity and Bowater has a 17.5% share. Following the merger Abitibi-Bowater would have a combined share of 45.0%. The next largest newsprint manufacturer, White Birch would have a 9.0% share. See Chart C2 below.
Based on estimated 2006 east of the Rockies newsprint capacity, the pre-merger HHI is 1,876. If the merger is consummated, the change in the HHI would be 1,445 and the post-merger HHI would be 3,321. See Chart C3 below.
Abitibi has only two west of the Rockies mills (Mackenzie, BC and Snowflake, AZ) and, as noted above, Bowater does not own a majority interest in any west of the Rockies newsprint mill. Virtually all of their combined capacity is located east of the Rockies. Pre-merger, Abitibi has a 30.8% market share based on estimated 2006 east of the Rockies capacity and Bowater has a 23.4% share. Following the merger, AbitibiBowater would have a combined share of 54.3%. The next largest newsprint manufacturer, White Birch, would have a 12.1% share. See Chart C4 below.
John Weaver, the President and CEO of Abitibi, has discussed the increase in consolidation in the NA newsprint market in a number of presentations to investment analysts. Slide 5 below is from a presentation that Weaver made at the UBS Global Paper and Forest Products Conference on September 18, 2003. The presentation was titled “Is the Industry Positioned to Reap the Benefits of Its Restructuring?” and is available on the Abitibi Web site. Slide 5 shows Abitibi with a 32% capacity share and Bowater with a 19% capacity share in NA.
Slide 3 below from Abitibi's UBS presentation states that the capacity share of the top 5 NA newsprint producers more than doubled from 35% in 1995 to 73% in 2002. Slide 3 also identifies the acquisitions and mergers that occurred over the period 1995 to 2002 that enabled the share of the top 5 newsprint producers in North America to rise from 35% to 73%.
Slide 4 below from Abitibi's UBS presentation shows the acquisitions that enabled Abitibi to increase its NA newsprint capacity share from 11.2% in 1995
In a slide show presentation at the Annual Citigroup Paper and Forest Products Conference on December 7, 2006, David Paterson, President and CEO of Bowater, spoke to investment analysts about Bowater's product lines, efforts to reduce costs, and financial results. Referring to Slide 12,
In 1995, Abitibi Price was the largest newsprint manufacturer with a capacity share of 11.2% and Bowater was the third largest firm with a capacity share of 8.1%. Their combined share was 19.4%. If Abitibi-Price and Bowater had merged in 1995, the pre-merger HHI would have been 545, the change in the HHI would have been 183 and the post-merger HHI would have been 728. According to § 1.51(a) of the Merger Guidelines, markets with post-merger HHIs below 1,000 are unconcentrated. See Chart D1 below which includes both the HHIs for the 1995 hypothetical AbitibiBowater merger and the HHIs for the proposed 2007 AbitibiBowater merger.
See Table D1 in Attachment D for capacity shares and HHIs for all 33 NA manufacturers of newsprint in 1995. Based on Table D1, Table D2 in Attachment D identifies all acquisitions and exits in the NA newsprint market since 1995.
See Chart D2 below, which shows capacity shares for the top 20 newsprint manufacturers in 1995.
The chart also shows which of the top 20 newsprint manufacturers in 1995 were acquired directly and indirectly by Abitibi and Bowater after 1995.
In 1995, there were 16,093,000 metric tonnes of NA newsprint capacity. In 2006, there were an estimated 12,760,000 metric tonnes of NA newsprint capacity, a reduction of 20.7%, most of it occurring since 2002.
The firms in Table D5 can be divided into three categories: (1) Firms remaining today in the NA newsprint market that had a net reduction in capacity over the period 1995 to 2006; (2) firms remaining today in the NA newsprint market that had a net addition in capacity over the period 1995 to 2006; and (3) firms who exited from the NA newsprint market between 1995 and 2006.
The first and third categories total 3,963,000 metric tonnes in net capacity reductions. These net capacity reductions are partially offset by 630,000 metric tonnes in net capacity additions by 10 of the 16 firms that remain in the market today.
The first category in Table D5 shows that the reductions by Abitibi, Bowater, and Catalyst account for 99.5% of NA capacity reductions by firms that (a) had net capacity reductions between 1995 and 2006 and (b) remain in the market today.
As Table D4 indicates, Abitibi lost 6.5% in capacity share. Bowater lost 0.9% in capacity share, and Catalyst lost 2.1% in capacity share between 1995 (adjusted 1995 capacity) and 2006 due to their net capacity reductions. Combined, the three firms lost 9.5% in newsprint capacity share. The 5 firms that exited the NA newsprint market lost a combined 4.6% in newsprint capacity share.
The demand for newsprint by daily newspapers is derived from the demand for newspapers by readers and advertisers. Demand, as used in this sense, means the demand curve for newsprint and the demand curve for newspapers. If the demand for newspapers declines independent of the price of newsprint, the demand curve for newspapers will shift downward causing the newspaper's derived demand curve for newsprint to also shift downward.
Chart E2 below shows the total NA average quarterly demand for newsprint 1999 to 2006.
Chart E6 shows quarterly prices for newsprint. Prices declined from the Q1 1999 to Q3 1999, generally increased from Q3 1999 to Q2 2001, declined significantly from Q2 2001 before bottoming out in Q2 and Q3 2002, and generally increasing from Q3 2002 to Q3 2006 before declining somewhat in Q4 2006. Just considering the period from Q3 2005 to Q3 2006 the price of newsprint increased by an aggregate of $222 or 49.0% while demand (quantity purchased) declined by an aggregate of 521,000 metric tonnes or 18.0%.
This section, as well as Sections D and F, explores the likely causes of the significant and sustained increase in newsprint prices over the two periods described above while newsprint demand (quantity purchased) was either flat or steadily declining. See Chart 7 below, which combines Chart 2 and Chart 6. In seeking the explanation for the likely causes, we make three main observations:
(1) The decline in demand (quantity purchased) over the period 1999 to 2006 was due primarily by downward shifts in the demand curve for newspapers caused by declining circulation and advertising lineage independent of increases in the price of newsprint. The downward shifts in the demand curve for newspapers caused downward shifts in the derived newsprint demand curve.
(2) Holding the newsprint supply curve constant, downward shifts in the newsprint demand curve would be expected to lead to lower newsprint prices. That has not happened. The steady rise in newsprint prices over the two periods was primarily caused by the strategic and coordinated removals of newsprint capacity from the market by Abitibi and Bowater in response to the downward shifts in the newsprint demand curve, These upward shifts of the supply curve maintained maximum operating rates and increased newsprint prices. Both Abitibi and Bowater pursued the approach of reducing capacity, which was highly successful in achieving a steady increase in the price of newsprint.
(3) It is not plausible that increases in the price of inputs used to manufacture newsprint or the appreciating Canadian dollar are a significant cause of the price increases.
The reduction in newsprint capacity by Abitibi and Bowater and its relationship to the maintenance of high operating rates and rising prices was recognized as a strategic move by newsprint producers, newsprint buyers, and newsprint industry analysts, as this passage from The Global Pulp & Paper Fact Book 2006
Even though demand continued to decline during the 2003-2006 period, newsprint producers have steadily raised prices during the past several years. Through a policy of closing mills and either shutting newsprint machines or converting them to added-value grades, newsprint producers have kept supply and demand relatively balanced, and operating rates high enough to support the progression of supply-driven price increases. By third quarter of 2006 the market average stood at $675/tonne with another $20/tonne increase proposed by some producers for August 1 and by others for September 1.
The Global Pulp & Paper Fact Book 2006 does not identify any newsprint manufacturers but noted that unnamed newsprint manufacturers had a “
NA annual newsprint demand (quantity purchased) has fallen 25.5% on an annual basis between 1999 and 2006. See Chart E1 below.
Chart E2 below shows NA demand (quantity purchased) by quarter from Q1 1999 to Q4 2006. Quarterly NA demand (quantity purchased) has decreased from Q4 1999 to Q4 2006 by 28.8%
There are three main causes of the decline in NA newsprint demand over the period 1999-2006: (a) Declining newspaper circulation; (b) declining newspaper ad linage; and (c) newspaper efforts to conserve on the consumption of newsprint.
In the March 2007 edition of Pulp & Paper Magazine, Bill Moore of Moore & Associates, a recycled paper consulting firm, states that “[t]he decline in newsprint consumption in North America is structural and very little can be done at this point to change the situation.”
Mr. Moore described how the decline in newspapers has led to the decline in the production of newsprint.
The reasons for this decline in NA newsprint production have been well documented and are related to a series of factors in the decline of newspapers:
• Newspaper readership in the U.S. has been steadily declining for a number of years and the downward trend has accelerated in the last few years.
• Many newspapers have moved to smaller formats, tighter margins, and also the use of a lower basis weight sheet.
• More advertising and classifieds have moved to the web.
• Stock pages, and even the classical in-depth reporting that newspapers were known for, have been eliminated from many papers. The recent Wall Street Journal changes resulted in a 15% reduction in the use of newsprint [by that newspaper]!
Martine Hamel, head of market research for the PPPC, has estimated the relative size of each of these effects
Slide 8 of the PPPC 2006 NPA/NAA Presentation shows a 7.8% decline in U.S. daily newsprint consumption for the first nine months of 2006 compared to the first nine months of 2005.
If the newsprint supply curve shifts upward and to the left due, say, to the permanent closure of newsprint capacity, a new equilibrium price and quantity will be established. The new price will be higher than the old price and the new quantity purchased will be lower than the old quantity purchased. This can be described as a movement along the demand curve caused by the shift of the supply curve upward and to the left. The effect of the supply curve shift on equilibrium price and quantity will depend upon the price elasticity of demand. If the demand curve is highly inelastic in the region of the supply curve shift,
Newspapers, of course, buy newsprint to help meet the demands of their customers, the readers and advertisers. Their demands for newspapers are exogenous to the newspapers' demand for newsprint. That is, their demand for newspapers is shaped by factors completely independent of the market for newsprint.
When newspapers narrow the width of the page or buy lower basis weight newsprint or move stock tables from the newspaper to their web sites, they are permanently removing newsprint demand from the market. In so doing, they are shifting the demand curve downward and to the left. While the conservation efforts are no doubt largely in response to the four years of newsprint price increases, they do not indicate movements along the demand curve. They indicate shifts in the demand curve. If newsprint prices declined by 10 percent, it is implausible that newspapers would go back to wider webs or start running stock tables in the newspaper again. As long as the relative prices for higher and lower basis weight paper remain approximately the same, as seems likely, newspapers will have no incentive to switch back to higher basis weight paper.
The demand removal through conservation efforts is directly analogous to the capacity removal that has been taking place in the NA newsprint market, particularly since 2002. The capacity removals shift the supply curve upward and to the right. The demand removals shift the demand curve downward and to the left. The major difference between the two is that the capacity removals occur more quickly and have a much greater impact on price than the demand removals. The narrowing of the width of newspapers from 50 inches to 48 inches would be the equivalent of a 4 percent reduction in price. The move from 30 lb. newsprint to 27.7 lb. newsprint
Slide 5 of the 2006 PPPC presentation shows that in 2006, about half of the newsprint shipped by NA mills to NA customers was 27.7 lb. newsprint. That implies that only half of the 2.7% or $16.94 cost savings potentially available to newsprint customers had been realized even though prices had steadily risen over the prior four years. Slide 6 in the same presentation also shows that conservation efforts on the part of newsprint customers take years to accomplish in the aggregate and even then, some and perhaps many customers will never convert. The same general comments can be made with respect to the reduction of page widths to 48 inches from 50 inches. Finally, newsprint buyers have said that the low-hanging fruit has been picked and that the opportunities for cost savings from future efforts to conserve on newsprint are reaching the point of diminishing returns.
The PPPC forecasts a 5.9% decline in NA newsprint demand in 2007 and an additional 3.3% decline in NA newsprint demand in 2008.
Assuming the PPPC forecast is reasonably accurate, NA demand will fall by a total of 879,000 metric tonnes over the two-year period. Assuming no change in overseas shipments from NA mills or in imports by NA customers from 2006 levels, NA manufacturers would have to temporarily idle or permanently shut down 1,055,000 metric tonnes of capacity during 2007 and
Shipments by NA mills to NA customers and overseas customers declined significantly over the period 1999 to 2006. See Chart E3 below.
As a result of the decline in shipments to NA and overseas customers, NA newsprint production declined by 24.5% between 1999 and 2006. Due to newsprint mill closures, newsprint machine shut downs, and newsprint machine conversions to other grades, NA newsprint capacity has declined by 23.7% during the same period.
Chart E4 below shows capacity and production by quarter over the period 1999 to 2006. The chart shows that both capacity and production have declined steadily from the beginning of 2001 through the end of 2006.
Chart E5 below shows the quarterly operating rates
Chart E6 below shows the price of newsprint per metric tonne by quarter for the period 1999 to 2006.
The price of newsprint increased $145 or 30.2% from the third quarter of 1999 to the second quarter of 2001 before falling by $172 or 27.5% through the second quarter of 2002. As Chart E6 shows, price increased in 5 of the 7 quarters during the period of the price rise. In the other two quarters, price was unchanged.
After the bottom was reached in the second and third quarters of 2002, the price of newsprint steadily increased over the next four years from $453 to $675 in the third quarter of 2006. This was an increase of $222 or 49.0%. As Chart E6 shows, price increased in 14 of the 16 quarters over this four-year period. In one quarter, the price was unchanged and in one quarter the price declined by $5. In the fourth quarter of 2006, price decreased slightly to $660.
Combining Chart E2 and Chart E6, shows the two sustained price increases from the end of 1999 to the beginning of 2001 and from the end of 2002 to the end of 2006. During the first period demand was more or less flat and during the second period demand was steadily trending downward. See Chart E7 below.
In Section D above, the significant increase in concentration in the NA newsprint industry between 1995 and 2006 and the significant decrease in newsprint capacity over that same period were analyzed. Due primarily to acquisitions by Abitibi and Bowater between 1995 and 2001, the NA newsprint market was transformed from an unconcentrated market in 1995 to a highly concentrated market in 2000 with Abitibi's acquisition of Donohue in April 2000. Bowater's acquisition of Alliance in 2001 and Norske Skog's acquisition of Pacifica, also in 2001, further increased concentration in an already highly concentrated market.
The key to increasing newsprint prices is maintaining high newsprint industry operating rates. Before 1995 no newsprint producer had a market share large enough to cause an increase in the market price. Without the acquisitions of newsprint capacity that they made between 1995 and 2001 (described in Section D above), Abitibi and Bowater could not have profitably pursued a strategy to increase the market price even through coordinated interaction. With the increased capacity under their control, Abitibi and Bowater gained that power and have jointly used it to play the role of a dominant firm. Publicly available information shows that Abitibi and Bowater have acted in a coordinated manner to strategically idle and shut down newsprint capacity sufficient to maintain high industry operating rates and increase the price of newsprint. With the possible exception of Catalyst,
Since the end of 2002, Abitibi and Bowater have used their dominant control over NA newsprint capacity to raise operating rates and the price of NA newsprint significantly above competitive levels. Between the third quarter of 2002 and the third quarter of 2006, the price of newsprint has increased by an aggregate of 49.0 percent even though the demand for newsprint declined 16.5 percent over that same period.
John Weaver, the President and CEO of Abitibi, and David Paterson, the President and CEO of Bowater, made separate presentations at the 11th Annual Citigroup Global Paper and Forest Products Conference on December 7, 2006 (“Citigroup Conference”). These presentations are discussed in more detail in Sections F.2. and F.3. below. Weaver emphasized the importance of maintaining a “balance” in the demand and supply of newsprint. Weaver introduced a slide which shows the positive relationship between the level of the newsprint industry operating rate and the percentage change in the list price of newsprint.
Paterson of Bowater stated that the “industry” had “responded fairly aggressively” to declines in demand and that Bowater was “taking action” to remove capacity from the market. He described the removal of more than 10% of Bowater's newsprint capacity from the market during 2006. During the Q&A, he said that to maintain cash flow and dividend payments, Bowater needed to stay ahead of the demand curve to maintain an operating rate that would give Bowater “pricing leverage”. He said “I can do that” by shutting down Bowater's high cost assets hopefully before price erosion has set in with any significance. From these remarks, it is clear that that the control of capacity is used by Abitibi and Bowater not only to raise newsprint prices but to prevent prices from falling from current levels.
This section discusses information primarily from Abitibi and Bowater presentations to investment analysts. This evidence is consistent with and supportive of our hypothesis that Abitibi and Bowater acted as a joint dominant firm to raise the price of newsprint significantly above competitive levels from the end of 2002 through 2006. Section I below discusses
This section provides evidence of Abitibi's and Bowater's anticompetitive conduct for the period 2002-2006, based on (a) John Weaver's presentation at the December 2006 Citigroup Conference (Section F.2.); (b) David Paterson's presentation at the same Citigroup Conference (Section F.3.); (c) John Weaver's presentation to the Credit Suisse First Boston investment analysts conference in March 2004 (Section F.4.); and (d) an interview of John Weaver by paperloop.com in February 2004 (Section F.5.).
John Weaver, president and CEO of Abitibi, spoke for about 30 minutes at the December 2006 Citigroup Conference. His presentation consisted of commentary on slides prepared by Abitibi
Slide 9 of Weaver's presentation shows the relation between the level of the newsprint operating rate and percentage change in the list price of newsprint between July 2000 and September 2006.
Slide 9 and Slide 10, which follow are titled “Industry Supply/Demand Balance.” Slide 9 is sub-titled “Newsprint List Price and Operating Rate.” Slide 9 shows that beginning in September of 2000, price rose about 12% above the June 2000 price by April 2001. As the U.S. economy went into negative growth in 2001, price plunged by 33% (from 12% above the June 2000 price to 21% below the June 2000 price) reaching the bottom in July 2002. Price then rose in a fairly uninterrupted path from 21% below the June 2000 price to 20% above the June 2000 price by September 2006.
The operating rate bottomed out at the end of 2001, about 6 months before the bottoming out of price. The operating rate then rose in fits and starts to above 95% by early 2004. Price rose accordingly, lagging the increase in the operating rate by several months. As will be discussed below, Weaver describes a 95% operating rate as a full capacity rate for the industry.
Weaver said that demand and supply have more or less been in balance since 2003.
Weaver said that the industry had been at a 95%+ operating rate for past 2 years and since mill inventories were declining, a 95% operating rate is “for all intents and purposes the full operating rate.
There is also a distinction between market-related downtime and the strategic idling of capacity. If a relatively small newsprint producer takes market-related downtime, it is because the producer does not have enough orders to keep operating. It is
We are unaware of any Abitibi or Bowater indefinitely idled newsprint capacity that has been restarted. The capacity has either been shut down or has remained indefinitely idled. The subject of determining the “real” operating rate as opposed to the PPPC official operating rate is discussed further in Section H.3.c. below.
Slide 10 below shows the newsprint industry supply/demand balance from January 2004 through September 2006.
Demand (quantity purchased) is defined as NA consumption plus net exports. Referring to Slide 10, Weaver said “month after month production is equal to consumption” and since mill inventories are flat or trending down, “there is no excess capacity in the marketplace today. It [i.e., production] is all being consumed.”
David Paterson of Bowater, also made a presentation at the Citigroup Conference on December 7, 2006. The format was similar to Weaver's presentation.
The note at the bottom of Slide 13 of Paterson's presentation says “Balanced newsprint capacity & demand.” See Slide 13 below. The slide plots the quantity of NA demand and supply over the period 2000 to 2006. The slide shows similar downward slopes over time for both demand and supply. Paterson said “North American demand. That's not the slope you want clearly but the industry has responded fairly aggressively.”
During the Q&A that followed the slide show, Paterson was asked about maintaining cash flow and dividend payments. Paterson said that in the near term, newsprint pricing is stable but that any significant decline in prices would cause another round of closures, primarily Canadian assets.
Paterson said he thinks about near-term cash management as using two tools to sustain cash flow.—“One is newsprint pricing and the ability to manage that and that's critical. I've got two and a half million tonnes [of capacity], so the math is pretty compelling. Every $10 bucks, with a company our size, that's $25 million in revenue that I've got to protect. So that's number one.”
Paterson then elaborated on the second tool that Bowater uses to sustain near-term cash flow:
“Number two is we have to stay ahead of that curve, that demand curve that you mentioned to sustain cash flow. So my belief [* * *] is that we have to move faster to stay ahead of that [demand] curve to maintain an operating rate that gives us some pricing leverage in the market and I can do that. We know which our high cost assets are and we will shut them down hopefully before rather than after price erosion with any significance. So that's the second tool. Now what does that do? My spread between best and worst assets is quite significant. So without doing anything else, I can lower my total manufacturing costs pretty significantly. I've got to balance that against—you know these assets are generating cash and we need to pay down debt and do other things.”
He said that the Bowater Board of Directors is committed to paying dividends and that the board challenges management to generate operating cash flow on a sustainable basis to pay dividends and interest payments.
John Weaver gave a presentation at the Credit Suisse First Boston Credit Global Basics Conference on March 3, 2004 (“Credit Suisse Conference”). Three consecutive slides presented by Weaver relate to the closure of Abitibi's capacity in order to raise industry operating rates and prices.
Slide 13 below is an earlier version of Slide 9 that Weaver presented at the December 2006 Citigroup Conference. Slide 13 shows that the price of newsprint lags the NA operating rate by about a quarter. When the operating rate begins to fall, the newsprint price will begin to fall several months later. Similarly, when the operating rate begins to rise, the newsprint price will begin to rise several months later.
Slide 14 below shows NA monthly newsprint production, capacity and operating rate from mid-1996 through January 2004.
Note that capacity hit a monthly high of 1,378 metric tonnes in 1998. Between 1998 and 2001, capacity declined by about 5%. Abitibi began removing newsprint capacity from the newsprint market in 1999 and announced additional newsprint capacity removals in conjunction with its acquisition of Donohue in April 2000. These capacity closures are discussed in Section I below. Between the end of 2001 and the end of 2003, an additional 7% of capacity, compared to the 1998 peak, was removed from the market. Some of this capacity removal was due to the closure of the Garden State mill at the end of 2001. In addition, several other manufacturers converted small newsprint machines to other groundwood grades as is discussed in Sections D.3. and D.4. above. Slide 14 projects additional capacity reduction in 2004 to bring the total reduction as a percentage of the 1998 peak to 12.8%. Between the 1998 peak through projected 2004, Abitibi and Bowater accounted for almost 80% of the total reduction.
Slide 15 below shows that Abitibi removed 977,000 metric tonnes of capacity from the NA newsprint market in 2003. About 43% of the removal was due to temporary rotating downtime (i.e., market related downtime). The remaining 57% of the 2003 capacity removal was due to the indefinite idling of capacity. Abitibi calculated the 2003 industry operating rate at 87%. This calculation excludes Abitibi's indefinitely idled capacity from total NA newsprint capacity (i.e., the denominator of the operating rate calculation). The exclusion of Abitibi's indefinitely idled capacity from total NA capacity indicates that the capacity was withheld from the market for the strategic purpose of raising the industry operating rate and increasing the price of newsprint.
Slide 15 also shows Abitibi's projected 2004 capacity removals. In 2004, Abitibi was projected to remove 1,075,000 metric tonnes of newsprint capacity from the NA market. Rotating downtime was not expected to account for any of the capacity removal in 2004. Abitibi projected that it would achieve its capacity removal in 2004 by increasing indefinitely idled capacity by 202,000 metric tonnes, by permanently closing 230,000 metric tonnes of capacity, and by converting 85,000 metric tonnes of capacity to uncoated groundwood specialty grades. Slide 15 also shows projected 2004 NA capacity (excluding indefinitely idled capacity) declining by 498,000 metric tonnes from 2003. Abitibi's projected increase in capacity removal in 2004 accounts for all of the projected reduction in total NA newsprint capacity from 2003.
John Weaver, President and CEO of Abitibi, was interviewed by Will Mies, Editorial Director, Paperloop Information Products. The interview was published on
The article describes Abitibi's aggressive “focused downtime” strategy. While the term “focused downtime” strategy is not explicitly defined in the article, it clearly means that the newsprint machine or newsprint mill has been indefinitely idled. It should be noted that none of the mills mentioned in the article subject to Abitibi's “focused downtime” strategy in December 2003 have re-opened. The Port-Alfred, QC and Sheldon, TX mills have been permanently closed. The Lufkin, TX mill remains indefinitely idled.
Abitibi-Consolidated has been aggressively pursuing a “focused downtime” strategy. On Dec. 14 the company indefinitely idled its Lufkin, Texas, and Port-Alfred, Que., newsprint mills, extended downtime at its Sheldon, Texas, mill and permanently shut two machines at the latter two mills with 230,000 tonnes/yr. of capacity. As a result, the company began the year with one million tonnes of newsprint capacity removed from the market—and this excludes the conversion of the company's Alma, Que., to Equal Offset paper production later this year. Last year the company took 977,000 tonnes of newsprint downtime and 887,000 tonnes in 2002.
As used by Abitibi, “focused downtime” or the indefinite idling of capacity means that this capacity has been removed from the market to maintain high newsprint industry operating rates. The capacity would not be restarted if the effect would be to lower the operating rate from its current and, presumably, high level. However, it seems plausible that indefinitely idled capacity would be restarted if there were sufficient increases in newsprint demand that the restart would not adversely affect the industry operating rate. Since demand has been consistently declining in recent years, none of Abitibi's indefinitely idled machines has been restarted. As noted above, most have been permanently closed. “Focused downtime” or the indefinite idling of capacity should not he confused with market related downtime. As discussed in Section F.4 above market related downtime, called “rotating downtime” in Slide 15, was a temporary idling of capacity that would be brought back on line as demand rebounds to expected levels.
When asked about Abitibi's pricing goal, “Weaver said that AbitibiConsolidated's goal is to ‘return newsprint prices back to their trend line level’ which would eventually bring prices on standard newsprint up to around $585-595/tonne level.”
Weaver was asked if consolidation is working (i.e., Abitibi's acquisitions of Stone-Consolidated and Donohue that occurred in 1997 and 2000). His reply was included in the quote below.
Section D.4. above analyzed the permanent capacity reductions that occurred in the NA newsprint industry between 1995 and 2006. The analysis showed that of the firms that (a) had net capacity reductions between 1995 and 2006 and (b) remain in the market today, Abitibi and Bowater combined accounted for 83.6% of those permanent capacity reductions. Catalyst accounted for most of the remaining permanent capacity reductions. The analysis in this section focuses on permanent newsprint capacity reductions in North America between 2002 and 2006. As documented in Section E.6., newsprint prices rose an aggregate of 49.0% between the third quarter of 2002 and the third quarter of 2006. Of the newsprint manufacturers that remain in the market today, Abitibi and Bowater combined accounted for 89.4% of the permanent reductions of NA newsprint capacity between the end of 2002 and the end of 2006. Charts G1 to G4 provide an analysis of the NA permanent capacity reductions during this period.
Chart G1 below shows the shares of NA newsprint capacity by manufacturer for 2002 and 2006.
Chart G1 shows that the combined Abitibi and Bowater NA capacity share declined from 51.4% to 45.0% between the end of 2002 and the end of 2006 and that Catalyst's share declined by 0.3%. Including Katahdin and Irving, the shares of all other NA newsprint manufacturers increased from 42.8% to 49.6%.
Chart G2 below shows the permanent reduction of NA newsprint capacity by manufacturer during the period 2002 to 2006.
There were 2,795,000 metric tonnes of capacity permanently removed from the NA newsprint market from the end of 2002 to the end of 2006. Abitibi and Bowater combined accounted for 2,258,000 metric tonnes that were permanently removed
Tembec's closure of a 35,000 metric tonne capacity newsprint machine at its Kapuskasing, ON mill accounted for more than half of this total.
Chart G3 below shows the percentage of total NA permanent newsprint capacity reduction by manufacturer during the period 2002 to 2006.
The percentage calculations are based on the capacity reduction figures shown above in Chart G3. Combined, Abitibi and Bowater accounted for 80.8% of the permanent capacity removals over this period and Catalyst accounted for 7.3%. Of manufacturers that remain in the market today, Abitibi and Bowater combined account for 89.4% of the total capacity removals and Catalyst accounts for 8.1%. The two manufacturers who converted their newsprint capacity to uncoated groundwood specialty grades accounted for 9.7% of the total permanent capacity reduction. All other NA newsprint manufacturers accounted for 2.2% of the total capacity removals and 2.5% of the capacity removals by the manufacturers that remain in the market today.
Chart G4 below shows the permanent reduction of NA newsprint capacity over the period 2002 to 2006 as a percentage of each manufacturer's own capacity at the end of 2002.
Between the end of 2002 and the end of 2006, NA newsprint capacity was reduced by 18.0%. Through permanent capacity removals, Abitibi reduced its own capacity by 30.7% and Bowater reduced its own capacity by 24.0%. Catalyst also reduced its newsprint capacity by a significant proportion—22.7%. The other 13 newsprint manufacturers that remain in the market today reduced their capacity by a combined 1.0%.
Catalyst is the largest newsprint manufacturer West of the Rockies. Catalyst's removal of a significant amount of its own newsprint capacity from the market suggests the possibility of a relevant West of the Rockies newsprint market and a relevant East of the Rockies newsprint market. Norske Skog's acquisition of Pacifica in 2001 may have given it the incentive and ability to shut down capacity to raise the industry operating rate and increase prices in a West of the Rockies market.
Four articles by two newsprint industry experts are cited in this section describing the strategy of Abitibi and Bowater to raise the price of newsprint through the closure of capacity. The first article does not specifically identify Abitibi and Bowater, but the events described can only apply to Abitibi, Bowater and, possibly, Catalyst. The four articles are evidence that the Abitibi-Bowater strategy is well understood throughout the newsprint industry by buyers and sellers alike. The four articles also provide confirmation of our analysis in this White Paper.
Harold M. Cody, Contributing Editor to Paper Age, published an article in the May/June 2006 edition of Paper Age titled “New Paradigm: Newsprint Demand Falls, Prices Soar.” The following passage confirms how newsprint industry consolidation has permitted unnamed manufacturers to strategically shut down capacity to raise newsprint prices despite a “steady five year decline in demand.”
North American newsprint consumption continued its steady five-year decline last year and newspaper publishers faced similar difficulties.
Continuing the boxing parallel, these prolonged tribulations clearly illustrate just how adept U.S. and Canadian newsprint producers really are at fighting.
Cody notes that, despite the continual decline in newsprint demand, “[t]hey have been able to quickly and decisively cut supply in response to these challenging conditions, masterfully reducing capacity via either shutdowns or conversions to other grades.” Cody does not identify who “they” are, but his description of events can only apply to Abitibi, Bowater, and, possibly, Catalyst. He says that the capacity reductions have “kept operating rates for the most part above 95%, fueling the steady increase in prices.”
Andrew Battista, senior economist at RISI, published an article
At the time Battista wrote this article, newsprint prices were just starting to increase after the 28% decline in newsprint prices between the second quarter of 2001 and the second and third quarters of 2002, caused primarily by the U.S. recession that began in late 2000/early 2001 and the economic aftermath of 9/11.
Producers finally got the ball moving in the other direction with a $35/tonne rise (of the proposed $50/tonne) last autumn. Newsprint manufacturers hope to capitalize on this momentum and push hard for the next $50/tonne increase announced for March 1.
Battista describes the economic relationships between production costs, operating rates and the price of newsprint.
There are two predominant drivers of product prices: Production costs and operating rates. Both are highly and positively correlated with newsprint prices through mechanisms that are well understood. When production costs inflate, newsprint profit margins fall. Buyers may balk at paying more for newsprint when ONP [recycled old newspapers] gets more expensive, but as cost pressure mounts, the least competitive mills edge closer to shutdown unless newsprint prices also rise.
The closure of a mill will result in higher operating rates. Likewise, a rise in demand usually leads to a tighter market (higher operating rates) in which paper becomes increasingly scarce, and hence, more valuable.
Rising costs support higher prices, but do not guarantee them in the short term. We still need to forecast the supply/demand balance in order to get a handle on pricing.
Battista provides an analysis of the relationship between operating rates and changes in newsprint prices.
When we plot operating rates against the (quarter-to-quarter) percent change in prices (as in Figure 1), we clearly see a high degree of correlation between the two series.
Furthermore, we observe that the goodness of fit in this relationship is best with a one-quarter lag on operating rates. This fact reinforces the hypothesis of a causal relationship; higher operating rates lead to higher prices. In other words, a tight market in the summer tends to yield higher prices in the autumn. But how tight is ``tight”?
Closer examination of Figure 1 shows us that sustained operating rates in excess of 95% are typically required to lift newsprint prices.
Battista then analyzes the newsprint price increase that had occurred since the market hit bottom in mid-2002 and the prospects for further price increases in 2003 and 2004.
Last autumn's increase stands as an exception to that rule [that sustained operating rates in excess of 95% are required to lift newsprint prices]. The oddly timed price hike led publishers to complain that the market fundamentals did not justify an increase and forced producers to argue that they needed a rise just to stay alive.
But the massive market downtime taken by producers held inventory levels in check and led to a compromise increase (buyers accepted $35/tonne of the proposed $50/tonne). And although market recovery seems to be on hold during the winter months, with operating rates hovering between 92% and 93%, signs point to a tighter market in 2003. Abitibi-Consolidated Inc. and Bowater Inc. recently announced plans to withdraw 270,000 tonnes of combined capacity at Alma, Que., and Calhoun, Tenn.
In addition, ad lineage will likely continue along a gradual growth path and support a steady rise in newsprint demand. These factors should push operating rates above 94% this spring and summer before cresting [at] 95% toward the end of 2003.
North American newsprint producers will struggle to get prices to crest [at] $500/tonne by the fourth quarter of this year because operating rates will struggle to get above the 95% threshold in time to have much impact.
No new capacity will come online in North America in 2004, and we forecast newspaper advertising lineage growth to accelerate. Operating rates will likely top 97% for the year next year, and cost pressure probably will not subside. [Emphasis added]
Battista followed up his February 2003 article with an article
Just yesterday, Abitibi-Consolidated announced its intention to idle, or keep idle, its mills at Sheldon, Lufkin, and Port-Alfred. Over 750,000 metric tonnes per year (mtpy) will be indefinitely removed from the market. Perhaps more importantly, though, the company will permanently shut down two machines, one in Port-Alfred and one in Sheldon. This latter action will remove 230,000 mtpy from the North American newsprint market, permanently. Furthermore, closures and conversions at Abitibi-Consolidated's mill at Alma and Bowater's mills at Calhoun and Catawba in addition to any market-related downtime taken next year by anyone will further exacerbate the 7-year downward trend in North American newsprint supply.
The extremely tight market for newsprint in 2000 pushed the average transaction price over $600/tonne by the end of the year. Several successive years of approximately 2% annual gains in demand against virtually flat supply led to extraordinarily high operating rates (near 100%) in the autumn of 2000. However, the turnaround in 2001 proved to be bitterly sharp for newspapers and newsprint manufacturers, alike. In the three years since, flailing newspaper advertising lineage pulled North American newsprint demand down by over 12% or approximately 1.4 million tonnes on an annual basis.
Mills struggled and eventually succeeded in matching the declines in demand with permanent closures and downtime. True operating rates (which count temporarily idled capacity as if it were available capacity) stayed below 90% throughout 2003, and we further know that production corresponded with demand during 2002-2003 because producer inventories remained low. This producer discipline had its first impact last summer when it effectively stopped the year-and-a-half long slide in prices, and has since permitted three partially successful increases (thanks also to rising production costs and the Canadian dollar).
If we now include Abitibi-Consolidated's latest permanent cuts to the announced list of newsprint capacity withdrawals, we see that the drop in North American newsprint
What then will happen to newsprint prices in 2004? Given that, in all likelihood, the North American operating rate in newsprint will climb above 95% sometime in 2004 perhaps as early as the spring—prices will surely rise. When we plot operating rates against the (quarter-to-quarter) percent change in prices (as in Figure 2), we clearly see a high degree of correlation between the two series. Furthermore, we observe that the goodness-of-fit in this relationship is best with a one-quarter lag on operating rates. This fact reinforces the hypothesis of a causal relationship; higher operating rates lead to higher prices. In other words, a tight market in the summer tends to yield higher prices in the autumn. But how tight is “tight”?
Closer examination of Figure 2 shows us that sustained operating rates in excess of 95% are typically required to lift newsprint prices. The half-successful increases since last summer provide a very noteworthy exception, but are attributable to the massive
In October 2004, Battista wrote a third article on the use of reductions and downtime of newsprint capacity to raise the price of newsprint.
Last year, in the RISI Viewpoint, I wrote that rising newsprint demand would not be necessary to support higher North American newsprint prices in 2004. Over the first eight months of the year, U.S. demand is off 0.8%, and Canadian demand is down 2.0% from 2003. And yet, average prices climbed $30/tonne higher this spring and are in the midst of another bitterly fought $50/tonne hike that could take them above $575/tonne before the end of the year.
After three consecutive years of declines in newsprint demand, seasonally adjusted U.S. consumption among all users is finally showing marginal improvement on a quarterly basis. The year-over-year figures will probably show some growth in the current quarter if only because the market during 4Q03 was so weak. And even though we expect to see solid, 3%, expansion in North American GDP in 2005, print advertising and newspaper circulation will likely continue to underperform and, at best, yield a meager 0.8% gain in domestic newsprint consumption. Nevertheless, we foresee U.S. newsprint prices climbing above $600/tonne in 2005 owing to producers' ongoing zeal to match the declining market with supply reductions.
Battista then discusses the removal of idled Abitibi and Bowater newsprint capacity from the official PPPC total. His discussion illustrates why it is misleading to rely on official PPPC capacity numbers to calculate operating rates. Based on these misleading capacity numbers, the official PPPC newsprint operating rate was 92%. In reality, the “real” operating rates were 98% to 99% which explains the sustained rise in newsprint prices from the end of 2002 through the time the article was written. According to Battista, the capacity the PPPC had removed from its official total a few weeks before his article was published raised the official operating rate to over 95% but still below the “real” operating rate of 98% to 99%. Battista anticipated that the PPPC would remove additional capacity from the official total in the first quarter of 2005, which would then align the official operating rate with the “true” operating rate. Note that with one minor exception,
Several weeks ago, the PPPC officially removed some idled capacity that had been inoperative for more than one year: Bowater's PM3 at Thunder Bay, and Abitibi's PM5 and PM7 at Sheldon. The move suddenly took 480,000 tpy from the North American capacity base and lifted operating rates by more than 3% to over 95%. Furthermore, over the next two to three months, several more idled machines will have to come out of the official numbers. Abitibi's remaining machines at La Baie (Port Alfred) and PM2 at Lufkin were officially idled last December and account for approximately 430,000 tonnes of annual capacity. Also, accounting for Tembec's idled PM1 at Kapuskasing will pull an additional 35,000 tpy in early 2005.
The supply reductions in 2005 could run deeper still. Abitibi may soon announce the conversion of yet another newsprint machine to Alternative Offset/Equal Offset. The company has high expectations for this growing market. Such a conversion would probably be in addition to possible permanent closures at Sheldon and La Baie. (The PPPC reporting change temporarily removes those machines from the books, but Abitibi is rumored to be considering permanent shutdowns at these sites.) Bowater is also expected to make aggressive moves out of newsprint in the year ahead, although no details have yet been made public.
The forthcoming PPPC cuts will effectively boost the North American newsprint operating rate to 98%-99% in the first quarter of 2005. If another machine or two were to stop manufacturing newsprint, the market would be as tight as the white-hot market in 2000 and paper would be extremely hard to find. Prices next year will almost certainly rise even if demand fails to show any improvement at all.
Battista next discusses, as he did in his two previous articles, the relation between operating rates and price changes and he forecasts high operating rates for 2005. Also, as he did before, he includes a figure plotting NA newsprint operating rates against changes in price with one adjustment. In the figure below, Battista adjusts the operating rate for “downtime,” presumably to reflect the “true” operating rate rather than the PPPC official operating rate. The comparable figure that was included in his December 2003 article above reflects the PPPC official operating rate. The figure shows the PPPC official operating rate bottoming out at 84% at the end of 2001 and then rising to about 90% by the third quarter of 2002 before leveling out at or slightly below 90% through the third quarter of 2003. The figure below, which adjusts for downtime, shows the “real” operating rate bottoming out at perhaps 89% at the end of 2001 and then rising very quickly to above 95% by mid-2002 and generally remaining at that level or above through the third quarter of 2004.
Historically speaking, when the North American operating rate climbs above 95% for two or more consecutive quarters, prices rise. This relationship exhibits a very tight correlation and makes good intuitive sense as well. Newsprint prices inflate when either demand jumps or supply falls such that the market is tighter than average. As noted above, the current operating rate is slightly higher than 95%, which means—in conjunction with rising ONP costs and a strong Canadian dollar—the current price increase ought to be moderately successful. Indeed, despite the fact that some suppliers have opted to delay implementation to October 1, other mills tell us that their order books are full through the balance of 2004.
This section briefly reviews Abitibi's newsprint capacity closures between 1999 and 2001 and their likely impact on newsprint operating rates and prices.
According to the Abitibi 1999 Annual Report (p. 6), Abitibi removed 450,000 metric tonnes of newsprint capacity from the market in 1999 almost 3% of NA capacity.
According to the Abitibi 2000 Annual Report, (p. 23), Abitibi announced in conjunction with its acquisition of Donohue in April 2000 that Abitibi would remove an additional 400,000 metric tonnes of newsprint capacity from the market during 2000 and 2001.
High-cost newsprint capacity rationalization program. In conjunction with the acquisition of Donohue, the Company announced its intention to permanently remove 400,000 tonnes of high-cost newsprint capacity. As part of this program, the Company shut down its 130,000 tornne West Tacoma newsprint mill, located in Steilacoom, Washington, in December 2000.
One paper machine with an annual capacity of 70,000 tonnes was shut down at the Lufkin, Texas mill, on November 1st, 2000 as part of the modernization program of the mill. At the end of December 2000, the Company shut down a value-added paper machine with an annual capacity of 45,000 tonnes at the Ke
Abitibi closed 200,000 metric tonnes of newsprint capacity in 2000 and 200,000 metric tonnes in 2001 for a total removal of 850,000 metric tonnes of newsprint capacity over the three year period or about 5% of NA newsprint capacity that existed at the beginning of 1999.
Abitibi's removal of 450,000 metric tonnes of newsprint capacity in 1999 raised the industry operating rate by almost 3%. In Section E.6., we noted that newsprint prices increased $145 or 30.2% between the third quarter of 1999 and the second quarter of 2001. As Chart E5 in Section E shows, the operating rate increased from 93.0% in the second quarter of 1999 to 97.7% in the fourth quarter of 1999, and, except for one quarter, remained above 97% through the end of 2000. Without the newsprint capacity removals of Abitibi during 1999, the industry operating rate would have been at 95% or somewhat below during the period 4Q 1999 to 2Q 2001. While prices may still have increased at these lower operating rates, the magnitude of the price increases would likely have been significantly lower than what actually occurred.
The “Pulp & Paper North American 2000 Factbook,” p. 194, summarizes the effect of Abitibi's capacity closures on the three $50 per metric tonne price increases that occurred between September 1999 and September 2000. The Factbook does not identify any other manufacturers that closed capacity from the market during this period.
Adding to market tightness and lending support to the price increases was Abitibi-Consolidated's vow to remove 400,000 mtons of newsprint from the North American market by 2001. In July 2000, Abitibi announced the closure of its 130,000 mtpy West Tacoma, Wash., newsprint mill at year-end. The company had already idled the No. 2 paper machine at the mill in 1999. Also in 1999, Abitibi idled the No. 7 paper machine at Iroquois Falls, Ont. (24,000 mtpy of newsprint). In addition, Abitibi idled and then subsequently sold its 125,000 mtpy Chandler, Que., mill with the condition that the new owners not produce newsprint.
The Factbook excerpt above notes that Abitibi's Chandler, QC newsprint mill was sold with the condition that the new owners not make newsprint. Abitibi closed the Chandler mill in 1999 and sold it in 2000. The condition that the Chandler mill not be used by the new owners to produce newsprint suggests that the mill's variable costs for producing newsprint were below prevailing newsprint prices at the time and that it would have been profitable for the new owners to use the mill to produce newsprint.
In Section B above we described the similarities and differences between newsprint and uncoated groundwood specialty grades. The higher value uncoated groundwood grades generally are brighter than newsprint (i.e., the fibers in the pulp furnish have been subjected to more bleach) or glossier (i.e., clay is added to the pulp furnish). While newsprint is the lowest-quality and lowest value groundwood grade, the main inputs used to produce newsprint and uncoated groundwood specialty grades, in particular energy and fiber, are the same. Rises in common input costs should have a very similar impact on both NA newsprint mills and NA mills that produce uncoated groundwood specialty grades, other things being equal.
In Section J.2. below we explain why the impact of the increase in input prices over
In Section J.3. we compare the quarterly price of newsprint from the third quarter of 1999 to the second quarter of 2006 with the quarterly prices of four uncoated groundwood specialty grades. We find that the quarterly prices for newsprint as a percentage of its quarterly price in 3Q 1999 were significantly higher than the quarterly prices for three of the four uncoated groundwood specialty grades over the period 4Q 1999 to 2Q 2006. Based on these results, it is implausible that the increases in newsprint prices were caused by the increases in input prices. We find that the price trend of one uncoated groundwood specialty grade was similar to that of newsprint. It appears that Abitibi and Bowater are the dominant providers of that grade as well.
Section J.4. presents evidence that Abitibi's variable costs have been relatively constant since 2001. Since nearly all of the newsprint price increases over the period 2002 to 2006 were led by Abitibi, it seems unlikely that increases in Abitibi's input costs are a plausible justification for the price increases.
In Section J.5. we calculate quarterly newsprint revenues over the period 3Q 1999 to 2Q 2006 based on actual NA newsprint demand and actual newsprint prices. We then apply the quarter to quarter percentage price changes for each of the four uncoated groundwood specialty grades to the 3Q 1999 newsprint price and multiply the resulting adjusted newsprint prices by actual NA demand. For the three grades with percentage changes in prices significantly below the percentage changes in newsprint prices, total revenues over the period are reduced by $4.7 billion to $7.4 billion.
Both newsprint producers and producers of uncoated groundwood specialty grades have been subjected to increasing costs of inputs in recent years. The inputs that have increased in cost include fiber (both wood and recycled), energy and transportation. Advantages that Canadian mills once enjoyed in lower energy and fiber costs have been reversed.
At the December 2006 Citigroup Conference, David Paterson of Bowater stated that Bowater's U.S. mills (which are all in the southeastern U.S. with the exception of the Ponderay mill in Washington) were more efficient than Bowater's Canadian mills (which are all in Eastern Canada). He said that due to energy and currency issues (discussed immediately below), the age of the equipment and other reasons, there is not much margin left at Bowater's Canadian newsprint mills. He also said that if Bowater had only U.S. mills, the Bowater's newsprint business would be pretty good at “today's” prices.
In addition to increases in the cost of inputs, Canadian mills have been adversely affected by a significant increase in the value of the Canadian dollar relative to the U.S. dollar.
A greater percentage of NA uncoated groundwood capacity is in Canada compared to the percentage of NA newsprint capacity in Canada.
There are two reasons to assume that price increases over the period should be greater for uncoated groundwood specialty grades than for newsprint over the period 3Q 1999 to 4Q 2006. First, the growth rate in consumption over this period has been positive for uncoated groundwood specialty grades in the aggregate, while the growth rate in consumption has been negative for newsprint. Between 1999 and 2006, total NA uncoated groundwood specialty grade consumption grew at a compound average growth rate of 3.1% per year. Over that same period, the compound average growth rate of NA newsprint consumption was a negative 4.0%.
Second, as described in Section J.2. above, the rise in input costs and the appreciation in the Canadian dollar relative to the U.S. dollar have fallen more heavily on NA producers of uncoated groundwood specialty grades in the aggregate than on NA newsprint manufacturers in the aggregate.
Chart J1 below reflects the quarterly average price of newsprint and four uncoated specialty grades over the period 3Q 1999 to 2Q 2006.
Chart J1 shows in a broad sense similar price movements for newsprint and the four uncoated specialty grades. For each of these grades, price rose from 3Q 1999 to 2001, followed by a rapid decline as the U.S. recession set in. Prices bottomed out in 2002 or so and began to climb until Q2 2006. However, the magnitudes and rates of the price movements are quite different for the five grades. The prices of both newsprint and Hi-Brites (brightness level = 65) rose significantly more than the other three grades between 3Q 1999 and 2001 and between bottoming out in 2002 and 4Q 2006. Chart J1 shows prices increasing within a quarter or two of bottoming out for these two grades. The price of both grades rose steadily from the bottom. The newsprint price rose to 39% above its 3Q 1999 price by 4Q 2006 and the Hi-Brite price rose to 36% above its 3Q 1999 price by 3Q 2005 before declining somewhat to 32% by 4Q 2006. In terms of dollars per metric tonne, the newsprint price in 4Q 2006 was $185 above its 3Q 1999 price and the Hi-Brite price was $196 above its 3Q 1999 price.
The Directory, SCA and SCB grades had much smaller price increases in the run-up to 2001 and, after the decline to 2002, the recovery in prices took much longer to occur than for newsprint and the Hi-Brite grade. The bottoms for the SCA and SCB prices were much deeper as a percentage of their 3Q 1999 prices than was the case for the bottoms for newsprint and Hi-Brite prices. The prices for the SCA and SCB grades also stayed at their bottoms for a much longer period of time than was the case for the prices for newsprint and the Hi-Brite grade. By 4Q 2006, the SCA price was 1.3% below its 3Q 1999 price and the SCB price was 3.1% above its 3Q 1999 price. In terms of dollars per metric tonne, the SCA price in 4Q 2006 was $11 below its 3Q 1999 price and the SCB price was $24 above its 3Q 1999 price. The price of Directory paper as a percentage of its 3Q 1999 price did not fall nearly as deeply as did the SCA and SCB prices and it recovered more quickly. By 4Q 2006, the Directory paper price was 7.8% or $61 above its 3Q 1999 price.
Why should 4Q 2006 prices for newsprint and Hi-Brites be so much higher than their 3Q 1999 prices both in percentage terms and as an absolute change in price compared to SCA, SCB, and Directory paper prices? One possible answer is that not only are Abitibi and Bowater dominant in newsprint, they are also dominant in Hi-Brites. During our interviews with newspaper newsprint buyers, we learned that there was also concern that the proposed Abitibi-Bowater merger could lead to higher Hi-Brite prices and Super Hi-Brite prices.
Our analysis of uncoated groundwood specialty grades in Attachment B confirms the statements of the newspaper newsprint buyers cited above regarding the availability of Hi-Brite and Super Hi-Brite suppliers. See Tables B5 and B6 in Attachment B. Besides Abitibi and Bowater, the only suppliers of Hi-Brites and Super Hi-Brites in NA that we were able to identify
The price comparisons shown in Chart J1 are not consistent with a hypothesis that newsprint price increases observed over the past four years are due to the rising costs of inputs. If the newsprint price increases were caused by input cost increases, we should at a minimum see similar price increases for newsprint and the four uncoated groundwood specialty grades. As argued above, the price increases should, in fact, be greater for uncoated groundwood specialty grades than for newsprint since the impact of the cost increases falls more heavily on uncoated groundwood specialty producers in the aggregate than it does on newsprint producers in the aggregate. In addition, the price increases should be greater for the uncoated groundwood specialty grades because of the steady demand growth for the specialty grades in contrast to the steady demand decline for newsprint.
The price comparisons shown in Chart J1 are consistent with the hypothesis that Abitibi and Bowater have jointly exercised
While there have been cost increases in inputs used to make newsprint and uncoated groundwood specialty grades in recent years, Abitibi has been able to implement cost-saving measures to maintain relatively constant variable costs of producing these grades over the period 2001 to 2005.
See Slide 25 below from the December 2006 Citigroup Conference presentation of Abitibi's John Weaver. The slide shows the cost of goods sold (or variable costs) for uncoated groundwood specialty grades (called commercial printing papers or CPP by Abitibi), newsprint and wood products. The slide shows variable costs (in Canadian $) actually declining slightly for both newsprint and uncoated groundwood paper specialty grades from 2001 to 2005.
In the audio recording of Weaver's comments on Slide 25, he said that despite the Canadian dollar and all the increase in input costs such as energy and fiber, “You can see for the last 5 years Abitibi has basically managed to keep our costs relatively flat through all these escalating input costs. So I think this shows the focus of the company on cost reduction.”
Since all or nearly all of the newsprint price increases over the period 2002 to 2006 were led by Abitibi, it seems unlikely that increases in Abitibi's input costs are a plausible justification for the price increases.
We applied the percentage price changes calculated for the four uncoated groundwood specialty grades shown in Table J1 to the 3Q 1999 newsprint price ($480 per metric tonne) to generate four series of adjusted newsprint prices. Next we multiplied the actual newsprint price series and the four adjusted newsprint price series by quarterly NA demand (quantity purchased) shown in Chart E2. Finally, we summed over the 30 quarters to derive total revenues based on the five newsprint price series. The results are shown below.
Table J1 is broadly suggestive of the scope of overcharges to NA newsprint customers due to the behavior of Abitibi and Bowater over the period 3Q 1999 to 4Q 2006. In this context, it must be noted that we have done no analysis of the demand and supply conditions for the Directory, SCA, and SCB grades to ensure they are good “but for” world candidates. Nor have we done any analysis to determine the appropriate methodology to determine overcharges to NA newsprint customers. With this caveat and assuming that the price changes for Directory, SCA, and SCB paper over the period 3Q 1999 to 4Q 2006 represent a range of appropriate “but for” worlds and the methodology used to calculate the results in Table J1 is appropriate, overcharges to NA newsprint customers over the period 3Q 1999 to 4Q 2006 totaled in the range of $4.7 billion to $7.5 billion due to the anticompetitive behavior of Abitibi and Bowater.
The preceding sections, especially Sections F through J, have provided evidence that Abitibi and Bowater have acted to decrease newsprint output and increase the price of newsprint over the past four years. Their behavior can be interpreted as two firms acting together like a dominant firm. This section discusses a simple model of dominant firm behavior adapted to the newsprint industry. A more detailed description of this model can be found in Attachment 4.
The model allows us to address two questions:
• In theory, how could Abitibi and Bowater, acting together or as a merged entity, profitably raise price?
• Do the current conditions in the newsprint industry suggest that Abitibi and Bowater actually have the ability profitably to raise price further?
The model assumes that the industry is composed of a dominant firm (or firms) with a significant market share. The rest of the industry is made up of a large number of smaller firms, none of which is large enough to affect significantly the market price on its own. All firms produce the same undifferentiated product. Each firm is assumed to have a well-defined “full capacity” output level which cannot be exceeded at reasonable cost within the relevant time frame. It is further assumed that imports are unlikely to increase significantly from current low levels. These assumptions provide a reasonably accurate, if somewhat simplified, representation of the North American newsprint industry today.
Under the conditions outlined above, the strategy available to the dominant firm is to remove fringe firms as competitive constraints by allowing them to fill up their plants. Once the fringe firms are operating at full capacity, they no longer can compete to draw sales away from the dominant firm. The dominant firm can then effectively behave as a monopolist with respect to the “residual demand”—i.e., that portion of industry demand that is not satisfied by the fringe firms operating at full capacity. In this monopoly position, the dominant firm can raise price above the initial, competitive level.
Conceptually, one can think of the dominant firm's strategy as involving two steps. In Step 1, the dominant firm allows the fringe firms to reach full capacity. One way to do this is for the dominant firm to remove some of its productive capacity from the market, either temporarily or permanently. Customers that previously purchased from the dominant firm must then increase their purchases from fringe firms. Total industry output is unchanged, but a portion of industry output shifts from the dominant firm to the fringe firms. Once the fringe firms have reached full capacity, the dominant firm can take Step 2 and raise price without fear of being undercut by the fringe firms. The fringe firms will tend to raise their price along with the dominant firm, since they cannot produce any more product. Failure to raise price to the level of the dominant firm's price would unnecessarily sacrifice profit.
The same two conceptual steps can be achieved if the dominant firm simply announces a significant price increase. Initially, fringe firms behaving competitively do not follow the price increase. To the extent possible, customers divert their purchases from the higher-priced dominant firm to the lower-priced fringe firms. Once the fringe firms reach their capacity constraint, however, remaining purchases must be made from the dominant firm at its higher price. The dominant firm is the only available supplier capable of satisfying the “residual demand.”
In Attachment 4, the model is expressed formally using equations and various parameters. Whether the dominant firm will adopt this strategy depends on the associated gains and losses. The gains and losses depend on various factors, including initial capacity utilization of the fringe firms, the current market price, the dominant firm's variable contribution margin, the percentage price increase and the elasticity of demand. These factors are set forth in Table K1 below. Public sources provide at least a rough estimate of the values of these parameters for the North American newsprint industry, as shown in Table KI. Using these estimated values, the model predicts that it would be profitable under current conditions for a dominant firm with the combined shares of Abitibi and Bowater to exercise market power through the dominant firm strategy.
Using
The model assumes Abitibi's average cost of production as the unit variable cost.
See Table K1 above. It is quite likely that the capacity that Abitibi and Bowater would idle when pursuing a dominant firm strategy would be their highest cost capacity. In his December 2006 presentation to the Citigroup Conference, Abitibi Bowater's David Paterson was asked how Bowater would be able to maintain sufficient cash flow to pay for dividends and interest payments if newsprint prices declined from current levels. As quoted in Section F.3 above from an audio recording of his remarks, Paterson responded,
So my belief[. . .]is that we have to move faster to stay ahead of that [demand] curve to maintain an operating rate that gives us some pricing leverage in the market and I can do that. We know which our high cost assets are and we will shut them down hopefully before rather than after price erosion with any significance.
Earlier in his presentation, Paterson had stated that Bowater's high-cost newsprint assets were located in Eastern Canada and that “there is not a lot of margin left in the Canadian assets.”
Based on our economic analysis of the likely competitive effects of the proposed Abitibi-Bowater merger contained in Sections B through K above, we conclude that the merger, if it is permitted to proceed, will have very significant adverse competitive and economic effects on U.S. newspaper publishers and other NA consumers of newsprint.
Through their joint behavior over the past four years, Abitibi and Bowater have demonstrated that their combined share of NA newsprint capacity was large enough to enable them to consistently raise the price of newsprint in the face of steadily declining NA newsprint demand. Abitibi and Bowater matched declining consumption year after year with the amount of capacity removal needed to maintain high operating rates and increasing newsprint prices. This strategy has been remarkably successful as this White Paper documents. The title of one of the articles cited in Section H, “New Paradigm: Newsprint Demand Falls, Prices Soar,” captures this paradox of “soaring” prices in the face of declining consumption.
The fact that Abitibi and Bowater have been able to profitably reduce their own capacity to raise the price of newsprint is direct evidence that they have jointly possessed and exercised market power over a sustained period of time. A small firm would have no incentive unilaterally to close capacity to raise the price of newsprint because the loss of net margin from the closed capacity would outweigh the gain in margin from the price increase on the capacity that it would still operate.
As we have documented in this White Paper, the NA newsprint market was unconcentrated in 1995 but became highly concentrated by 2000 primarily due to mergers by Abitibi, Bowater, and the newsprint firms they acquired. Without these mergers, Abitibi and Bowater would have been unable to pursue their highly effective and highly anticompetitive joint strategy.
The newspaper newsprint buyers whom we talked to believe that it is certain that a combined Abitibi and Bowater will continue to pursue this anticompetitive strategy, but the merged firm will be able to do so more effectively. Coordination difficulties, costs, and uncertainties that Abitibi and Bowater faced as separate firms in their exercise of joint dominance would be removed by a merger. Future capacity closures to raise the price of newsprint will be more optimal and timely from the viewpoint of the merged firm and more harmful to NA consumers of newsprint. Without a merger, imperfect coordination between Abitibi and Bowater may break down in the coming months or years. With a merger, perfect coordination is certain.
Two tables appearing in this comment are not able to be reprinted here. Copies of the comment with the tables are available at the Department of Justice Antitrust Division Web site,
Since the quality and value of newsprint is lower than the quality and value of all uncoated groundwood specialty grades, we would expect that newsprint would have a lower price. Table B1 below compares the February 2007 price (Eastern U.S.) of 30 lb. newsprint with the price of 35 lb. Hi-Brites (65 brightness level), the price of 35 lb. SCA,
The SCB, Hi-Brite 65, and SCA 35 lb. February 2007 prices were 17.3% to 23.4% higher than the price of 30 lb. newsprint. If a newsprint buyer switched from 30 lb. newsprint to one of these higher basis weight grades, the buyer would incur a 14.3% reduction in printing surface. Taking the reduction in printing surface into account, a buyer of 30.0 lb. newsprint who switched to 35.0 lb. SCB, Hi-Brite 65, or SCA, would face an equivalent price increase per metric tonne of 30.0 lb. newsprint ranging from 34.0% to 47.0% based on February 2007 prices.
Table B1 shows that the February 2007 price of 22.1 lb. directory paper was 20.9% higher than the price of 27.7 lb. newsprint. If a buyer of 27.7 lb. newsprint switched to the lower basis weight paper, the buyer would gain 27.2% in printing surface per metric tonne. Taking this increase in printing surface into account, a buyer of 27.7 lb. newsprint who switched to 22.1 lb. directory paper would receive an equivalent price reduction of 12.0% per metric tonne of 27.7 lb. newsprint based on February 2007 prices. However, as discussed in Section B.3.a.(4), the information provided to us by newsprint buyers leads us to conclude that the lower basis weight and thinner directory paper would not be suitable for use in a newspaper or for running on newspaper printing presses.
It is beyond the scope of this White Paper to delineate product markets composed of one or more uncoated groundwood specialty grades. Nonetheless, each of these grades is in some relevant product market. Both Abitibi and Bowater are significant producers of uncoated groundwood specialty grades.
We have estimated capacities and capacity shares for the following uncoated groundwood specialty grade segments: (1) All uncoated groundwood specialty grades; (2) directory paper; (3) SC/SNC glossy grades; (4) Hi-Brites/Super Hi-Brites; and (5) Bulky Book and Other. Attachment 1 contains tables showing capacity and capacity shares for NA mills for each of the first four segments shown above.
Our primary source for the estimated capacity and capacity shares was the Uncoated Mechanical Papers chapter from the RISI 2006 Fact and Price Book (pp. 161-173). RISI provides capacity by manufacturer for total uncoated groundwood specialty grades, directory paper, and SC/SNC grades. Because most of the remaining capacity is for Hi-Brites and Super Hi-Brites, RISI implicitly provides capacity estimates for those two grades combined.
We supplemented the RISI uncoated groundwood specialty grade capacity data with the following sources: (1) Reported capacity for Abitibi and Bowater shown on p. 17 of their merger announcement presentation;
Tables B2 through B6 at the end of Attachment B show Abitibi-Bowater HHIs based on estimated 2006 capacity and capacity shares by manufacturer for the following uncoated groundwood specialty grade segments: (a) All uncoated groundwood specialty grade capacity in NA; (b) all directory paper in NA; (c) all SC/SNC glossy paper capacity in NA; (d) all Hi-Brite & Super Hi-Brite non-glossy paper capacity in NA; and (e) all HiBrite & Super Hi-Brite non-glossy paper capacity East of the Rockies. The results from Tables B2 through B6 plus Bulky Book and Other are summarized in Table B7 below.
Assuming the uncoated groundwood specialty segments shown in Table B7 above were relevant product and geographic markets, four of the segments (total NA uncoated groundwood specialty grades, NA SC/SNC glossy paper, NA Hi-Brite/Super Hi-Brite non-glossy paper, and East of the Rockies Hi-Brite/Super Hi-Brite non-glossy paper) show an increase in the HHI significantly greater than 100 resulting from an Abitibi-Bowater merger and these same four segments show a post-merger HHI greater than 1,800. In the case of NA Hi-Brite/Super Hi-Brite capacity, the post-merger HHI is 4,679. In the case of East of the Rockies Hi-Brite/Super Hi-Brite capacity, the post-merger HHI is 10,000. Two of the segments (Directory Paper and Bulky Book and Other) show no change in the HHI resulting from an Abitibi-Bowater merger. According to § 1.51(c) of the Merger Guidelines:
Where the post-merger HHI exceeds 1800, it will be presumed that mergers producing an increase in the HHI of more than 100 points are likely to create or enhance market power or facilitate its exercise.
Imports into NA vary by segment: (a) 2005 imports of SC paper into NA were 13.5% of 2006 NA SC/SCA capacity; (b) 2005 imports of Lightweight (Directory) paper into NA were 6.5% of 2006 NA Directory paper capacity; (b) all other 2005 imports were 1.9% of all other 2006 NA Uncoated Groundwood Specialty Grade capacity (i.e., Hi-Brite/Super Hi-Brite, Bulky Book, and Other).
1. The capacity estimates for Abitibi, Bowater and Ponderay Newsprint mills are from the Abitibi-Bowater merger announcement presentation, “Creating a Global Leader in Paper and Forest Products,” January 29, 2007, p. 17.
2. The capacity estimates for the White Birch Paper newsprint mills are from the White Birch Paper Web site:
3. The capacity estimates for the Kruger newsprint mills are from the Kruger Web site:
4. The capacity estimates for the Catalyst newsprint mills are from the Catalyst Web site:
5. The capacity estimates for the Tembec newsprint mills are from the Tembec 2006 Annual Report, p. 29.
6. The capacity estimate for the Alberta Newsprint mill is from the Alberta Newsprint Web site:
7. The capacity estimate for the Stora Enso's Port Hawkesbury, NS newsprint mill is from the Stora Enso Web site:
8. Annual capacity estimates for the SP Newsprint, North Pacific, Boise Cascade, Blue Heron, Howe Sound, Atlantic Newsprint, and Inland Empire mills in Table C1 are from the July 2004 preliminary forecast shown in the Pulp and Paper Products Council (PPPC) July 9, 2004 update titled “Update of North American Mechanical Printing Papers Capacity Forecast.” This update can be found on the PPPC Web site under press releases:
9. Capacity at Abitibi's Kenora ON, La Baie (Port-Alfred) QC, and Stephenville NF newsprint mills are included in the PPPC July 2004 preliminary forecast. Those mills have been permanently closed. See the Abitibi 2005 Annual Report, p. 18 and the Abitibi 2004 Annual Report, p. 50. The PPPC July 2004 preliminary forecast also shows Abitibi's Alma, QC mill with newsprint capacity. The Alma mill's newsprint capacity has been converted to the production of higher value uncoated groundwood specialty grades. See the Abitibi 2004 Annual Report, p. 50.
10. The PPPC July 2004 update also notes on p. 1 that the capacities of three newsprint machines at Abitibi's Sheldon, TX mill and the #3 newsprint machine at Bowater's Thunder Bay ON mill that had been idled for over a year were no longer included in the forecast. The Abitibi Sheldon, TX mill has been permanently closed. See Abitibi 2004 Annual Report, p. 50. The Bowater Thunder Bay #3 newsprint machine will not be restarted according to Bowater. See Bowater February 6, 2007 news release “Bowater Announces Fourth Quarter and Full Year 2006 Financial Results,” Note 1. “Based on the continued decline of North American newsprint consumption through the third quarter of 2006, Bowater now has no plans to restart the machine.”
11. The PPPC March 2006 forecast of 2006 NA newsprint capacity is 12,625,000 metric tonnes. Compared to the total in Table C2 above, this is a difference of 135,000 metric tonnes or 1.4%. In its forecast, the PPPC does not provide a breakdown by manufacturer or by mill so the reasons for the difference cannot be ascertained with certainty. The PPPC does not include the 150,000 metric tonne capacity of Abitibi's Lufkin, TX mill in its 2006 forecast because the mill has been indefinitely idled since December 2003. The capacity of the Lufkin, TX mill is included in Tables C1-C3, however, because Abitibi continues to count the Lufkin capacity in its public documents, including the Abitibi-Bowater merger announcement presentation. See the Abitibi-Bowater merger announcement presentation, “Creating a Global Leader in Paper and Forest Products,” January 29, 2007, p. 17. From an antitrust perspective, it is appropriate to include the Lufkin, TX capacity in Abitibi's total newsprint capacity if the mill could be re-started within a year. See the product market discussion in Section B regarding “Firms That Participate Through Supply Response.” If the Lufkin, TX mill's capacity is added to the PPPC 2006 forecast, the difference between the Table C2 total and the PPPC forecast for 2006 is reduced to 15,000 metric tonnes or 0.1%.
12. Two other mills included in the PPPC July 2004 preliminary forecast, Katahdin Paper and Irving Paper, no longer manufacture newsprint. Their newsprint capacity has been converted to the production of higher value uncoated groundwood specialty grades. In addition, the PPPC July 2004 preliminary forecast shows a small amount of newsprint capacity at Kruger's Manistique, MI mill. The mill no longer produces newsprint and Kruger no longer owns the mill.
13. According to an article in Editor & Publisher by Debra Garcia, dated March 28, 2007,”Blue Heron Paper Co. [recently] announced it would indefinitely idle its 140,000 tonnes/year 100% recycled newsprint mill in Pomona, Calif., due to high wastepaper and energy costs and declining newsprint consumption. The shutdown is slated to begin about May 6.”
14. The information on which the notes in Table C1 are based can generally be found on manufacturer web sites, including annual reports and 10K reports available as pdf files on the web sites of publicly-traded newsprint manufacturers. The source for Abitibi's plans to purchase the remaining 47.5% interest in Augusta Newsprint is the Abitibi presentation “Our Story on Paper” by President and CEO John Weaver at the Citigroup 11th Annual Global Paper and Forest Products Conference, December 7, 2006, p. 26, which is available on the Abitibi Web site.
This section provides a formal model of a dominant firm in an industry with fixed capacity constraints producing a homogeneous product. Fringe firms are assumed to be price-takers. Imports are assumed to be fixed. Under these conditions, a dominant firm may find it profitable to remove fringe firms as competitive constraints by allowing them to fill up their plants (Step 1). Once the fringe firms are operating at full capacity, they no longer can compete to draw sales away from the dominant firm. The dominant firm can then effectively behave as a monopolist with respect to the “residual demand”—i.e., that portion of industry demand that is not satisfied by the fringe firms operating at full capacity. In this monopoly position, the dominant firm can raise price above the initial, competitive level (Step 2).
Whether the dominant firm will adopt this strategy of reducing output to bring the fringe to capacity and then raising its price depends on the associated gains and losses from doing so. The gains and losses, in turn, depend on various factors discussed below. The losses can be thought of in two parts, L1 and L2, corresponding to Step 1 and Step 2.
L1: In Step 1, the dominant firm gives up some of its sales to the fringe firms. The cost of doing this is the variable profit that the dominant firm would have earned on those sales. This variable profit can be calculated as the forgone quantity times the unit variable margin on those sales. The forgone quantity is the quantity needed to move the fringe firms from their initial capacity utilization to full capacity utilization. The unit variable margin is the difference between the initial industry price and the dominant firm's unit variable cost for the capacity that it idles.
The greater is L1, the less likely it is that the benefits of the dominant firm strategy will outweigh the costs. Three factors are particularly important in determining the magnitude of L1. The first factor is the capacity utilization of the fringe firms, and the second and third factors pertain to the variable profit margins on the lost sales.
• Factor 1. Initial capacity utilization of the fringe firms. if the fringe firms are operating at a high level of capacity utilization, the quantity that the dominant firm must give up to move them to full capacity is relatively small, and L1 is proportionately small. On the other hand, if initial capacity utilization is low, the dominant firm will have to give up a larger quantity to bring the fringe firms to full capacity, and L1 will tend to be large.
• Factor 2. Initial price level. Suppose the initial industry price level is low relative to the variable cost of the capacity to be idled. This means that the dominant firm's variable margin is low for the idled capacity, and the
• Factor 3. Dominant firm's variable cost of production. The variable cost of production operates as the flip side of the initial price level. The higher the variable cost (relative to price), the smaller is L1, and the lower is variable cost (relative to price), the greater is L1. (Note that the relevant variable margin is the margin in those plants that the dominant firm would remove from production. Rationally, the dominant firm would first remove its capacity with the highest costs. For this reason, using the firm-wide average variable cost margin overstates the loss of margin in L1. The same point applies to L2 below.)
L2: In Step 2, when the dominant firm raises price above the initial level, industry customers will tend to respond by reducing their total purchases. This relationship between price and quantity demanded follows the basic “law of demand.” In order to keep the competitive fringe at full capacity, the dominant firm absorbs this entire decrease in quantity. As with L1, the reduction in profits in L2 is the reduction in quantity times the variable margin on those sales. We have already noted how the initial price and variable cost of production, Factor 2 and Factor 3, are important in determining the variable margin. Two additional factors also affect L2.
• Factor 4. Percentage price increase. Obviously, the greater the percentage price increase, the larger will be the associated loss of quantity along the demand curve.
• Factor 5. Elasticity of demand. Elasticity of demand is defined as the percentage change in quantity demanded that occurs in response to a one-percent change in price. The greater the elasticity of demand, the larger is the loss of quantity resulting from the price increase, and the larger is L2. Since the dominant firm is absorbing the quantity reduction for the entire industry, the appropriate demand elasticity to use is the industry demand elasticity.
The dominant firm strategy will be adopted only if the benefit or gain (G) exceeds the sum of L1 and L2. The gain the dominant firm receives from the strategy is that it receives a higher price on all of its remaining output. The relevance of the initial price level (Factor 2) and the percentage increase in price (Factor 4) is quite apparent. The other factor determining the dominant firm's profit gain is its initial sales and market share.
• Factor 6. Initial sales and share of the dominant firm. To determine the quantity of sales on which the dominant firm will enjoy the price increase, one takes the dominant firm's initial quantity and subtracts the quantity reductions associated with L1 and L2.
To see the role of initial share, take the rather extreme case in which the dominant firm has low initial sales due to a low share, and that its sales are approximately equal to the quantity losses associated with L1 and L2. In that position, the dominant firm could absorb the quantity needed to move the fringe to full capacity and absorb the decrease in quantity resulting from the increased price. However, the dominant firm would have little or no remaining sales to make at the higher price, and hence little or no benefit or gain from the strategy. In this situation, the dominant firm will not adopt the price increase strategy. By contrast, if the dominant firm has large initial sales due to a large initial share, it is more likely to still have a large quantity to sell after absorbing the losses (L1 and L2). In this situation, the dominant firm would realize a large gain from the price increase, and the price increase strategy is more likely to be adopted by the dominant firm than if it had a low initial share.
Note that the share of the dominant firm also affects L1. A large initial share for the dominant firm indicates that there is a smaller competitive fringe. This would reduce the amount of quantity that must be absorbed in Step 1 to bring the fringe to full capacity (i.e., reduces L1) for any given level of fringe capacity utilization.
Though mentioned last, the share of the dominant firm may have the greatest relevance because it is the only factor directly affected by merger enforcement policy. The initial share affects the likelihood of a significant price increase and the potential magnitude of a price increase, both of which are central antitrust concerns.
Table K1 shows the six factors discussed above, the symbol used in this attachment to represent each factor, and an estimate of the current value of each factor. Factor 1a, the maximum potential capacity utilization rate for the fringe firms, is added to assist in calibrating the model to current industry conditions.
Under
LI is the product of the dominant firm's per-unit variable margin and the quantity reduction needed to bring the fringe firms to their maximum capacity. Per-unit variable margin is represented as P1−C. For convenience, and in the absence of more exact information about the actual shape of the cost curve, it is assumed that the
As a further convenience, quantity units will be chosen such that the industry's total nominal capacity is one unit. Under this assumption, the total capacity of the dominant firm is S and the total capacity of the fringe firms is 1−S. Maximum practical capacity, Um, is permitted to he below maximum nominal capacity. To change fringe firms' capacity utilization from the initial level, Uc, to Um requires that the fringe's quantity be increased, and the dominant firm's quantity be decreased, by (1−S) (Um−Uc). Thus
Once fringe firms are operating at maximum capacity, the dominant firm raises price by some percentage R. The dominant firm absorbs the entire reduction in industry quantity demanded resulting from the price increase. The quantity reduction is given by the product of R (the percentage price increase), E (the industry elasticity of demand), and Uc (initial industry quantity demanded). As before, unit variable margin for the dominant firm is given by P1−C. The profit reduction due to the loss of quantity resulting from the price increase is given by
The profit increase the dominant firm gains from raising price is the price increase multiplied by the quantity the dominant firm will sell after the price increase. The change in price is R multiplied by P1. The quantity sold is the dominant firm's initial quantity, S Uc, less the quantity reductions associated with L1 and L2, which are (1−S) (Um−Uc) and (R E Uc), respectively. The profit increase can be written
The entire profit consequences of the dominant firm strategy can be expressed as
From Equation [4] one can find the profit-maximizing price increase, R*, by taking the first derivative with respect to R, setting the derivative equal to zero, and solving for R*. The resulting expression is
Equation [5] can be solved using the parameter values in [Table 3.1]. The model predicts that the profit-maximizing price increase for a dominant firm under these circumstances would be approximately 48 percent above current levels.
This result should not be viewed as a prediction that price will necessarily increase by 48 percent above current levels. If price were to increase by such a large percentage, it is quite possible that some fringe firms would make investments that would increase capacity. It is also possible that imported newsprint would become a significant factor. It also is possible that newsprint purchasers would consider additional alternatives if price were to increase by such a large percentage. Conceptually, reactions could be accommodated in the model by reflecting additional loss of quantity experienced by the dominant firm.
Several of the parameters in Table K1 are estimated; hence, their true value could be higher or lower than shown. Significant further price increases are predicted by the model even if some of the parameters are altered. As explained above, production cost in the plants that Abitibi and Bowater would idle when pursuing a dominant firm strategy would likely be higher than the average cost used in the model.
However, suppose that the level of variable cost were 20 percent lower than shown in Table K1. Suppose further that the elasticity of demand were 20 percent larger than shown in Table K1. With these changed parameters, the profit-maximizing price increase would still be 30 percent.
On April 11, 2007, Economists Incorporated presented an economic analysis of the likely competitive effects of the proposed Abitibi-Bowater merger in the North American (“NA”) newsprint market (“White Paper”) to the U.S. Department of Justice (“DOJ”) to assist the Department in its investigation of the proposed merger. This economic analysis was prepared on behalf of the Newspaper Association of America (“NAA”), an association of U.S. daily newspapers.
The evidence we presented to DOJ in the White Paper demonstrates that Abitibi and Bowater jointly exercised market power to raise newsprint prices significantly above competitive levels during the period 2002 to 2006. We do not believe that any alternative explanation of the aggregate 49% increase in newsprint prices from the third quarter of 2002 through the third quarter of 2006 is remotely plausible.
On April 20, 2007, we met with the DOJ staff investigating the proposed merger to discuss our White Paper. In our discussion with DOJ, several questions were raised concerning our analysis and evidence regarding the joint exercise of market power by Abitibi and Bowater. One staff member suggested that the rise in the price of newsprint might be explained as a competitive response by newsprint producers to the appreciation of the Canadian dollar relative to the U.S. dollar. Another staff member asked whether the maximum practical operating rate for the production of uncoated groundwood specialty grades might be lower than the maximum practical operating rate for the production of newsprint.
We divide our response to issues raised by the DOJ staff into the following five sections:
1. In 2007, NA Newsprint Demand and Prices Have Declined Significantly While the Value of the Canadian Dollar Relative to the U.S. Dollar Has Increased Significantly
2. Abitibi and Bowater Have Not Taken Significant Actions To Remove Newsprint Capacity From the Market Since They Announced Their Merger in January 2007
3. Newsprint Industry Analysts and Competitors of Abitibi and Bowater Do Not Expect Abitibi and Bowater To Take Any Significant Action To Remove Newsprint Capacity From the Market Until After They Have Merged
1. Based on Publicly Available Information, the Cash Costs of NA Newsprint Mills Were Below the Price of Newsprint in 2003 and 2005.
2. Based on Publicly Available Information, the Cash Costs of NA Newsprint Mills Were Below the Price of Newsprint in 4Q 2006
3. A Comparison of Operating Rates for Newsprint and Uncoated Groundwood Specialty Grades 1999 to 2006
1. Introduction
2. The Relevance of a Paper by Matthew Gentzhow to Our Conclusions Regarding the DFM
3. Would the Dominant Firm Strategy Be Profitable for Abitibi or Bowater Acting Independently?
4. What Are the Effects on Dominant Firm Behavior of a Decline in Demand?
5. A Description of a Revision of the DFM Designed to Consider Multi-period Dynamics
Table 1 below shows the percentage change in selected newsprint statistics for the first five months of 2007 compared to the first five months of 2006.
During the period January 2007 to May 2007 NA demand declined by 10.8% compared to the first five months of 2006 and consumption by U.S. daily newspapers declined by 9.1%. Imports of newsprint from overseas mills to NA customers declined by 51 .3% to an annual rate of 79,000 metric tonnes. At this rate, imports will account for 0.8% of NA demand in 2007.
Table 1 also shows that shipments by NA newsprint mills to NA customers declined by 10.1% over the first five months of 2007. Partially offsetting the decline in shipments to NA customers, exports from NA mills to overseas customers increased by 5.6%. Total shipments by NA mills to both NA customers and overseas customers were down 7.3% for the five-month period.
Since March 2007, there has been a gradual improvement in NA demand and total shipments from NA mills to NA customers and overseas customers.
Between January 2007 and March 2007, the rate of decline in total NA newsprint demand was higher than previously. In March 2007, NA demand was down 13.4% compared to March 2006. However, in April and May 2007, the rate of decline slowed. By May 2007, the decline in NA demand dropped to 8.7%.
A comparison of the two columns in Table I reflects the gradual improvement in newsprint operating results over the period March 2007 to May 2007. The decline in consumption by U.S. daily newspapers increased from 7.1% for the twelve months of 2006 to 9.1% for the first five months of 2007, an increase of 2.0%. The decline in total shipments from NA newsprint mills increased from 6.4% for the twelve months of 2006 to 7.3% for the twelve months of 2006, and increase of 0.9%. Operating rates at NA newsprint mills for both the first five months of 2007 and the twelve months of 2006 were 94%.
We conclude that while there has been a modest increase in the rate of decline in newsprint consumption by U.S. daily newspapers for the first five months of 2007 compared to the twelve months of 2006, the overall operating results for NA newsprint mills over the two periods are not significantly different. As Table 2 shows, the operating results between 2006 and 2007 have been narrowing over the period March to May, not widening.
The price of newsprint (30 lb, Eastern U.S.) reached a peak of $675 per metric tonne in May 2006 and stayed at $675 through September 2006 before declining gradually to $660 in December 2006. From December 2006 to June 2007, the NA newsprint price fell $75 to $575, a decline of 11.4%.
While the price of newsprint was declining by 11.4% between December 2006 and June 2007, the value of the Canadian dollar was increasing 8.2% from $0.868 per U.S. dollar in December 2006 to $0.939 per U.S. dollar in June 2007.”
The RISI Pulp & Paper Week edition of May 21, 2007 shows a chart on page 11 comparing the price of newsprint on one vertical axis with the value of the Canadian dollar per U.S. dollar on the other vertical axis from May 2005 to April 2007. The chart shows both values tracking each other fairly closely in the 20 months from May 2005 through December 2006. From January 2007 through April 2007 the two values continuously diverge with the value of the Canadian dollar steadily increasing and the price of newsprint steadily decreasing.
Chart I below is an adaptation of the Pulp & Paper Week chart. It shows the percentage change from the respective May 2005 values for both the price of newsprint
Between the third quarter of 2002 and the third quarter of 2006, the price of NA newsprint rose an aggregate of 49% despite a steady decline in NA newsprint consumption.
As discussed below, since the merger announcement in early January and likely several months earlier, Abitibi and Bowater have stopped strategically closing capacity to raise the price of newsprint. In our view and the view of newsprint industry analysts and newsprint competitors of Abitibi and Bowater,
The current decline in newsprint prices is the true competitive response to the decline in NA newsprint demand. In our view, the decline in newsprint prices is occurring because Abitibi and Bowater perceive it would be imprudent to close significant capacity during the merger review period. The current decline in newsprint prices is indicative of the declines that would have occurred over the period 2002 to 2006 had Abitibi and Bowater not intervened with their strategic removal of capacity.
The widening divergence between the percentage change in the appreciation of the Canadian dollar and the percentage change in NA newsprint prices from December 2006 to June 2007 as shown in Chart I is further evidence that the correlation between the appreciation of the Canadian dollar and the rise in the price of newsprint in prior years was due to the strategic behavior of Abitibi and Bowater and was not a competitive response to the appreciation.
Of course, higher newsprint costs must be reflected in newsprint prices and, as newsprint demand declines, the highest cost capacity will be forced to exit from the market. In 2007, we observe newsprint prices approaching or dropping below the cash costs of the highest cost mills. One mill (the Blue Heron Pomona, CA mill) has been indefinitely idled because it apparently can no longer cover its cash costs. In our view, the operation of the NA newsprint market in the face of declining demand in 2007 is reflective of a competitive market due to the temporary absence of the exercise of market power by Abitibi and Bowater.
Abitibi and Bowater began their merger discussions in June 2006 and concluded them with their merger announcement on January 29, 2007. As antitrust economists, we would expect that during the merger review by regulatory authorities neither Abitibi nor Bowater would take any actions that could be construed by antitrust regulators as anticompetitive, including the significant removal of capacity from the market to raise the price of newsprint.
We are not aware of any actions by Abitibi since June 2006 to indefinitely idle or permanently shut down newsprint capacity. No such actions are identified in the Abitibi 2006 Annual Report or in Abitibi's report on its 2007 first quarter results,
These actions by Bowater, however, fall far short of the capacity removals needed to restore the “balance” between NA newsprint supply and demand. According to RISI economist Kevin Conley, “At this point, the announced reduction in North American supply [
(1) “We would expect that Abitibi and Bowater will be focused primarily on closing the merger, and therefore, unlikely in our opinion to rationalize any newsprint capacity in IH 2007,” Goldman Sachs analyst Richard Skidmore told investors.
(2) “No one will close any capacity because they figure AbitibiBowater will do it for them. And Abitibi and Bowater will figure they can't be too aggressive on pricing or close capacity until their deal closes,” said one contact.
(3) North American newsprint capacity now exceeds orders, resulting in a declining market. Salman Partners indicated that the majority of newsprint producers are waiting to see what will happen after the merger of Abitibi-Consotidated Inc. with Bowater Inc. later this year before making any decisions on shutdowns.
(4) At this point, the announced reduction in North American supply could not possibly keep pace with the continued decline in North American demand. It appears producers are waiting for the Abitibi/Bowater merger to be finalized in the hope that the new company will close necessary capacity to balance the market and bring an end to falling newsprint prices. However, this merger of North America's two largest newsprint producers will not be completed until the third quarter of 2007, at the earliest.
(5) Other suppliers are hoping the union of the two companies will go through smoothly in anticipation that AbitibiBowater will quickly make the industry's capacity cuts. They see it as a silver bullet for the whole industry, allowing them to reap the benefits of a tighter North American paper market without the necessity of cutting production themselves.
(6) Dillon expected a further newsprint price hike attempt later this year, despite the sluggish market. To be successful, the two biggest producers, Abitibi and Bowater, would have to support it, and that is not likely to occur until after the merger is completed “due to concerns that such a move might he misread by regulators,” said Dillon.
From the trade press commentary above, it is apparent that newsprint industry analysts and newsprint competitors of Abitibi and Bowater are waiting for the merger to be completed in anticipation that a merged Abitibi-Bowater will increase NA newsprint prices by shutting down enough newsprint capacity to create a tight market. It is also apparent that these same analysts and competitors believe that Abitibi and Bowater will not take any significant actions to remove capacity from the market until after their merger review is completed “due to concerns that such a move might be misread by regulators.”
RISI conducts periodic cost benchmarking studies analyzing the cash cost of producing newsprint for each NA newsprint mill.
Chart 2 below compares the cash costs for NA mills in 2003 and 2005. Chart 2 has been adapted from a report by a Canadian securities analyst for CIBC World Markets (“CIBC report”)
A chart appearing in this comment is not able to be reprinted here. Copies of the comment with the chart are available at the Department of Justice Antitrust Division web site,
Chart 2 shows a reduction in NA newsprint capacity of about 1.4 million metric tonnes between 2003 and 2005. The aggregate NA capacity shown for 2003 is about 13.5 million metric tonnes and the aggregate NA capacity shown for 2005 is about 12.1 million metric tonnes. In Chart 2, the number of NA newsprint mills declined from 48 in 2003 to 44 in 2005.
In 2003 and 2005, Chart 2 shows that most of the highest cost mills in NA were located in Eastern Canada. In 2005, the top half of the cost curve is dominated by Eastern Canadian mills with the exception of one U.S. Northeast mill, three U.S. West mills, and one Western Canadian mill. The bottom half of the cost curve in 2005 is dominated by mills located in the U.S. South and in Western Canada. Between 2003 and 2005, the cost disadvantage of mills in Eastern Canada increased relative to other NA mills, particularly those mills located in the U.S. South. CIBC attributes this increased cost disadvantage “largely to the strong C$,” stating that the “15% appreciation of the C$ made the cost curve steeper—up another 5% since then.”
CIBC Slide 35 does not identify the quarter in which the NA mill cash costs were estimated for either the 2003 or 2005 newsprint cost benchmarking studies. In Chart 2, the two horizontal green lines that we have drawn show the NA newsprint price (30 lb., Eastern U.S.) for 1Q 2003 ($475 per metric tonne) and 4Q 2003 ($527 per metric tonne).
In Chart 2, the two horizontal red lines that we have drawn show the NA newsprint price (30 lb., Eastern U.S.) for 1Q 2005 ($580 per metric tonne) and 4Q 2005 ($637 per metric tonne).
The newsprint capacity removals by Abitibi and Bowater during the period 2002 to 2006 are analyzed in Sections F through H of the White Paper. During that time Abitibi and Bowater combined capacity removals accounted for 80.8% of total NA capacity removals. Catalyst accounted for 7.3% of the capacity removals and two firms that exited from the newsprint market to produce uncoated groundwood specialty grades accounted for 9.7%. The other thirteen newsprint manufacturers that remain in the NA newsprint market today accounted for just 2.2% of the capacity removals.
If the variable cost of the newsprint capacity that Abitibi and Bowater removed from the market during the period 2002 to 2006 was less than the price of newsprint, that capacity removal would be consistent with the hypothesis that Abitibi and Bowater were jointly exercising market power. Firms in competitive markets do not generally remove capacity from the market if that capacity is generating positive profit margin (i.e., when price exceeds variable cost).
Chart 2 above shows that the price of newsprint exceeded the 2003 cash cost of all NA newsprint mills in 1Q 2003 and 4Q 2003.
Chart 3 below shows cash costs of NA mills in 4Q 2006. The chart is adapted from a chart that appeared in a RISI article in April 2007.
The interpretation of Chart 3 is similar to the interpretation of Chart 2 except that Chart 3 doesn't provide a color code to identify mills by region. As in Chart 2, the mill owners and specific mill locations are not identified. In Chart 3, 43 newsprint mills are shown and the aggregate NA total capacity is 11.9 million metric tonnes. The highest cost mill has a cash cost of about $630 per metric tonne which is $30 lower than the December 2006 newsprint price of $660 (30 lb., Eastern U.S.) as reported by RISI Pulp & Paper Week. The December 2006 newsprint price is indicated by the horizontal red line at the top of Chart 3.
Since 4Q 2006, the price of newsprint has dropped from $660 per metric tonne to $585 in June 2007. In March 2007, Blue Heron announced that it would be indefinitely idling its Pomona, CA mill due primarily to significant increases in the cost of recycled fiber over the past year.
Section J of the White Paper compared newsprint prices with the prices of uncoated groundwood specialty grades 3Q 1999 to 4Q 2006. We showed that price increases for newsprint between 2002 and 2006 greatly exceeded price increases for three of four uncoated groundwood specialty grades for which data were available.
During our meeting with DOJ, we pointed out that the significantly lower price increases for uncoated groundwood specialty grades compared to the price increases for newsprint over the period 2002 to 2006 could be largely explained by the significantly lower operating rates for uncoated groundwood specialty grades. We were asked by the DOJ staff if the maximum practical operating rate for the production of uncoated groundwood specialty grades might be lower than the maximum practical operating rate for the production of newsprint.
Chart 4 below shows that the operating rates for both newsprint and uncoated groundwood specialty grades were nearly identical from 1999 to 2001 before diverging in 2002.
In Section K and Attachment K of the White Paper, we presented a model of dominant firm behavior adapted to the newsprint industry. The model allowed us to address two questions:
• In theory, how could Abitibi and Bowater, acting together or as a merged entity, profitably raise price?
• Do the current conditions in the newsprint industry suggest that Abitibi and Bowater actually have the ability profitably to raise price further?
Using estimated values for the model's parameters, we showed that the model predicted that it would be profitable under current conditions
In this section, we address the following issues:
1. Introduction
2. The Relevance of a Paper by Matthew Gentzhow to Our Conclusions Regarding the DFM.
3. Would the Dominant Firm Strategy be Profitable for Abitibi or Bowater Acting Independently?
4. What Are the Effects on Dominant Firm Behavior of a Decline in Demand?
5. A Description of a Revision of the DFM Designed to Consider Multiperiod Dynamics.
In our April 20 meeting, the DOJ staff mentioned a paper by Matthew Gentzhow which analyzed how a newspaper's online activities affect the demand for its print edition.
The DOJ staff expressed interest in determining the rate at which the demand for newsprint will decline in the future. Extrapolating from Gentzhow's paper to newspapers other than the Post, demand for printed newspapers has been reduced very slightly by the introduction of newspaper websites. There is nothing in the article to suggest that newspaper websites (which are now quite widespread) will cause significant further reduction in the demand for printed newspapers (and hence newsprint) in the near future.
Data recently published by the NAA on newspaper print copy and newspaper online advertising revenues are consistent with this conclusion. On-line advertising revenues at U.S. daily newspapers increased from 5.5% of total newspaper advertising revenues in the first quarter of 2006 to 7.1% of total newspaper advertising revenues in the first
In the White Paper model, as well as in a revised model designed to consider multi-period dynamics,
Under the White Paper model, the lowest initial dominant firm share from which it is profitable to engage in the dominant firm strategy, given the other assumed parameters, is about 16%. Using the revised model, the corresponding share is about 14.5%.
Both models indicate that it would be profitable for Abitibi or Bowater acting on its own to reduce capacity and elevate price. In both models, the dominant firm assumes that all other firms in the industry will act as fringe, increasing their output in response to a capacity reduction by the dominant firm. (In other words, there is no assumption of a coordinated anticompetitive response by the fringe.) As pointed out in the White Paper, however, both firms have been actively reducing capacity since at least 2002. We believe it unlikely that either of these firms assumes that the other firm will behave as part of the fringe.
A decline in demand can be interpreted as affecting the initial conditions. Reducing demand starts the industry off with lower industry capacity utilization. Decreasing industry capacity utilization (i.e., increasing excess capacity in the initial conditions) reduces the optimal price increase for a dominant firm of a given size.
This question can be addressed with a simple adjustment to the White Paper model. We assumed that capacity utilization was 95% and that a dominant firm could begin to raise newsprint prices by removing capacity to bring utilization to 98%. A fall in demand could be thought of as changing the starting position from 95% capacity utilization to something lower: e.g., 90%. Leaving all the other parameters in the model the same (see Table K1 of the White Paper), the profit-maximizing dominant firm price increase at various levels of initial capacity utilization is as follows:
Even if demand for newsprint fell to such an extent that capacity utilization was 63%, it would still be profitable for the dominant firm with a 41.5% initial share to withdraw capacity and raise price 5%.
Using a revised model, a fall in demand can be modeled as reducing the initial demand level such that, given the existing industry capacity and cost structure, the industry equilibrium output is at a lower level of capacity utilization. If demand were such that initial capacity utilization were as low as 73%, it would still be profitable for a dominant firm with a 41.5% initial share to engage in the dominant firm strategy.
Alternatively, a decline in demand can be interpreted as affecting the rate of decline of demand in future periods. A revised dominant firm model was created to consider multiple-period dynamics. To explore the effect of the rate of decline of demand, we contrasted the profits from two alternative strategies:
DF: The dominant firm acts as a dominant firm in the first period by withdrawing capacity and raising price, then it accepts the equilibrium price (given the reduced capacity) in subsequent periods.
No DF: The dominant firm accepts the equilibrium price and quantity in all periods.
The dominant firm prefers the strategy that yields the greatest discounted profit flow. With an initial share of 41.5%, the DF strategy is preferred even if demand is declining by as much as 20% per year.
If the dominant firm's initial share is sufficiently low (e.g., 15%), the No DF strategy is preferred when there is significant decline in future demand (e.g., 5% or 10% per year). Thus, it is possible that a dominant firm with a low initial share would act as a dominant firm when demand is declining slowly but choose not to act as a dominant firm when demand is declining rapidly. The intuition is as follows: with a small initial share, the dominant firm must close a major portion of its capacity to elevate the price in the first period. Accepting the competitive solution in subsequent periods, the dominant firm finds that the profits with a much-reduced output and slightly higher prices (as would result from the DF strategy) yields lower profits than taking its initial share of industry output at somewhat lower prices (as would result from the No DF strategy). When the two alternative strategies are considered for the initial period and multiple subsequent periods, the No DF strategy yields higher discounted profits.
Note that if there is an incentive not to act as a dominant firm, it comes from the assumption that capacity withdrawn by the dominant firm is permanently withdrawn and cannot be restarted. If the dominant firm were simply to “idle” capacity but retain the option of restarting the capacity in the future, then it suffers no penalty in future periods when the dominant firm behavior is no longer profitable. If capacity can be withdrawn on a temporary basis, future decreases in demand would not deter a dominant firm from behaving as a dominant firm when it is otherwise profitable to do so.
Using a model based on current industry conditions and plausible projected declines in North American demand for newsprint, we see no reason to believe that dominant firm behavior in the newsprint market will cease due to a more rapid decline in industry demand. The decline in newsprint demand is not new. With the exception of a few up-ticks in demand, the NA demand for newsprint has been steadily declining since the fourth quarter of 1999.
The model presented in the White Paper started with a stylized representation of current conditions and considered whether it would be profitable for a dominant firm to withdraw capacity. The revised model includes an expanded structure that permits calculation of an equilibrium price under various dominant firm behaviors and under different levels of industry demand. In particular, the revised model takes into account multi-period dynamics.
1. Information is available showing the variable cost per delivered tonne of all the mills in the industry as of 4Q 2006. See Chart 3 in Section C.2.a. above. Mills are arranged in order of increasing cost. Based on a slightly stylized version of this cost profile, it is assumed that the cost per tonne of the most efficient mill is $400, the cost per tonne of the least efficient mill is $600, and the cost per tonne of the rest of the capacity in the industry can be approximated by a straight line between these two end points. The industry cost of $600 per tonne occurs at full capacity of approximately 12,000,000 tonnes. This cost profile becomes the industry cost curve and is the supply curve under competitive conditions. Thus, if output were 12,000,000 tonnes, the cost of the least efficient mills would be $600 and, in a competitive equilibrium, $600 would be the price. C = 400 + Q/60,000.
2. For simplicity, it is further assumed that the dominant firm and the fringe have the same cost profile at corresponding degrees of capacity utilization, or in other words, that they have (approximately) the same mix of mills with various degrees of efficiency. The cost curve for the dominant firm runs from $400 at zero or low levels of output to $600 at full capacity utilization; likewise for the fringe. Added together, the two cost curves make up the industry supply curve.
3. There is an explicit industry demand equation: Q = A P
4. We start by looking at a situation in which the industry is at competitive equilibrium with capacity utilization of 95%. (For simplicity, we assume that the maximum achievable capacity utilization is 100%, rather than a lower level such as 98% in the White Paper model.) Given the industry capacity assumed, 95% capacity utilization is achieved at an output level of 12,000,000 * 95% = 11,400,000. Given the industry cost curve assumed, cost at this output level is $590 per tonne. The demand curve is parameterized with A = 113,347,403 so demand equals supply at this price and output. The assumption that the industry is currently at a competitive equilibrium follows the observation that price has been falling and capacity has not been withdrawn by either Abitibi or Bowater in the past few months.
5. At this stage, the dominant firm decides whether it is more profitable to stay at the competitive equilibrium or behave as a dominant firm, removing capacity from the market to increase price. When the industry is at a competitive equilibrium, the profit of the dominant firm is calculated as the area of a right triangle. The base of the triangle is the segment from $400 to the current industry cost level. The height of the triangle is the output of the dominant firm. In the initial scenario, output of the dominant firm is 95% times the capacity of the dominant firm.
6. If the dominant firm decides to increase price, its profit has two components. The first is a triangle as described previously (but with a reduced quantity for the dominant firm). The second is a rectangle. The height of the rectangle is the dominant firm's output and the base of the rectangle is the difference between price and the dominant firm's cost at the relevant output level. (As the dominant firm reduces capacity, the capacity with highest cost is eliminated first. For this reason, the marginal cost of the dominant firm's output declines as it reduces capacity.)
7. With these initial conditions, it is profitable for a firm with 41.5% share of capacity to remove capacity and increase price—the profit-maximizing price is almost double the initial price of $590. (One reason that such a large price increase is predicted is the assumption that demand elasticity does not increase as price increases.) At lower initial capacity levels, the profit-maximizing price is reduced. At an initial capacity level of about 14.5%, the profit-maximizing price under a dominant firm strategy yields no more profit than the competitive equilibrium. Separately and combined, Abitibi and Bowater currently have shares above 14.5%.
8. Suppose that a firm is at 15% initial capacity share. It is slightly more profitable for the first period to behave as a dominant firm. However, if demand declines 10% in each subsequent period, it is not profitable in these subsequent periods to behave as a dominant firm. The “dominant firm” accepts the market equilibrium in the second period and thereafter. Because the firm gave up share in the first period, however, its profits in all subsequent periods are reduced. For a firm with an initial share of 15%, the multi-period discounted profit flow is greater if the firm does not engage in the dominant firm strategy even in the first period.
9. Intuitively, whether it will be profitable to behave as a dominant firm for some number of periods will depend on the firm's initial share of capacity, the degree of capacity utilization initially, the rate of decline in demand, and the relevant discount rate. As noted above, acting as a dominant firm brings no penalty in later periods if the dominant firm idles, rather than permanently removes, capacity. In this case, considerations about reduced capacity in future periods would no longer deter a firm from pursuing a dominant firm strategy.
We met with the DOJ staff on April 20, 2007 to discuss our White Paper analyzing the likely competitive effects of the proposed Abitibi-Bowater merger.
In this response memorandum, we reach six main conclusions:
(1) Events in the NA newsprint market since the Abitibi-Bowater merger announcement in January 2007 demonstrate how the NA newsprint market would have functioned absent the exercise of market power by Abitibi and Bowater. As NA newsprint demand continued to decline in 2007, NA newsprint prices have declined to the cash costs of the highest cost NA newsprint mills. One mill (Blue Heron in Pomona, CA) has been indefinitely idled due to its high cash costs of newsprint production. In the absence of the exercise of a dominant firm strategy by Abitibi and Bowater while their proposed merger is under regulatory review, the NA newsprint market is performing competitively. See Sections B.1., B.2., B.3., and C.2. above.
(2) We conclude that if the merger is approved, Abitibi-Bowater will have an enhanced incentive and ability to engage in dominant firm behavior post-merger. As shown by trade press comments cited in Section B.3.a. above, it is widely anticipated by competitors of Abitibi and Bowater and by newsprint industry analysts that, once the merger is approved, Abitibi-Bowater will remove enough newsprint capacity from the market post-merger to create a tight market, thereby increasing newsprint prices above competitive levels.
(3) Prior to the merger announcement, changes in the price of newsprint were closely correlated with changes in the value of the Canadian dollar per U.S. dollar. Since the merger announcement in January, the value of the Canadian dollar has increased significantly while the price of newsprint has declined significantly. The divergence between the value of the Canadian dollar and the price of newsprint since the merger announcement provides strong support for the Dominant Firm hypothesis and contradicts the Competitive Response hypothesis. See Section B.1.b. and Chart 1 above.
(4) RlSI benchmarking cash cost studies for NA newsprint mills strongly suggest that Abitibi and Bowater closed newsprint capacity over the period 2002-2006 even though the cash cost of that capacity was below the price of newsprint at the time of the capacity closures. Such behavior is consistent with the Dominant Firm hypothesis and contradicts the Competitive Response hypothesis. See Section C.1. and Chart 2 above.
(5) Between 1999 and 2001, the aggregate operating rates for NA newsprint mills and NA mills producing uncoated groundwood specialty grades were nearly identical. Beginning in 2002, the gap between newsprint mill operating rates and the operating rates of mills producing uncoated groundwood specialty grades began to widen. In 2004, the aggregate operating rate for newsprint mills was 6% greater than the aggregate operating rate for mills producing uncoated groundwood specialty grades. This divergence in operating rates is consistent with the Dominant Firm hypothesis and contradicts the Competitive Response Hypothesis. See Section C.3. and Chart 4 above.
(6) In Section D above, we revise the Dominant Firm Model to account for multi-period dynamics and the effect of an increase in the decline of newsprint demand on dominant firm strategy.
On July 9, 2007, Economists Incorporated submitted a response (“DOJ Response”) to issues raised by the Department of Justice (“DOJ”) staff concerning the likely competitive effects of the proposed Abitibi-Bowater merger in the North American (“NA”) newsprint market.
In footnote 17 of our DOJ Response, we stated the following:
According to a RISI news note dated June 29, 2007, Kruger announced a $25 per metric tonne price increase for 30 lb. newsprint effective September 1, 2007. According to RISI, “Kruger is North America's fourth-largest newsprint producer in terms of capacity with 1.15 million tonnes/yr of production, all of it located in [Eastern] Canada. Contacts said it was the first time they could remember that the company had sought to initiate a price increase round.” We view Kruger's announced price increase as a competitive response primarily to the appreciation of the Canadian dollar, an action taken in the absence of the exercise of market power by Abitibi and Bowater since their merger announcement in January 2007. It is plausible that NA newsprint prices have fallen close to the cash costs of one or more Kruger newsprint mills, necessitating the price increase announcement. See Section C.2. below for a discussion of 4Q 2006 cash costs of NA newsprint mills. Whether the price increase will be successfully implemented or not will depend mainly on the amount of excess capacity at NA newsprint mills in September and succeeding months.
Subsequent trade press reports have made it clear that we were mistaken in our conclusion that Kruger's announced price increase should be viewed as a “competitive response” to the appreciation of the Canadian dollar. Instead, these subsequent trade press reports make it clear that the announced price increase is an anticompetitive continuation of the Abitibi-Bowater Dominant Firm strategy supported by coordination between Abitibi-Bowater and some of its leading NA newsprint competitors. According to an article in the July 16, 2007 edition of Pulp & Paper Week (p.7):
Several newsprint producers including the largest North American supplier, Abitibi-Consolidated, began telling customers last week they planned to increase the price of 30-lb newsprint by $25/tonne effective Sept 1.
The move to raise prices $25 was kicked off at the end of June by Canadian supplier Kruger, the fourth largest newsprint maker in North America based on capacity. Contacts said Catalyst and Blue Heron were among suppliers also planning the increase, and No. 3 ranked White Birch was considering it.
“If this gets followed by capacity reduction announcements it would put some teeth into it,” said one contact last week.
North American suppliers depend on Abitibi-Consolidated and Bowater, which
No one expects the two companies to remove any capacity until after the U.S. Dept of Justice (DOJ) and Canada's Competition Bureau (CCB) disclose whether the terms of the deal require any asset divestments.
In our view, the most economically reasonable interpretation of the comments in the Pulp & Paper Week article above is as follows:
(1) Kruger, Catalyst, and Blue Heron announced a $25/tonne price increase at the end of June and in early July effective September 1, 2007 timed for the anticipated completion of the Abitibi-Bowater merger.
(2) The price increase will not succeed unless substantial capacity is closed.
(3) Abitibi-Bowater's NA newsprint competitors “depend on Abitibi-Consolidated and Bowater * * * to close sufficient capacity to move North American newsprint supply in line with demand.”
(4) By also announcing a $25 price increase effective September 1, 2007, Abitibi has signaled to its NA newsprint competitors that it will close the capacity necessary to support the price increase.
(5) Abitibi-Bowater will not close the capacity necessary to support the price increase before their merger is approved by DOJ and the CCB, almost certainly out of concern that such an action would jeopardize regulatory approval of the merger.
(6) Abitibi-Bowater will close the capacity necessary to support the price increase after the merger review period assuming the merger is approved by DOJ and CCB.
(7) In initiating the $25 price increase to become effective at the time of the anticipated completion of the Abitibi-Bowater merger, Kruger and the other Abitibi-Bowater competitors who have announced the price increase have engaged in coordinated interaction in support of the Abitibi-Bowater Dominant Finn strategy.
In previous submissions to DOJ, we have not addressed the synergies and other cost savings that Abitibi and Bowater have claimed will result from the merger. There are two reasons. First, as we do not have access to the non-public analyses supporting those claims, we are not in a good position to analyze those claims. Second, even assuming for the sake of argument that the magnitude of the claimed efficiencies were likely to be achieved, it is our opinion that the cost savings would not come close to offsetting the likely anticompetitive harm from the merger that we have analyzed in the White Paper and in the DOJ Response.
The U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines set out stringent standards for determining if claimed efficiencies would be sufficient to prevent a merger from being anticompetitive.
Third Avenue Management LLC (TAM) is Abitibi's largest shareholder with an ownership share of 12.44%.
Third Avenue Management LLC is a New York-based investment advisory firm that offers its services to private and institutional clients. Third Avenue adheres to a disciplined bottom-up value investment strategy to identify investment opportunities in undervalued securities of companies with high quality assets, understandable businesses and strong management teams that have the potential to create value over the long term. Third Avenue Management has $30 billion in assets under management and offers value-oriented strategies through mutual funds, separate accounts and alternative investment vehicles.
On July 16, 2007, TAM announced its opposition to the Abitibi-Bowater merger. Among the reasons cited for its opposition was that TAM has “low confidence” that the economic benefits and synergies claimed for the merger will be achieved.
Mr. Wadhwaney noted that, “We have low confidence that the alleged economic benefits and synergies claimed by management will actually be realized, and urge shareholders to read carefully the risk factors and disclaimers that the companies have identified in their combined proxy circular.”
If DOJ and the CCB approve the proposed Abitibi-Bowater merger, anticompetitive price increases to NA newsprint customers, beginning with the $25 per metric tonne price increase announced for September, 1, 2007, are virtually certain. If the Third Avenue Management analysis is correct, the synergies and other cost reductions claimed by Abitibi and Bowater are unlikely to be realized.
United States Patent and Trademark Office, Commerce.
Final rule.
The Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office amends the rules governing practice before the Board of Patent Appeals and Interferences in
Fred E. McKelvey or Allen R. MacDonald at 571-272-9797.
A notice of proposed rulemaking was published in the
Existing rules in Part 1 are denominated as “Rule x” in this
Existing rules in Part 41 are denominated as “Rule 41.x” in this
Proposed rules in the notice of proposed rulemaking and this final rule are denominated as “Bd.R. x” in this
A portion of the Board's jurisdiction is to consider and decide
Presently, the Board is experiencing a rapid increase in
The amended rules make clear that the Board is not a tribunal for
A major objective of the amended rules is to avoid unnecessary returns to examiners by the Appeals Center and the Board, along with the resulting delays in application and appeal pendency. The requirements of the amended rules are believed to be more objective and, therefore, both appellants and examiners will have a better understanding of what is required, thereby minimizing, if not eliminating, a need to hold appeal briefs defective. If a rule does not require an action to be taken in connection with an appeal brief, then a brief will not be held defective for failure to take that action. Some former rules have turned out in practice to be too subjective. For example, the former rules require a summary of the invention. Appellants, as well as examiners, have given different interpretations to the requirement for a summary of the invention. The amended rules replace the requirement for a summary of the invention with a claims and drawing analysis and a means or step plus function analysis. Appellants have also had difficulty complying with the evidence appendix requirement. Compliance with the amended rules is expected to ensure that the Appeals Center and the Board, working together, can minimize, possibly eliminate, unwarranted returns to examiners based on non-compliant appeal brief requirements.
The amended rules are directed to improving appellant briefing. A 30-page limit for the brief will promote concise and precise writing. Any statement of the real party in interest, statement of related cases, table of contents, table of authorities, status of amendments, jurisdictional statement, signature block, and appendix are excluded from the 30-page limit. The amended rules also require a “statement of facts” section where the appellant is required to set out the material facts relevant to the rejections on appeal.
The amended rules require an “argument” section where an appellant shall explain why the examiner is believed to have erred as to each rejection to be reviewed. Any explanation must address all points made by the examiner with which the appellant disagrees and must identify where the argument was made in the first instance to the examiner or state that the argument has not previously been made to the examiner. By having a clear focus on the dispute and making clear what arguments have been and have not been presented to the examiner, the USPTO reviewers as well as the examiner can make a well-informed decision on (1) whether to proceed with the appeal or (2) whether to withdraw the rejection.
Finally, the amended rules improve uniform enforcement of the rules. Petitions are decided by the Chief Administrative Patent Judge of the Board. Under former rules, petitions are decided by the Director of each Technology Center. The rules also allow for sanctions which may be imposed against an appellant for failure to comply with an applicable rule.
The rules do not amend any of the rules relating to
What follows is a discussion of the new appeal rules. Further information relevant to particular rules appears in the analysis of comments portion of this final rule.
Bd.R. 41.2 amends Rule 41.2 to eliminate from the definition of “Board” any reference to a proceeding under Bd.R. 41.3 relating to petitions to the Chief Administrative Patent Judge. Action by the Chief Administrative
Bd.R. 41.2 also amends Rule 41.2 to eliminate a petition under Bd.R. 41.3 from the definition of contested case. At the present time, there are no petitions authorized in a contested case.
Bd.R. 41.3 is amended to include a delegation of authority from the Director to the Chief Administrative Patent Judge to decide certain petitions authorized by Part 41. The delegation of authority would be in addition to that already set out in the MPEP § 1002.02(f) (8th ed., Aug., 2006). The petitions would include (1) seeking an extension of time to file certain papers after an appeal brief is filed in an
Bd.R. 41.3(b) is amended to define the scope of petitions which can be filed pursuant to the rules. Under Bd.R. 41.3(b), a petition could not be filed to seek review of issues committed by statute to a panel.
Bd.R. 41.4(c) is amended to add the phrase “Except to the extent provided in this part” and to revise paragraph 2 to read: “Filing of a notice of appeal and an appeal brief (
The notice of proposed rulemaking did not propose a change to Bd.R. 41.12 which concerns citation of authority. Rule 41.12 currently requires the public to cite to specific reporters, including some parallel citations. The Board, however, no longer follows the practice specified in Rule 41.12, and does not use parallel citations. Accordingly, Bd.R. 41.12 is being amended to make the rule consistent with Board practice and minimize the citation burden on the public. Under Bd.R. 41.12, as amended, a citation to a single source, in the priority order set out in the rule, will be sufficient.
Bd.R. 41.30 is amended to add a definition of “Record.” The Record on appeal would be the official content of the file of an application or reexamination proceeding on appeal. In the rules, a reference to “Record” with a capital R is a reference to the Record as defined in Bd.R. 41.30. The definition advises applicants of what documents the Board will consider in resolving the appeal. The definition also makes it clear to any reviewing court what record was considered by the Board.
Bd.R. 41.31(a) provides that an appeal is taken from a decision of the examiner to the Board by filing a notice of appeal. The following language would be acceptable under the rule: “An appeal is taken from the decision of the examiner mailed [specify date appealed rejection was mailed].” An appeal can be taken when authorized by the statute 35 U.S.C. 134. The provision of Rule 41.31(b) that a notice of appeal need not be signed has been removed. Papers filed in connection with an appeal, including the notice of appeal, would need to be signed in accordance with § 1.33 of this title.
Bd.R. 41.31(b) requires that the notice of appeal be accompanied by the fee required by law and would refer to the rule that specifies the required fee.
Bd.R. 41.31(c) specifies the time within which a notice of appeal would have to be filed in order to be considered timely. The time for filing a notice of appeal appears in Rule 134.
Bd.R. 41.31(d) provides that a request for an extension of time to file a notice of appeal in an application is governed by Rule 136(a). Bd.R. 41.31(d) also provides that a request for an extension of time to file a notice of appeal in an
Bd.R. 41.31(e) defines a “non-appealable issue” as an issue that is not subject to an appeal under 35 U.S.C. 134. Non-appealable issues are issues (1) over which the Board does not exercise authority in appeal proceedings and (2) which are handled by a petition. Non-appealable issues include such matters as an examiner's refusal to (1) enter a response to a final rejection, (2) enter evidence presented after a final rejection, (3) enter an appeal brief or a reply brief, or (4) withdraw a restriction requirement. The rules contemplate that some petitions relating to non-appealable issues are to be decided by the Chief Administrative Patent Judge. Some of those non-appealable issues include: (1) A petition to exceed the page limit and (2) a petition to extend the time for filing a paper in the appeal after the filing of the appeal brief. An applicant or patent owner dissatisfied with a decision of an examiner on a non-appealable issue would be required to seek review by petition before an appeal is considered on the merits. Failure to timely file a petition seeking review of a decision of the examiner related to a non-appealable issue would generally constitute a waiver to have those issues considered. The language “[f]ailure to timely file” would be interpreted to mean not filed within the time set out in the rules. For example, Rule 1.181(f) provides that any petition under Rule 181 not filed within two months of the mailing date of the action or notice from which relief is requested may be dismissed as untimely. The object of the amendment to the rule is to maximize resolution of non-appealable issues before an appeal is considered on the merits. Under current practice, an applicant or a patent owner often does not timely seek to have non-appealable issues resolved, thereby necessitating a remand by the Board to the examiner to have a non-appealable issue resolved. The remand adds to the pendency of an application or reexamination proceeding and, in some instances, may unnecessarily enlarge patent term adjustment. The Office intends to strictly enforce the waiver provisions of Bd.R. 41.31(e) with the view of making the appeal process administratively efficient. While the Office will retain discretion to excuse a failure to timely settle non-appealable issues, it is expected that exercise of that discretion will be reserved for truly unusual circumstances.
Bd.R. 41.33(a) provides that an amendment filed after the date a notice of appeal is filed and before an appeal brief is filed may be admitted as provided in Rule 116.
Bd.R. 41.33(b), under two circumstances, gives the examiner discretion to enter an amendment filed with or after an appeal brief is filed. A first circumstance would be to cancel claims, provided cancellation of claims does not affect the scope of any other pending claim in the proceedings. A second circumstance would be to rewrite dependent claims into independent form.
Bd.R. 41.33(c) provides that all other amendments filed after the date an appeal brief is filed will not be admitted, except as permitted by (1) Bd.R. 41.50(b)(1) (request for amendment after remand), (2) Bd.R.
Bd.R. 41.33(d) provides that evidence filed after a notice of appeal is filed and before an appeal brief is filed may be admitted if (1) the examiner determines that the evidence overcomes at least one rejection under appeal and (2) appellant shows good cause why the evidence was not earlier presented. The first step in an analysis of whether evidence may be admitted is a showing of good cause why the evidence was not earlier presented. The Office has found that too often an applicant or a patent owner belatedly presents evidence as an afterthought and that the evidence was, or should have been, readily available. Late presentation of evidence is not consistent with efficient administration of the appeal process. Under the rule, the Office would strictly apply the good cause standard.
Bd.R. 41.33(e) provides that evidence filed after an appeal brief is filed will not be admitted except as permitted by (1) Bd.R. 41.50(b)(1) (request to reopen prosecution after entry of a remand by the Board), and (2) Bd.R. 41.50(d)(1) (request to reopen prosecution after new ground of rejection entered by the Board).
Bd.R. 41.35(a) provides that the Board acquires jurisdiction when the Board mails a docket notice. At an appropriate time after proceedings are completed before the examiner, a docket notice identifying the appeal number would be entered in the application or reexamination proceeding file and mailed to the appellant. A new docket notice identifying a new appeal number would be mailed upon return of the case to the Board following remand. By delaying the transfer of jurisdiction until the appeal is fully briefed and the position of the appellant is fully presented for consideration by the examiner and the Office reviewers (appeal conferees), the possibility exists that the examiner will find some or all of the appealed claims patentable without the necessity of proceeding with the appeal and invoking the jurisdiction of the Board. For this reason, jurisdiction transfers to the Board only after (1) the appellant has filed an appeal brief, (2) the examiner's answer has been mailed, and (3) the appellant has filed a reply brief or the time for filing a reply brief has expired. Rule 41.35(a) provides that the Board acquires jurisdiction upon transmittal of the file, including all briefs and examiner's answers, to the Board. Under that practice, however, an appellant may or may not know the date when a file is transmitted to the Board. Most files are now electronic files (Image File Wrapper or IFW file) as opposed to a paper file wrapper. Accordingly, a paper file wrapper is no longer transmitted to the Board. Under current practice, the Board prepares a docket notice which is (1) entered in the IFW file and (2) mailed to appellant. Upon receipt of the docket notice, appellant knows that the Board has acquired jurisdiction over the appeal. Bd.R. 41.35(a) codifies current practice and establishes a precise date, known to all involved, as to when jurisdiction is transferred to the Board.
Bd.R. 41.35(b) provides that the jurisdiction of the Board ends when (1) the Board mails a remand order (
There are two occasions when a remand is entered. First, a remand is entered when the Board is of the opinion that clarification on a point of fact or law is needed.
The Board also no longer has jurisdiction as a matter of law when an appeal to the Federal Circuit is filed in the USPTO.
Bd.R. 41.35(c) would continue current practice and provide that the Director could
Bd.R. 41.37 provides for filing an appeal brief to perfect an appeal and sets out the requirements for appeal briefs. The appeal brief is a highly significant document in an ex parte appeal. Appeal brief experience under Rule 41.37 has been mixed. Bd.R. 41.37 seeks to (1) take advantage of provisions of Rule 41.37 which have proved useful, (2) clarify provisions which have been subject to varying interpretations by counsel, and (3) add provisions which are expected to make the decision-making process more focused and efficient.
Bd.R. 41.37(a) provides that an appeal brief shall be filed to perfect an appeal. Upon a failure to timely file an appeal brief, proceedings on the appeal would be considered terminated. The language “without further action on the part of the Office” gives notice that no action, including entry of a paper by the Office, would be necessary for the appeal to be considered terminated. Bd.R. 41.37(a) does not preclude the Office from entering a paper notifying an applicant or patent owner that the appeal has been terminated. Any failure of the Office to enter a paper notifying an applicant or patent owner that an appeal stands terminated would not affect the terminated status of the appeal. The language “proceedings are considered terminated” provides notice that when (1) no appeal brief is filed and (2) no claims are allowed, the time for filing a continuing application under 35 U.S.C. 120 would be before the time expires for filing an appeal brief. The language “terminated” is used because proceedings on appeal are over prior to mailing of a docket notice pursuant to Bd.R. 41.35(a). Dismissal of an appeal takes place after a docket notice is mailed since only the Board dismisses an appeal (Bd.R. 41.35(b)(2)).
Bd.R. 41.37(b) provides that the appeal brief shall be accompanied by the fee required by Bd.R. 41.20(b)(2).
Bd.R. 41.37(c) provides that an appellant must file an appeal brief within two months from the filing of the notice of appeal.
Bd.R. 41.37(d) provides that the time for filing an appeal brief is extendable under the provisions of Rule 136(a) for applications and Rule 550(c) for
Bd.R. 41.37(e) provides that an appeal brief must contain, under appropriate headings and in the order indicated, the following items: (1) Statement of the real party in interest, (2) statement of related cases, (3) jurisdictional statement, (4) table of contents, (5) table of authorities, (6) [reserved], (7) status of amendments, (8) grounds of rejection to be reviewed, (9) statement of facts, (10) argument, and (11) an appendix containing (a) claims section, (b) claim support and drawing analysis section, (c) means or step plus function analysis section, (d) evidence section, and (e) related cases section. The items are otherwise defined in other subsections of Bd.R. 41.37 and, where applicable, would apply to appeal briefs and reply briefs (Bd.R. 41.41).
Bd.R. 41.37(f) requires a “statement of real party in interest” which would include an identification of the name of the real party in interest. The principal purpose of an identification of the name of the real party in interest is to permit members of the Board to assess whether recusal is required or would otherwise be appropriate. Another purpose is to assist employees of the Board to comply with the Ethics in Government Act. Since a real party in interest can change during the pendency of an appeal, there would be a continuing obligation to update the real party in interest during the pendency of the appeal. If an appeal brief does not contain a statement of real party in interest, the Office will assume that the named inventors are the real party in interest.
Bd.R. 41.37(g) requires an appeal brief to include a “statement of related cases.” The statement of related cases would identify related cases by (1) application number, patent number, appeal number or interference number or (2) court docket number. The statement would encompass all prior or pending appeals, interferences or judicial proceedings known to any inventors, any attorneys or agents who prepared or prosecuted the application on appeal and any other person who was substantively involved in the preparation or prosecution of the application on appeal. A related case is one which would directly affect, or would be directly affected by or have a bearing on the Board's decision in the appeal. A copy of any final or significant interlocutory decision rendered by the Board or a court in any proceeding identified under this paragraph shall be included in the related cases section in the appendix (Bd.R. 41.37(u)). A significant interlocutory decision would include (1) a decision on a patentability motion in an interference or (2) a decision in an interference or a court interpreting a claim. A related case includes any continuing application of the application on appeal. If an appellant fails to advise the Board that it has filed a continuing application or a request for continued examination, or that it has filed an express abandonment of the application on appeal and the Board mails a decision on appeal in the application on appeal, the appellant should expect that the decision will not be removed from the file. The time to update a statement of related cases, or notify the Board that an application on appeal has been abandoned, is when the continuing application, request for continued examination, or express abandonment is filed. Appellant would be under a continuing obligation to update a statement of related cases during the pendency of the appeal. If an appeal brief does not contain a statement of related cases, the Office will assume that there are no related cases.
Bd.R. 41.37(h) requires an appeal brief to contain a “jurisdictional statement” which would set out why an appellant believes that the Board has jurisdiction to consider the appeal. The jurisdictional statement would include a statement of (1) the statute under which the appeal is taken, (2) the date of the decision from which the appeal is taken, (3) the date the notice of appeal was filed, and (4) the date the appeal brief is being filed. If a notice of appeal or an appeal brief is filed after the time specified in the rules, the appellant also would have to indicate (1) the date an extension of time was requested, and (2) if known, the date the request was granted. A jurisdictional statement will minimize the chance that the Board will consider an appeal when the application on appeal is abandoned or a reexamination proceeding on appeal has terminated. An example of a jurisdictional statement is: “The Board has jurisdiction under 35 U.S.C. 134(a). The Examiner mailed a final rejection on August 1, 2006, setting a three-month shortened statutory period for response. The time for responding to the final rejection expired on November 1, 2006. Rule 134. A notice of appeal and a request for a one-month extension of time under Rule 136(a) was filed on November 15, 2006. The time for filing an appeal brief is two months after the filing of a notice of appeal. Bd.R. 41.37(c). The time for filing an appeal brief expired on January 16, 2007 (Monday, January 15, 2007, being a Federal holiday). The appeal brief is being filed on January 16, 2007.” If during the preparation of a jurisdictional statement, an appellant becomes aware that its application is abandoned, the appellant could then take steps to revive the application, if revival is appropriate.
Bd.R. 41.37(i) requires an appeal brief to contain a “table of contents” identifying the items listed in Bd.R. 41.37(e) along with a page reference where each item begins. In the case of a reply brief, the table of contents would
Bd.R. 41.37(j) requires an appeal brief to contain a “table of authorities.” This item would list (1) court and administrative decisions (alphabetically arranged), (2) statutes, and (3) other authorities, along with a reference to the pages of the appeal brief where each authority is cited. A similar requirement applies to a reply brief.
Bd.R. 41.37(k) is reserved.
Bd.R. 41.37(l) requires an appeal brief to indicate the “status of amendments” for all amendments filed after final rejection (e.g., entered or not entered). Examples of a status of amendments might read as follows: (1) “No amendment was filed after final rejection.” (2) “An amendment filed October 31, 2006, was
Bd.R. 41.37(m) requires an appeal brief to set out the grounds of rejection to be reviewed, including the claims subject to each rejection. Examples might read as follows: (1) “Rejection of claim 2 as being anticipated under 35 U.S.C. 102(b) over Johnson.” (2) “Rejection of claims 2-3 as being unpatentable under 35 U.S.C. 103(a) over Johnson and Young.” (3) “Rejection of claim 2 as failing to comply with the written description requirement of the first paragraph of 35 U.S.C. 112.” (4) “Rejection of claim 2 as failing to comply with the enablement requirement of the first paragraph of 35 U.S.C. 112.” (5) “Rejection of claim 3 under 35 U.S.C. 251 based on recapture.”
Bd.R. 41.37(n) requires a “statement of facts.” Appellant will set out in an objective and non-argumentative manner the material facts relevant to the rejections on appeal, preferably in numbered paragraphs. A clear, concise and complete statement of relevant facts will clarify the position of an appellant on dispositive issues and assist the examiner in reconsidering the patentability of the rejected claims.
A significant requirement of Bd.R. 41.37(n) is that a fact would be required to be supported by a reference to the page number of the Record. Where appropriate, the citation should also be to a specific line or paragraph and to a drawing figure and element number of the Record (
Likewise, too often an appellant will not support a statement of fact in an appeal brief by an explicit reference to the evidence. A statement of fact based on the specification would be proper if supported by a reference to page and line or paragraph (and where appropriate also to drawing figure and element number). A statement of fact based on a patent would be proper if it is supported by a reference to a column and line (and where appropriate also to a drawing figure and element number). A statement of fact based on an affidavit would be proper if supported by a reference to a page and line number or to a page and paragraph number of the affidavit; the affidavit would appear in the evidence section (Bd.R. 41.37(t)) in the appendix.
A specific citation is required because an appellant should not expect the examiner or the Board to search the record to determine whether a statement of fact is supported by the evidence. Bd.R. 41.37(n) is consistent with the approaches taken by federal courts concerning appeal brief practice and other briefing practice: (1)
Bd.R. 41.37(o) requires that an appeal brief contain an argument comprising an analysis explaining, as to each rejection to be reviewed, why the appellant believes the examiner erred. The analysis would have to address all points made by the examiner with which the appellant disagrees. The presentation of a concise, but comprehensive, argument in response to the final rejection (1) will efficiently frame any dispute between the appellant and the examiner not only for the benefit of the Board but also for consideration by the examiner and Office reviewers (appeal conferees) and (2) provide the best opportunity for resolution of the dispute without the necessity of proceeding with the appeal.
Where an argument has previously been presented to the examiner, the analysis would have to identify where any argument being made to the Board was made in the first instance to the examiner. Where an argument has not previously been made to the examiner, an appellant would be required to say so in the appeal brief so that the examiner would know that the argument is new. An example where an argument might not have been previously made to an examiner might occur under the following fact scenario. A first Office action rejects claims over Reference A. Applicant amends the
Bd.R. 41.37(o)(1) provides that when a ground of rejection applies to two or more claims, the claims may be argued separately (claims are considered by appellant as separately patentable) or as a group (claims stand or fall together). When two or more claims subject to the same ground of rejection are argued as a group, the Board may select a single claim from the group of claims that are argued together and decide the appeal on the basis of the selected claim alone with respect to the group of claims as to the ground of rejection. Any doubt as to whether an election has been made would be resolved against the appellant and the claims would be deemed to have been argued as a group.
For each claim argued separately, a subheading identifying the claim by number would be required. The requirement for a separate subheading in the appeal brief is to minimize any chance the examiner or the Board will overlook an argument directed to the separate patentability of a particular claim. In the past, appellants have been confused about whether a statement of what a claim covers is sufficient to constitute an argument that the claim is separately patentable. It is not. A statement that a claim contains a limitation not present in another claim would not in and of itself be sufficient to satisfy the requirement of Bd.R. 41.37(o)(1) that a separate argument be made.
Unless an appellant plans to argue the separate patentability of a claim, the appellant should not discuss or refer to the claim in the argument section of the appeal brief. A copy of the claims will be before the Board in the “claims section” (Bd.R. 41.37(p)). In an application containing claims 1-3 where the examiner has made (1) a § 102 rejection or (2) a § 103 rejection or (3) both a § 102 and § 103 rejection, examples of a proper statement of “claims standing or falling together” would be as follows: (1) “With respect to the rejection under § 102, claims 1-3 stand or fall together.” (2) “With respect to the rejection under § 103, claims 1-2 stand or fall together; claim 3 is believed to be separately patentable.” (3) “With respect to the rejection under § 102, claims 1-2 stand or fall together; claim 3 is believed to be separately patentable. With respect to the rejection under § 103, the claims stand or fall together.”
Bd.R. 41.37(o)(2) provides that the Board would only consider arguments that (1) are presented in the argument section of the appeal brief and (2) address claims set out in the claim support and drawing analysis section in the appendix. Appellant would waive all arguments which could have been, but were not, addressed in the argument section of the appeal brief. A first example would be where Argument 1 and Argument 2 are presented in response to a final rejection, but only Argument 1 is presented in the appeal brief. Only Argument 1 would be considered. Argument 2 would be waived. A second example would be where an applicant presents an affidavit under Rule 131 or Rule 132 to the examiner, but does not rely on the affidavit in the argument section of the appeal brief. The Board would not consider the affidavit in deciding the appeal.
Bd.R. 41.37(o)(3) requires that when responding to points made in the final rejection, the appeal brief shall specifically (1) identify each point made by the examiner and (2) indicate where appellant previously responded to each point or state that appellant has not previously responded to the point. In supporting any argument, the appellant shall refer to a page and, where appropriate, a line or paragraph, of the Record. Examples of argument formats that are acceptable under Bd.R. 41.37(o)(3) follow.
In the case where an argument had been previously presented to the examiner, the following format is acceptable under Bd.R. 41.37(o)(3). “The examiner states that Reference A teaches element B. Final Rejection mailed [insert date], page x, lines y-z. In response, appellant previously pointed out to the examiner why the examiner is believed to have erred. Amendment filed [enter date], pages 8-9. The response is [concisely state the response].” A similar format has been successfully used for some years in oppositions and replies filed in interference cases.
Alternatively, in the case where an argument has not been previously made to the examiner, the following format would be acceptable under Bd.R. 41.37(o)(3). “In response to the examiner's reliance on Reference C for the first time in the final rejection (page 4), appellant's response includes a new argument which has not been previously presented to the examiner. The response is [concisely state the response].” Use of this format will minimize any chance that the examiner will overlook an argument when preparing the examiner's answer.
Bd.R. 41.37(p) would require an appeal brief to contain a “claims section” in the appendix which would consist of an accurate clean copy in numerical order of all claims pending in the application or reexamination proceeding on appeal. The claims section in the appendix would include all pending claims, not just those under rejection. The status of each claim would have to be indicated, (e.g., 1 (rejected), 2 (withdrawn), 3 (objected to), 4 (cancelled), and 5 (allowed)).
Bd.R. 41.37(q) is reserved.
Bd.R. 41.37(r) requires an appeal brief to contain a “claim support and drawing analysis section.”
The claim support portion of Bd.R. 41.37(r) replaces Rule 41.37(c)(1)(v) which required a concise explanation of the subject matter defined in each of the independent claims on appeal. The claim support section, for each independent claim involved in the appeal and each dependent claim argued separately (
One significant problem faced by the Board under Rule 41.37(c)(1)(v) occurs when the language of a claim does not have direct antecedent language in the specification. In order for the Board to understand the scope of a claim or the meaning of a term in the claim, the Board primarily relies on the specification. Moreover, in practice before the Office, a claim is given its broadest reasonable construction consistent with the specification. However, when the language of the claim does not find correspondence in the specification, as filed, often it is difficult to determine the meaning of a particular word in a claim or to give the claim its broadest reasonable interpretation. The claim support requirement will give the examiner and the Board the appellant's view on where the claim is supported by the application, as filed. The requirement is expected to significantly improve the efficiency of the Board's handling of appeals.
The “claims support and drawing analysis section” also requires for each independent claim on appeal and each dependent claim argued separately (
Bd.R. 41.37(s) requires an appeal brief to contain a “means or step plus function analysis section.” The means or step plus function analysis section replaces the requirement of Rule 41.37(c)(1)(v) relating to identification of structure, material or acts for means or step plus function claim limitations contained in appealed claims. Under Bd.R. 41.37(s), the means or step plus function analysis section would include each independent claim and each dependent claim argued separately (
The Office is requiring a particular format for the means or step plus function analysis section to avoid the confusion that arises from the variety of ways appellants employ under current practice in attempting to comply with the requirements of Rule 41.37(c)(1)(v). A means or step plus function analysis essentially tracking Bd.R. 41.37(s) has been used in interference cases since 1998 and has been helpful in determining the scope of claims involved.
Bd.R. 41.37(t) would require an appeal brief to contain an “evidence section” in the appendix. The evidence section essentially continues the practice under Rule 41.37(c)(1)(ix). The evidence section would include (1) table of contents, (2) affidavits and declarations upon which the appellant relied before the examiner, (3) other evidence upon which the appellant relied before the examiner, and (4) evidence relied upon by the appellant and admitted into the file pursuant to Bd.R. 41.33(d).
Documents in the evidence appendix would not have to be reformatted to comply with format requirements of the appeal brief. However, the affidavits, declarations and evidence required by Bd.R 41.37(t) which is otherwise mentioned in the appeal brief, but which does not appear in the evidence section will not be considered. Rule 41.37(c)(1)(ix) has a similar provision, but appellants have not attached the evidence appendix required by that rule. Appellants will now be on notice of the consequence of failing to comply with Bd.R. 41.37(t).
If the examiner believes that other material should be included in the evidence section, the examiner would be able to attach that evidence to the examiner's answer. Pursuant to Bd.R. 41.37(v)(1), all pages of an appeal brief or a reply brief (including appendices to those briefs) will be consecutively numbered beginning with page 1.
Bd.R. 41.37(u) requires an appeal brief to contain a “related cases section” in the appendix. The related cases section consists of copies of orders and opinions required to be cited pursuant to Bd.R. 41.37(g).
Bd.R. 41.37(v) requires an appeal brief to be presented in a particular format. The appeal brief would have to comply with the format of Rule 52 as well as with other requirements set out in Bd.R. 41.37(v)(1), (2) and (4) through (6).
Bd.R. 41.37(v)(1) requires that the pages of an appeal brief, including all sections in the appendix, be consecutively numbered using Arabic numerals beginning with the first page of the appeal brief, which would be numbered page 1. This practice would prevent (1) re-starting numbering with each section in the appendix or (2) using Roman numeral page numbers, e.g., I, II, V, etc., or page numbers with letters, e.g., “a”, “b”, “c”, “i”, “ii”, etc. If an appellant chooses to number the lines, line numbering may be within the left margin. Line numbering has been used for some time in interference cases and has been found to be useful when making reference in oppositions, replies, and opinions of the Board.
Bd.R. 41.37(v)(2) would require that text in an appeal brief would be double spaced except in headings, tables of contents, tables of authorities, signature blocks and certificates of service. Block quotations would be indented, but could be presented in double spaced or space and a half format. Footnotes, which are discouraged, would be double spaced.
Bd.R. 41.37(v)(3) is reserved.
Bd.R. 41.37(v)(4) requires that the font size be 14 point, including the font for block quotations and footnotes.
Bd.R. 41.37(v)(5) provides that an appeal brief may not exceed 30 pages, excluding any (1) statement of the real party in interest, (2) statement of related cases, (3) jurisdictional statement, (4) table of contents, (5) table of authorities, (6) status of amendments, (7) signature block and (8) appendix. To give meaning to the 30-page limitation, an appeal brief would not be permitted to incorporate by reference arguments from other papers in the evidence appendices or from any other source. The prohibition against incorporation by reference is necessary to prevent an appellant from adding to the length of an appeal brief.
A request to exceed the 30-page limit would be made by petition under Bd.R. 41.3 at least ten calendar days prior to the date an appeal brief is due.
Bd.R. 41.37(v)(6) requires a signature block which would identify the appellant or appellant's representative, as appropriate, and a mailing address, telephone number, fax number and e-mail address.
Bd.R. 41.39(a) provides that within such time and manner as may be directed by the Director and if the examiner determines that the appeal should go forward, the examiner shall enter an examiner's answer responding to the appeal brief. The specific requirements of what would be required in an examiner's answer would appear in the Manual of Patent Examining Procedure.
Bd.R. 41.39(b) provides that a new ground of rejection can no longer be made in the examiner's answer.
Generally, a new ground of rejection in an Examiner's Answer occurs when an applicant has not had a fair opportunity in the appeal brief to react to the “thrust of the rejection” made in the final rejection.
Bd.R. 41.41(a) provides that an appellant may file a single reply brief responding to the examiner's answer. On too many occasions, appellants have filed a first reply brief and thereafter a second reply brief. Only one reply brief is authorized under Bd.R. 41.41(a). A second reply brief will not be considered.
Bd.R. 41.41(b) provides that the time for filing a reply brief would be within two months of the date the examiner's answer is mailed.
Bd.R. 41.41(c) provides that a request for an extension of time shall be presented as a petition under Bd.R. 41.3(a) and (c). A decision on the petition shall be governed by Bd.R. 41.4(a) of this part. The provisions of Rule 136(a) would no longer apply to extensions of time to file a reply brief.
Bd.R. 41.41(d) provides that a reply brief shall be limited to responding to points made in the examiner's answer. Except as otherwise set out in the rules, the form and content of a reply brief would be governed by the requirements for an appeal brief as set out in Bd.R. 41.37. A reply brief would not be able to exceed 20 pages, excluding any (1) table of contents, (2) table of authorities, and (3) signature block. A reply brief would be required to contain, under appropriate headings and in the order indicated, the following items: (1) Table of contents, (2) table of authorities, (3) statement of additional facts, and (4) argument.
Bd.R. 41.41(e) is reserved.
Bd.R. 41.41(f) would require a statement of additional facts that appellant believes are necessary to respond to points raised in the examiner's answer. When there is a statement of additional facts, and the appellant has elected to number the facts in the appeal brief, any numbering of facts in the reply brief should start with the number following the last number in the appeal brief. For example, if Facts 1-10 are set out in the appeal brief and a statement of additional facts is required with a reply brief, the statement of additional facts in the reply brief should start with Fact 11.
Bd.R. 41.41(g) requires that an argument made in the reply brief be limited to responding to points made in the examiner's answer. Any argument raised in a reply brief which is not
Bd.R. 41.41(h) is reserved.
Bd.R. 41.41(i) provides that an amendment or new evidence may not accompany a reply brief. The Office has found that appellants continue to attempt to file amendments and evidence with reply briefs. If an appellant, after reviewing the examiner's answer, believes that an amendment is appropriate, the appellant may file a continuing application or a request for continued examination or, in the case of a reexamination proceeding, ask that the proceeding be reopened.
Bd.R. 41.43 is reserved. An examiner will no longer be responding to a reply brief.
Bd.R. 41.44 is reserved. A supplemental reply brief is no longer authorized because the examiner will no longer be filing a response to a reply brief.
Bd.R. 41.47(a) provides that if the appellant desires an oral hearing, appellant must file, as a separate paper, a written request captioned: “REQUEST FOR ORAL HEARING.”
Bd.R. 41.47(b) provides that a request for oral hearing shall be accompanied by the fee required by § 41.20(b)(3).
Bd.R. 41.47(c) provides that the time for filing a request for an oral hearing would be within two months from the date the examiner's answer is mailed.
Bd.R. 41.47(d) provides that a request for an extension of time to request an oral hearing would have to be presented as a petition as specified in Bd.R. 41.3(a) and (c). A decision on the petition shall be governed by Bd.R. 41.4(a).
Bd.R. 41.47(e) provides that if an oral hearing is properly requested, a date for the oral hearing would be set.
Bd.R. 41.47(f) provides that if an oral hearing is set, then within such time as the Board may order, appellant shall confirm attendance at the oral hearing. Failure to timely confirm attendance would be taken as a waiver of any request for an oral hearing.
Bd.R. 41.47(g) provides that at the time appellant confirms attendance at the oral hearing, appellant would be required to supply a list of technical terms and other unusual words which can be provided to any individual transcribing an oral hearing. The current practice of the Board is to transcribe all oral arguments. A list of technical terms provided by appellant should improve the accuracy of any transcript.
Bd.R. 41.47(h) provides that unless otherwise ordered by the Board, argument on behalf of appellant at an oral hearing would be limited to 20 minutes.
Bd.R. 41.47(i) provides that at oral hearing only the Record will be considered. No additional evidence may be offered to the Board in support of the appeal. Any argument not presented in a brief cannot be made at the oral hearing.
Bd.R. 41.47(j) provides that notwithstanding Bd.R. 41.47(i), an appellant could rely on and call the Board's attention to a recent court or Board opinion which could have an effect on the manner in which the appeal is decided.
Bd.R. 41.47(k) provides that visual aids may be used at an oral hearing. However, visual aids must be limited to copies of documents or artifacts in the Record or a model or exhibit presented for demonstration purposes during an interview with the examiner. When an appellant seeks to use a visual aid, one copy of each visual aid (photograph in the case of an artifact, a model or an exhibit) should be provided for each judge and one copy to be added to the Record.
Bd.R. 41.47(l) provides that failure of an appellant to attend an oral hearing would be treated as a waiver of the oral hearing. Over the years, the Board has become concerned with the large number of requests for postponements. In some cases, multiple requests in a single appeal are submitted for postponement of an oral hearing. Apart from the fact that a postponement can lead to large patent term adjustments, efficiency dictates that the Board be able to set an oral hearing schedule with an expectation that in a large majority of the cases the oral hearing will timely occur or the appellant will waive oral hearing. The Board will continue to handle requests for postponement of oral hearings on an
Bd.R. 41.50(a) provides that the Board may affirm or reverse a decision of the examiner in whole or in part on the grounds and on the claims specified by the examiner. Bd.R. 41.50(a) continues a long-standing practice that an affirmance of a rejection of a claim on any of the grounds specified constitutes a general affirmance of the decision of the examiner on that claim, except as to any ground specifically reversed.
Bd.R. 41.50(b) provides that the Board may remand an application to the examiner. Upon entry of a remand, the Board would no longer have jurisdiction unless an appellant timely files a request for rehearing. If the request for rehearing does not result in modification of the remand, the Board would then lose jurisdiction. Upon remand, should the examiner enter an examiner's answer in response to the remand, appellant would be required to exercise one of two options to avoid abandonment of the application or termination of the reexamination proceeding. Either option would have to be exercised within two months from the date of any examiner's answer mailed in response to the remand.
Bd.R. 41.50(b)(1) specifies a first option and provides that appellant could request that prosecution be reopened before the examiner by filing a reply under Rule 111, with or without amendment or submission of evidence. Any amendment or evidence would have to be relevant to the issues set forth
Bd.R. 41.50(b)(2) specifies a second option and provides that appellant could request that the appeal be re-docketed. The request would have to be accompanied by a reply brief as set forth in Bd.R. 41.41. An amendment or evidence could not accompany the reply brief. A reply brief that is accompanied by an amendment or evidence would be treated as a request to reopen prosecution pursuant to Bd.R. 41.50(b)(1).
Bd.R. 41.50(c) provides that a remand is not a final decision. Following proceedings on remand, and with respect to affirmed rejections and claims not involved in the remand, an appellant could request the Board to enter a final decision so that the appellant could then seek judicial review as to those rejections and claims. Only a final decision of the Board is subject to judicial review.
Bd.R. 41.50(d) provides that, should the Board have knowledge of a basis not involved in the appeal for rejecting a pending claim, the Board may enter a new ground of rejection. The pending claim could be a claim not rejected by the examiner. A new ground of rejection would not be considered final for purposes of judicial review. A new ground of rejection is not considered a final agency action because the appellant has not explained to the Board, without amendment or new evidence, or to the Office, with an amendment or new evidence or both, why the rejection is not proper. Bd.R. 41.50(d) places an appellant under a burden to explain to the Board or the Office why a new ground of rejection is not proper before it burdens a court with judicial review. A response by an appellant may convince the Office that a new ground of rejection should be withdrawn. If the Board enters a new ground of rejection, appellant would have to exercise one of two options with respect to the new ground of rejection to avoid dismissal of the appeal as to any claim subject to the new ground of rejection. Either option would have to be exercised within two months from the date of the new ground of rejection.
Bd.R. 41.50(d)(1) specifies that a first option would be to submit an amendment of the claims subject to a new ground of rejection or new evidence relating to the new ground of rejection or both and request that the matter be reconsidered by the examiner. The proceedings would be remanded to the examiner. A new ground of rejection would be binding on the examiner unless, in the opinion of the examiner, the amendment or new evidence overcomes the new ground of rejection. In the event the examiner maintains the rejection, appellant would be able to again appeal to the Board.
Bd.R. 41.50(d)(2) specifies that a second option would be to request rehearing pursuant to Bd.R. 41.52. The request for rehearing would have to be based on the record before the Board and no new evidence or amendments would be permitted.
Bd.R. 41.50(e) continues a long-standing practice that the Board, in its opinion in support of its decision, could include a recommendation, explicitly designated as such, of how a claim on appeal may be amended to overcome a specific rejection. For the recommendation to be binding, it would have to be explicitly designated as a recommendation. For example, a conclusion or comment by the Board that a claim, notwithstanding appellant's argument, is so broad as to read on the prior art should not be taken as a recommendation that if some undefined limitation is added the claim would be patentable. When the Board makes a recommendation, appellant may file an amendment in conformity with the recommendation. An amendment in conformity with the recommendation would be deemed to overcome the specific rejection. An examiner would have authority to enter a rejection of a claim amended in conformity with a recommendation provided that the additional rejection constitutes a new ground of rejection. For example, the examiner may know of additional prior art not known to the Board that would meet the claim as amended. It is because of the possibility that an examiner may know of additional prior art that a recommendation would be expected to be a relatively rare event.
Bd.R. 41.50(f) provides that the Board could enter an order requiring appellant to brief additional issues or supply additional evidence or both if the Board believes doing so would be of assistance in reaching a decision on the appeal. Bd.R. 41.50(f) continues a practice which has been in existence since 1999.
Bd.R. 41.50(g) provides for extensions of time to respond to actions of the Board under Bd.R. 41.50(b) and (d). Bd.R. 41.50(g) provides that a request for an extension of time to respond to a request for briefing and information under Bd.R. 41.50(f) is not authorized. A request for an extension of time to respond to Board action under Bd.R. 41.50(b) and (d) would be presented as a petition under Bd.R. 41.3(a) and (c). A decision on the petition shall be governed by Bd.R. 41.4(a).
Bd.R. 41.52(a) authorizes an appellant to file a single request for rehearing. In the past, appellants have filed a second request for rehearing, in effect supplementing a first request for rehearing. Filing a second or subsequent request for rehearing is not authorized. Any second or subsequent request for rehearing will not be considered.
Bd.R. 41.52(b) provides that a request for rehearing is due within two months from the date the decision by the Board is mailed.
Bd.R. 41.52(c) provides that a request for an extension of time would have to be presented as a petition under Bd.R. 41.3(a) and (c). A decision on the petition would be governed by Bd.R. 41.4(a).
Bd.R. 41.52(d) provides that the form of a request for rehearing is governed by Bd.R. 41.37(v) except that a request for rehearing could not exceed 10 pages, excluding any table of contents, table of authorities, and signature block. A request for rehearing would have to contain, under appropriate headings and in the order indicated, the following items: (1) Table of contents, (2) table of authorities, and (3) argument.
Bd.R. 41.52(e) is reserved.
Bd.R. 41.52(f) provides that a request for rehearing shall state with particularity the points believed to have
Bd.R. 41.52(f)(1) would authorize in a first instance an appellant to respond to a new ground of rejection entered pursuant to Bd.R. 41.50(d)(2).
Bd.R. 41.52(f)(2) would authorize an appellant to rely on and call the Board's attention to a recent decision of a court or the Board that is relevant to an issue decided in the appeal. Generally, the recent court decision would be a decision of the Supreme Court or the Court of Appeals for the Federal Circuit.
Bd.R. 41.52(g) provides that an amendment or new evidence could not accompany a request for rehearing.
Bd.R. 41.52(h) provides that a decision will be rendered on a request for rehearing. The decision on rehearing would be deemed to incorporate the decision sought to be reheard except for those portions of the decision sought to be reheard specifically modified on rehearing. A decision on rehearing would be considered final for purposes of judicial review, except when otherwise noted in the decision on rehearing.
Bd.R. 41.54 provides that, after a decision by the Board and subject to appellant's right to seek judicial review, the proceeding will be returned to the examiner for such further action as may be consistent with the decision by the Board.
Bd.R. 41.56 is new and provides for sanctions. The rule is designed to put the public on notice of actions which the Office believes are detrimental to the efficient handling of
Bd.R. 41.56(a) provides that the Chief Administrative Patent Judge or an expanded panel of the Board may impose a sanction against an appellant for misconduct. Misconduct would include (1) failure to comply with an order entered in the appeal or an applicable rule, (2) advancing or maintaining a misleading or frivolous request for relief or argument or (3) engaging in dilatory tactics. A sanction would be entered by the Chief Administrative Patent Judge (for matters not before a panel) or an expanded panel of the Board (for matters before a panel). A sanction would be applied against the appellant, not against a registered practitioner. Conduct of a registered practitioner could result in a sanction against an appellant. Conduct of a registered practitioner believed to be inappropriate would be referred to the Office of Enrollment and Discipline for such action as may be appropriate.
Bd.R. 41.56(b) provides that the nature of possible sanctions includes entry of (a) an order declining to enter a docket notice, (b) an order holding certain facts to have been established in the appeal, (c) an order expunging a paper or precluding an appellant from filing a paper, (d) an order precluding an appellant from presenting or contesting a particular issue, (e) an order excluding evidence, (f) an order holding an application on appeal to be abandoned or a reexamination proceeding terminated, (g) an order dismissing an appeal, (h) an order denying an oral hearing or (i) an order terminating an oral hearing.
Whether and what sanction, if any, should be imposed against an appellant in any specific circumstance would be a discretionary action.
Several changes have been made to the rules as proposed in the notice of proposed rulemaking. Those changes follow with additions shown in [brackets] and deletions shown in {braces}. Only the paragraph of a rule where a change was made is reproduced.
§ 41.3(a), as proposed, would be revised as follows:
§ 41.4(b), as proposed, would be revised as follows:
(2) A late filing that does not result in an application becoming abandoned or a reexamination proceeding becoming terminated under §§ 1.550(d) or 1.957(b) or [limited under § 1.957] (c) of this title may be excused upon a showing of excusable neglect or a Board determination that consideration on the merits would be in the interests of justice.
§ 41.12 (a), as proposed, would be revised as follows:
Citations to authority must include:
(1)
(2)
(3)
(4)
(5)
§ 41.12(b), as proposed, would be revised as follows:
§ 41.30, as proposed, would be revised as follows:
[
§ 41.31(e), as proposed, would be revised as follows:
§ 41.33(c), as proposed, would be revised as follows:
§ 41.33(d), as proposed, would be revised as follows:
[(1)] the examiner determines that the evidence overcomes [at least one rejection] {some or all rejections} under appeal [and does not necessitate any new ground of rejection], and
[(2)] appellant shows good cause why the evidence was not earlier presented. § 41.33(e), as proposed, would be revised as follows:
§ 41.35(a), as proposed, would be revised as follows:
§ 41.35(b), as proposed, would be revised as follows:
(1) The Board mails a remand order (see § 41.50(b) or § 41.50(d)(1) of this subpart),
(2) The Board mails a final decision (see § 41.2 of this part) and judicial review is sought or the time for seeking judicial review has expired,
(3) An express abandonment is filed which complies with § 1.138 of this title, or
(4) A request for continued reexamination is filed which complies with § 1.114 of this title.] {the Board orders a remand (see § 41.50(b) or § 41.50(d)(1) of this subpart) or enters a final decision (see § 41.2 of this subpart) and judicial review is sought or the time for seeking judicial review has expired.}
§ 41.37(e), as proposed, would be revised as follows:
(1) Statement of the real party in interest [(
(2) Statement of related cases [(
(3) Jurisdictional statement [(
(4) Table of contents [(
(5) Table of authorities [(
(6) [[Reserved.]] {Status of claims.}
(7) Status of amendments [(
(8) [Grounds of rejection] {Rejections} to be reviewed (
(9) Statement of facts [(
(10) Argument [(
(11) An appendix containing a claims section [(
§ 41.37(f), as proposed, would be revised as follows:
§ 41.37(g), as proposed, would be revised as follows:
§ 41.37(h), as proposed, would be revised as follows:
§ 41.37(i), as proposed, would be revised as follows:
§ 41.37(j), as proposed, would be revised as follows:
[[Reserved.]] {
§ 41.37(m), as proposed, would be revised as follows:
[
§ 41.37(n), proposed, would be revised as follows:
§ 41.37(o), as proposed, would be revised as follows:
(1)
(2)
(3)
{(4)
{(5)
{(6)
{(7)
{(8)
§ 41.37(p), as proposed, would be revised as follows:
§ 41.37(q), as proposed, would be revised as follows:
[[Reserved.]] {
§ 41.37(r), as proposed, would be revised as follows:
[
§ 41.37(s), as proposed, would be revised as follows:
§ 41.37(t), as proposed, would be revised as follows:
(1) A table of contents.
(2) [[Reserved.]] {The Office action setting out the rejection on appeal. If the Office action incorporates by reference any other Office action, then the Office action incorporated by reference shall also appear in the evidence section.}
(3) [[Reserved.]] {All evidence relied upon by the examiner in support of the rejection on appeal (including non-patent literature and foreign application and patent documents), except the specification, any drawings, U.S. patents or published U.S. applications.}
(4) [[Reserved.]] {The relevant portion of a paper filed by the appellant before the examiner which shows that an argument being made on appeal was made in the first instance to the examiner.}
(5) [
(6) [
[(7)
§ 41.37(v), as proposed, would be revised as follows:
(1)
(2)
(3) [[Reserved.]] {
(4)
(5)
§ 41.39(b), as proposed, would be revised as follows:
[
{(1)
{(2)
§ 41.39(c), as proposed, would be revised as follows:
§ 41.41(c), as proposed, would be revised as follows:
§ 41.41(d), as proposed, would be revised as follows:
(1) Table of contents—
(2) Table of authorities—
(3) [[Reserved.]] {Statement of timeliness—
(4) Statement of [additional] facts—
(5) Argument[—
{(6) Supplemental appendix.}
§ 41.41(e), as proposed, would be revised as follows:
[[Reserved.]] {
§ 41.41(g), as proposed, would be revised as follows:
§ 41.41(h), as proposed, would be revised as follows:
[[Reserved.]] {
(1) A table of contents—
(2) The examiner's answer.
(3) All evidence upon which the examiner relied in support of the new rejection that does not already appear in the evidence section accompanying the appeal brief, except the specification, any drawings, U.S. patents and U.S. published applications.}
§ 41.43, as proposed, would be removed:
{Upon consideration of a reply brief, the examiner may withdraw a rejection and reopen prosecution or may enter a supplemental examiner's answer responding to the reply brief.}
§ 41.44(a), as proposed, would be removed:
{
§ 41.44(b), as proposed, would be removed:
{
§ 41.44(c), as proposed, would be removed:
{
§ 41.44(d), as proposed, would be removed:
{
(1) Table of contents—
(2) Table of authorities—
(3) Statement of timeliness—
(4) Argument—
§ 41.44(e), as proposed, would be removed:
{
§ 41.44(f), as proposed, would be removed:
{
§ 41.44(g), as proposed, would be removed:
{
§ 41.47(c), as proposed, would be revised as follows:
§ 41.47(i), as proposed, would be revised as follows:
§ 41.47(j), as proposed, would be revised as follows:
§ 41.47(k), as proposed, would be revised as follows:
§ 41.50(b), as proposed, would be revised as follows:
(1)
(2)
§ 41.50(d), as proposed, would be revised as follows:
(1)
(2)
§ 41.50(e), as proposed, would be revised as follows:
§ 41.50(g), as proposed, would be revised as follows:
§ 41.52(b), as proposed, would be revised as follows:
§ 41.52(c), as proposed, would be revised as follows:
§ 41.52(d), as proposed, would be revised as follows:
(1) Table of contents—
(2) Table of authorities—
(3) [[Reserved.]] {Statement of timeliness—
(4) Argument—
§ 41.52(e), as proposed, would be revised as follows:
[[Reserved.]] {
§ 41.52(f), as proposed, would be revised as follows:
(1)
(2)
§ 41.56(a), as proposed, would be revised as follows:
(1) Failure to comply with an order entered in the appeal or an applicable rule.
(2) Advancing or maintaining a misleading or frivolous request for relief or argument.
(3) Engaging in dilatory tactics.
§ 41.56(b), as proposed, would be revised as follows:
(1) An order declining to enter a docket{ing} notice.
(2) An order holding certain facts to have been established in the appeal.
(3) An order expunging a paper or precluding an appellant from filing a paper.
(4) An order precluding an appellant from presenting or contesting a particular issue.
(5) An order excluding evidence.
(6) [[Reserved.]] {An order requiring terminal disclaimer of patent term.}
(7) An order holding an application on appeal to be abandoned or a reexamination proceeding terminated.
(8) An order dismissing an appeal.
(9) An order denying an oral hearing.
(10) An order terminating an oral hearing.
Where the applicant expressly and unambiguously states * * * [an] intention to claim broadly, the claim construction issue is easier and the question becomes one of validity—whether the specification supports the full breadth of the new claims. On the other hand, where—as in this case—the patentee has not been explicit about the scope of the new claims, the case can pose interdependent problems of both claim construction and validity.
An applicant knows when an appeal brief is due and whether the appeal brief is to be filed. Bd.R. 41.37(a) advises the applicant that it should not expect a notice that proceedings on the appeal are terminated (although the Office may nevertheless issue a notice in the form of a notice of abandonment). If there are no allowed claims, then any continuing applications (35 U.S.C. 120) would have to be filed before the date the appeal brief was due. If there are allowed claims, the application on appeal continues to be a pending application. The examiner would take such steps as may be needed to advance prosecution to issue, including making a requirement for the applicant to take certain action within a period of time. Rejected claims on appeal would be cancelled since a failure to file an appeal brief constitutes a waiver of any right to those claims in the application on appeal. The rule does not affect the pending status of any application in which there is an allowed claim.
Many of the comments are based on an underlying premise that the commentator's appeal will be considered and that the requirements of the rules impose an unwarranted burden in that appeal. Absent some adjustment which permits the agency to efficiently consider and decide appeals, the premise that the commentator's appeal will be considered promptly may turn out to be incorrect; while the appeal eventually will be reached and considered, the appeal may end up in a large backlog only to be reached when time permits. The rules seek to implement procedures which will assist the Office in avoiding delays in deciding appeals. However, to avoid delays, the Office needs help from applicants taking an appeal. The rules set out the help the Office needs.
The suggestion concerning large corporate entities has merit. If a corporation has a patent department with units in New York and Colorado or a law firm has offices in Chicago and Los Angeles, the patent department and law firm could find it difficult to comply with the rule. Accordingly, the language in Proposed Bd.R. 41.37(g) “known to appellant, appellant's legal representative or assignee” has been changed to “known to any inventors, any attorneys or agents who prepared or prosecuted the application on appeal and any other person who was substantively involved in the preparation or prosecution of the application on appeal.” The changed language conforms closely to the individuals mentioned in Rule 56(c) and narrows the individuals who need to be consulted.
A prudent practitioner will always check prior to filing a notice of appeal that the notice is being timely filed. Likewise, a prudent practitioner will check prior to filing an appeal brief that the appeal brief is timely filed. The jurisdictional statement will simply memorialize the practitioner's check and will help Board personnel confirm that the application or reexamination proceeding on appeal is pending and not “abandoned” or “terminated.” In the event a check reveals that an abandonment or termination has occurred, the applicant or patent owner can take advantage of available revival remedies at an early date and avoid an unnecessary dismissal of an appeal.
The observation that a statement of facts “could be a useful innovation” has merit. A well-written statement of facts can tell a “story” in an objective manner, particularly when each statement of fact is supported by a citation to a specific portion of the evidence. Often telling the story objectively convinces the trier of fact of the merit of a position. After reading an objective concise statement of facts, it is not unusual for a trier of fact to look with anticipation for an answer. There is no reason to expect that there should be any difficulty objectively setting out facts. An example follows involving Facts 1-5:
It is true that opinions of the former Court of Customs and Patent Appeals and Federal Circuit state that the initial burden is on the PTO to establish a
If an examiner is presumed to be correct when the examiner allows a claim (and a patent issues as a result), what possible rationale would justify a presumption that the examiner is wrong when the examiner rejects a claim? It is true that an examiner has an initial burden to make out a
If an appellant believes the examiner has not satisfied the examiner's initial burden, then an appellant needs to convince the Board that there is no
A suggestion was made that placing the burden on the appellant to establish that the examiner erred is not consistent with the duties of the Board as provided by 35 U.S.C. 6. The suggestion is believed to be incorrect and overlooks similarities between an appeal to the Board and a subsequent appeal to the Federal Circuit. An
It has also been suggested that the Board is under an obligation to review a decision of the examiner
The review process is straightforward. An example and a question in a comment confirm how the process works. Suppose the examiner finally rejects claim 1 finding that reference A describes limitation Y of claim 1. Assume that the appeal brief (through a combination of a statement of facts and argument) convincingly establishes that reference A does not describe limitation Y. The comment asked what will happen. First, if the argument is convincing, the examiner may withdraw the rejection. Second, if the examiner does not withdraw the rejection and the Board agrees with the appellant, then the rejection would be set aside.
Discussion of why the examiner erred in rejecting claim 1 under § 103 over Jones.
Discussion of why the examiner erred in rejecting claim 4 under § 103 over Jones even if the examiner did not err in rejecting claim 1 over Jones. Note that when a dependent claim is separately argued, any argument should assume
Discussion of why the examiner erred in rejecting claim 1 under § 102 over Smith.
Discussion of why the examiner erred in rejecting claim 3 under § 102 over Smith even if the examiner did not err in rejecting claim 1 over Smith.
An appeal brief would not have to use the same wording used in a response to an Office action. Pointing out where an argument was previously made will permit the Board to efficiently determine the nature of any dispute between the examiner and the appellant. Appellant needs some leeway
Claim 1 (cancelled).
Claim 2 (rejected). An apparatus comprising A, B, and C.
Claim 3 (objected to). The apparatus of claim 2 further comprising D.
Claim 4 (withdrawn from consideration). A method of using an apparatus comprising A, B, and C comprising the steps of x, y, and z.
Claim 5 (allowed). An apparatus comprising A, B, C, D, and E.
Cancelled claims need not be reproduced.
The only status indicators of interest to the Board are (1) “rejected,” (2) “allowed,” (3) “withdrawn from consideration” (4) “objected to” and (5) “cancelled”. However, if an appellant desires to say “Claim 1 (original—rejected)” or “Claim 2 (amended—objected to)” or otherwise use the Rule 121(c) status indicators, there is no objection as long as one of the five status indicators listed above is set out.
An apparatus comprising (1) a first valve {Fig. 2, element 25; ¶ 0005}, (2) a second valve {Fig. 2, element 31; ¶ 0006}, (3) a tank {Fig. 3, element 8; ¶ 0008}, (4) a pipe with the first valve disposed on one end and the tank disposed on the other end {Fig. 3, element 19; ¶ 0010}, and (5) * * *.
If a paragraph of a published U.S. application is long, reference to the line or lines of the paragraph may be added,
The comment made an additional suggestion that the practice of Bd.R. 41.37(r) be required for all amendments filed during prosecution. The additional suggestion is beyond the scope of the rule making to the extent it seeks changes to the rules governing pre-appeal examination practice.
An apparatus comprising (1) a first valve, (2) a second valve, (3) a tank, (4) means for connecting the first valve to the tank {Fig. 3, element 19; ¶ 0010} and (5) * * *.
An appellant should review any proposed appeal brief to determine if it has unnecessary “boilerplate” language which does not address why an examiner is believed to have erred. After setting out the facts (Bd.R. 41.37(n)), an argument section of an appeal brief should present arguments in the following format: “On page 4, lines 5-8 of the final rejection, the examiner found that * * *. The examiner's finding is not supported by the evidence because * * *.” “On page 5, lines 10-11 of the final rejection, the examiner held that one skilled in the art would have found it obvious to combine A with B. The examiner's conclusion is erroneous because * * *.” “On page 3, lines 2-6 of the final rejection, the examiner found that * * *. The examiner's finding, while correct, is not relevant to the § 103 rejection because * * *.”
Generally while discussion to “educate” the Board on the technology involved is helpful, it should not appear in the argument. Rather, it can and should appear in the statement of facts (Bd.R. 41.37(n)), claims support and drawing analysis section (Bd.R. 41.37(r)), and the means or step plus function section (Bd.R. 41.37(s)). In the event the Board believes that it needs more information with respect to the nature of an invention, it has authority to ask for further briefing (Bd.R. 41.50(f)).
Some have suggested that the statement of facts (Bd.R. 41.37(n)) should not be included in the 25-page limit. In motions practice in interferences, there was a time when there was a page limit for motions, including a statement of facts. At the suggestion of the bar, the statement of facts was excluded from the page limit. The result has been lengthy statements of fact which often (1) include unnecessary facts, (2) are not helpful to the Board and (3) burden the opponent. The Office does not intend to repeat the failed experiment in interferences with appeal briefs.
In response to the notice of proposed rulemaking, numerous comments suggested that a 25-page limit would restrict an appellant's ability to present its case. Taking into account the analysis set out above and the number of concerns expressed, the page limit will be increased to (1) 30 pages for appeal briefs (Bd.R. 41.37(v)(5)) and (2) 20 pages for reply briefs (Bd.R. 41.41(d)). An appellant needing more pages can obtain relief by a petition under Bd.R. 41.3 which shows good cause why additional pages are needed.
The 30 pages do not include (1) any statement of the real party in interest (Bd.R. 41.37(f)), (2) statement of related cases (Bd.R. 41.37(g)), (3) jurisdictional statement (Bd.R. 41.37(h)), (4) table of contents (Bd.R. 41.37(i)), (5) table of authorities (Bd.R. 41.37(j)), (6) status of amendments (Bd.R. 41.37(l)), (7) claims section (Bd.R. 41.37(p)), (8) claims support and drawing analysis section (Bd.R. 41.37(r)), (9) means or step plus function analysis section (Bd.R. 41.37(s)), (10) evidence section (Bd.R. 41.37(t)), and (11) signature block. It should be noted that Bd.R. 41.37(k) and Bd.R. 41.37(q) have been eliminated and changed to “reserved”. Bd.R. 41.37(v)(5) has been changed to explicitly set out what is not included in the 30-page limit.
A sanction of not entering a docket notice may be appropriate where an appellant repeatedly declines to comply with procedural requirements to perfect an appeal.
An order holding certain facts to have been established or from contesting a certain issue might be appropriate where an appellant is asked (Bd.R. 41.50(f)) to brief certain matters and avoids directly answering specific questions posed by the Board.
An order expunging a paper might be entered where an appellant repeatedly fails to file a paper complying with the rules.
An order excluding evidence might be appropriate where an appellant refuses to properly file evidence or where knowingly “false” evidence is presented.
Other sanctions may be appropriate depending on the situation, including sanctions not specifically listed in Bd.R. 41.56(b). The expectation is that sanctions will rarely be necessary. On the other hand, having notice in the rules of possible sanctions can avoid arguments by someone that the Office has not given notice of its intent to take
The changes in the rules relate solely to the procedure to be followed in filing and prosecuting an
The Deputy General Counsel for General Law of the United States Patent and Trademark Office certifies to the Chief Counsel for Advocacy of the Small Business Administration that this final rulemaking, Rules of Practice Before the Board of Patent Appeals and Interferences in Ex Parte Appeals (RIN 0651-AC12), will not have a significant economic impact on a substantial number of small entities.
The United States Patent and Trademark Office (Office) is amending its rules in 37 CFR part 41 governing prosecution in ex parte appeals at the Board of Patent Appeals and Interferences (Board). There are fee changes associated with the final rules.
The changes in this final rule involve interpretive rules, or rules of agency practice and procedure, and prior notice and an opportunity for public comment are not required pursuant to 5 U.S.C. 553(b)(A) (or any other law). Because prior notice and an opportunity for public comment are not required for the changes proposed in this rule, a Regulatory Flexibility Act analysis is also not required for the changes proposed in this rule.
In response to the notice of proposed rule making, a comment was submitted that contended that a Regulatory Flexibility Act analysis is required under 5 U.S.C. 603. Because these rules are procedural, they are not required to be published for notice and comment. The Office chose, however, to publish these rules for comment prior to adoption of the final rules in order to request valuable input from the public.
The primary changes in this rule are: (1) The requirements for an appeal brief include new sections for jurisdictional statement, table of contents, table of authorities, statement of facts, new format for arguments in the appeal brief and for claim support and drawing analysis section and means or step plus function analysis section in the appendix of the appeal brief, new section for table of contents in the evidence section of the appendix, new format in 14-point font, and 30-page limit for the grounds of rejection, statement of facts, and argument sections, (2) the requirements for a reply brief include new sections for table of contents, table of authorities, statement of additional facts, new format for arguments in the reply brief, new format in 14-point font, and 20-page limit for the statement of additional facts and argument sections, (3) the requirements for a request for rehearing include new sections for table of contents, table of authorities, new format for arguments in the request for rehearing, new format in 14-point font, and 10-page limit for the argument section, (4) new grounds of rejection are no longer permitted in an examiner's answer, (5) the examiner's response to a reply brief is eliminated, (6) petitions to exceed the page limit for an appeal brief, reply brief or request for rehearing are made under Rule 41.3 which requires a $400 fee, (7) petitions for an extension of time to file a reply brief, request for oral hearing, or request for rehearing are made under Rule 41.3 which requires a $400 fee, and (8) a list of technical terms or unusual words to be provided to the transcriber at the oral hearing. The rules described in (1) through (5) and (8) will apply to all appeal briefs filed with the Board. The rules described in (6) and (7) will apply only to those applicants filing certain petitions.
Little additional cost is associated with the new appeal brief requirements.
The jurisdictional statement of the appeal brief is a highly structured, fact-based paragraph of a maximum of 5 to 6 simple sentences. It is estimated that this section would add 10 to 15 minutes to the preparation of the brief. Assuming that the jurisdictional statement is prepared by a law firm staff member at the paralegal level, at an average billing rate of $150 an hour, the added cost for preparation of the jurisdictional statement is $25 to $37.50. In some cases, however, the preparation of the jurisdictional statement will result in a substantial time and cost savings to the applicant. For instance, if in the preparation of the jurisdictional statement it becomes apparent that the application is abandoned, the applicant can take advantage of available revival remedies at an early date and avoid an unnecessary dismissal of the appeal.
The table of contents and table of authorities sections add very little additional cost to the preparation of the appeal brief. Modern word processors make the creation of a table of contents or a table of authorities fairly easy when headings are used in a document. The current rules and the proposed rules require the use of headings in the appeal brief. Assuming that virtually all applicants create their documents with a word processor, it would add 5 to 10 minutes to the preparation of the brief to insert the table of contents and table of authorities. Assuming that the table of contents and table of authorities are prepared by a law firm staff member at the paralegal level, at an average billing rate of $150 an hour, the added cost for preparation of these two tables is $12.50 to $25. It should be noted that in many appeals pending before the Board, the briefs contain a table of contents or table of authorities even though these sections are not currently required.
The statement of facts section will not add to the appeal brief preparation cost and in many cases it will be a small cost savings. While the statement of facts is a new section in the final rule, the information contained in this section is part of the argument section of appeal briefs submitted under the current rule. By separating the facts from the argument, the applicant needs only to list a fact once and refer to it in the argument. Under current practice, applicant often times repeats a fact if
Under the final rule, the argument section of the appeal brief has a new requirement for applicant to identify where an argument was made in the first instance to the examiner or state that it is a new argument. It is estimated that this requirement would add 10 minutes to the preparation of the brief. Assuming that the argument section is prepared by a law firm staff member at the attorney level, at an average billing rate of $310 an hour, the added cost for preparation of the argument section is $51.67. Compliance with this requirement should be relatively easy. An applicant can take an appeal following the second rejection of the claims by the examiner. In most cases, this will mean that the argument was made to the examiner either in response to a first Office action or in response to a second Office action, likely a final rejection. Additionally, identification of whether an argument in an appeal brief is “new” will enable senior Patent Corps personnel to evaluate the new argument and determine whether a rejection should be withdrawn. This will provide a savings to applicant in one of two ways: (1) Eliminating at an early stage appeals which should not go forward or (2) making appeals which go forward capable of prompt resolution. The identification of where an argument is made or if it is a new argument prevents arguments from being overlooked by the examiner and allows senior Patent Corps personnel to more readily assess all the arguments. If it is decided, based on the arguments in the appeal brief, that the claims are allowable, the applicant saves the time of a full appeal to the Board and waiting for a decision. The applicant also saves the possible expense of a request for oral hearing before the Board. In those appeals which are presented to the Board, the arguments in the case will be readily identifiable for the panel to review in deciding the issues. This allows the panel to be more efficient in their decision making and consequently reducing the pendency of applications at the Board. By aiding in increasing the efficiency of panel review, the applicant will reduce the time it takes to receive a Board decision.
The claim support and drawing analysis section and the means or step plus function analysis section are analogous to the current summary of the claimed subject matter section in the appeal brief. The information required for these two newly titled sections is the same as that required by the current rules. The final rule, however, is explicit as to the format to be followed in these sections. The current rule requires an explanation of the subject matter, whereas the final rule sets forth the precise format to be used in mapping claim limitations to the support and description of the limitations in the specification and drawings. Bd. R. 41.37(r) and (s). The current rule leaves the format for the explanation of the claimed subject matter open to interpretation by the applicant. Rule 41.37(c)(1)(v). The final rule provides a standardized, easy to follow format for these sections. By following the prescribed format of the final rule, the applicant will save time in not having to create their own format to explain the claimed subject matter. Moreover, the final rule format is expected to reduce the number of applications returned to the examiner because the brief is not compliant with the explanation of the claimed subject matter section of the rule. Under the current rules, it is not uncommon for a case to be returned to the examiner because of deficiencies in the summary of the claimed subject matter section of the appeal brief. When a case is returned to the examiner for correction of a non-compliant brief, the applicant must prepare and file a corrected brief. This delays the applicant's appeal and costs the applicant money to prepare a compliant brief. By following the clear, standardized format in the final rule for the claim support and drawing analysis section and means or step plus function section, applicants can prevent a return of their application on either or both of these bases. This will save the applicant the time and expense incurred for filing a corrected appeal brief. The claim support and drawing analysis section and the means or step plus function analysis section will not add cost to the appeal brief and will provide a savings to applicants in some cases.
As reasoned above, for the table of contents and table of authorities sections, the preparation of a table of contents for the evidence section of the appeal brief appendix will add about five minutes to the time for preparing the brief. Assuming that the table of contents is prepared by a law firm staff member at the paralegal level, at an average billing rate of $150 an hour, the added cost for preparation of the table of contents is $12.50.
The final rule requires the font for the appeal brief to be 14 point in size. Assuming that virtually all applicants create their documents with a word processor, no additional time or cost is incurred in the selection of a 14-point font for the document.
The final rule sets forth a 30-page limit on the combined length of grounds of rejection, statement of facts, and argument sections of the appeal brief. This limit will not have any economic impact on approximately 97% of applicants. A recent survey of appeal briefs revealed that less than 3% of appeal briefs filed exceeded 30 pages in the current grounds of rejection and argument sections.
Very little additional economic impact is associated with the new reply brief requirements.
As set forth above in the discussion of the table of contents and table of authorities in the appeal brief, the creation of these sections will add only 5 to 10 minutes to the preparation of the reply brief. Assuming that the table of contents and table of authorities are prepared by a law firm staff member at the paralegal level, at an average billing rate of $150 an hour, the added cost for preparation of the jurisdictional statement is $12.50 to $25. It should also be noted that in a recent survey of cases on appeal at the Board, only 68% of the cases contained reply briefs. This added cost applies only to cases in which a reply brief is filed.
For the reasons listed above in the discussion of the statement of facts in the appeal brief, the statement of additional facts in the reply brief will not have any economic impact on the preparation of the reply brief and in many cases the applicant will save time.
Under the final rule, the argument section of the reply brief has a new requirement that arguments be responsive to points made in the examiner's answer; otherwise the argument will not be considered and will be treated as waived. This requirement does not impose any additional economic burden on the applicant. It only makes clear what arguments in the reply brief will be considered by the Board. It saves the applicant the time and expense of preparing arguments that will not be considered.
The final rule requires the font for the reply brief to be 14 point in size. Assuming that virtually all applicants create their documents with a word processor, no additional time or cost is incurred in the selection of a 14-point font for the document.
The final rule sets forth a 20-page limit on the combined length of the statement of additional facts and
With regard to the third change, very little additional economic impact is associated with the new request for rehearing requirements.
As set forth above in the discussion of the table of contents and table of authorities in the appeal brief, the creation of these sections will add 5 to 10 minutes to the preparation of the request for rehearing. Assuming that the table of contents and table of authorities are prepared by a law firm staff member at the paralegal level, at an average billing rate of $150 an hour, the added cost for preparation of the jurisdictional statement is $12.50 to $25. It should also be noted that in Fiscal Year 2007, there were only 123 requests for rehearing of a Board decision filed at the USPTO, out of 3,485 Board decisions rendered. This added cost applies only to cases in which a request for rehearing is filed.
Under the final rule, the argument section of the request for rehearing has a new format requirement that requires the applicant to explicitly identify in the Record the point that applicant believes was misapprehended or overlooked by the Board. Under current Rule 41.52(a)(1), applicants are required to “state with particularity the points believed to have been misapprehended or overlooked by the Board.” Citation to the Record in compliance with the final rule will add 5 to 10 minutes to the preparation of a request for rehearing. Assuming that the argument section is prepared by a law firm staff member at the attorney level, at an average billing rate of $310 an hour, the added cost for preparation of the argument section is $25.83 to $51.67.
The final rule requires the font for the reply brief to be 14 point in size. Assuming that virtually all applicants create their documents with a word processor, no additional time or cost is incurred in the selection of a 14-point font for the document.
The final rule sets forth a 10-page limit for the argument section of the request for rehearing. This limit will have no economic impact on most applicants. A survey of the request for rehearing in 92 rehearing cases decided within the last year (FY 2007) revealed that only 21 requests for rehearing contained arguments exceeding 10 pages.
A savings to the applicant will result from the prohibition of new grounds of rejection in an examiner's answer. The current rules permit a new ground of rejection to be made in the examiner's answer. Rule 41.39(a)(2). In response to a new ground of rejection an applicant must request that prosecution be reopened before the examiner or file a reply brief with a request that the appeal be maintained. Rule 41.39(b). If the applicant elects to respond to the new ground of rejection by filing a reply brief, the reply brief may not be accompanied by any amendment, affidavit or other evidence. Rule 41.39(b)(2). In order to present an amendment, affidavit or other evidence, the applicant must expend additional time and resources to reopen prosecution before the examiner. Recent data from the Patent Corps reveals that in Fiscal Year 2007 (FY 2007) approximately 5% of examiner's answers written that year contained a new ground of rejection. The final rules prohibit a new ground of rejection in an examiner's answer and, thus, provide a savings to applicants in not having to prepare a response to a new ground of rejection late in the appeal process.
The final rules eliminate the requirement for an examiner's response following a reply brief. Under the current rules, examiners are required to respond to a reply brief either by filing a communication noting the reply brief or by filing a supplemental examiner's answer. Rule 41.43(a)(1). The final rules eliminate both types of examiner response to a reply brief.
The elimination of the examiner's requirement to note the reply brief allows applications on appeal to proceed directly to the Board upon filing of the reply brief, without waiting for an examiner's response. This saves the applicant valuable time in the appeal process. It also saves the applicant the expense of tracking the examiner's response to the reply brief.
The elimination of a supplemental examiner's answer in response to a reply brief also allows applications on appeal to proceed directly to the Board upon filing of the reply brief. The applicant realizes an additional savings by elimination of the supplemental examiner's answer. Current practice provides that the applicant may file another reply brief in response to a supplemental examiner's answer. In almost every appeal where a supplemental examiner's answer is provided, the applicant submits a reply brief. By eliminating the supplemental examiner's answer, it eliminates the need for applicant to respond with another reply brief. Therefore, elimination of the supplemental examiner's answer saves the applicant the cost of preparing another reply brief.
A $400 cost is incurred for applicants who petition to exceed the page limit for filing an appeal brief, reply brief or request for rehearing. The final rules permit an applicant to petition under Rule 41.3 to exceed a page limit requirement. Petitions under Rule 41.3 must be accompanied by a $400 fee. Thus, the $400 petition fee is not a new fee, but the application of the existing petition fee to a new rule. Applicants can avoid this fee by filing a brief or request for rehearing within the page limits set forth in the rules.
An additional $200 cost is incurred for applicants who petition for an extension of time to file a reply brief, request for oral hearing or request for rehearing. Under the current rules, an applicant may request an extension of time to file the above papers under Rule 1.136(b). Rule 1.136(b) requests must be accompanied by a $200 fee. The final rules still permit applicants to request such extensions of time; however, the request must be made by petition under Rule 41.3, which requires a $400 fee. Thus, the net additional cost for an extension of time is $200. Moreover, applicants can avoid this fee by filing documents within the time periods set forth in the rules.
A small additional cost is associated with the new requirement for a list of technical terms or unusual words for the transcriber at the oral hearing. It is estimated that the list would take 5 to 10 minutes or less to prepare. Assuming that the list of terms is prepared by a law firm staff member at the attorney level, at an average billing rate of $310 an hour, the added cost for preparation of the list of terms is $25.83 to $51.67. It is further assumed that this list will replace the current practice of a question and answer session with the transcriber at the end of the hearing to collect these same terms. Note that in Fiscal Year 2007, there were 965 requests for oral hearing filed at the USPTO out of 4,639 appeals received at the Board. This added cost applies only
If an applicant were to incur all the additional costs outlined above, the total would range from $778.33 to $880.01. In many cases, however, the costs will be less than $880.01 when the savings outlined for the appeal brief, reply brief, no new grounds of rejection in examiner's answer, and no examiner response to the reply brief are realized. Moreover, the additional legal costs are not significant when compared to the cost of legal fees when filing an appeal with the Board. The net additional legal services cost, minus the Office petition fees of $400 (to exceed page limit) and $200 (request for extension of time), is $178.33 to $280.01. According to the 2007 Report of the Economic Survey by the American Intellectual Property Law Association (AIPLA), page 21, the median charge in 2006 for an appeal to the Board without government fees and without oral argument was $4,000. An increase of $178.33 to $280.01, out of $4,000, represents an increase of only 4.5% to 7%. From the same 2007 AIPLA survey, the median charge in 2006 for an appeal to the Board without government fees and with oral argument was $6,500. Thus, an additional cost of $178.33 to $280.01, in a case with oral argument, represents an increase of only 2.7% to 4.3%.
These additional costs apply equally to large and small entities, but do not disproportionately impact small entities for the following reasons. In examining the additional costs associated with the final rules, the largest single additional cost is the $400 petition fee to exceed the page limit for an appeal brief, reply brief, or request for rehearing. As will be shown the potential number of small entities impacted by this fee is a very small number.
In FY 2007, the Office processed 4,808 appeal briefs filed by small entities and 18,337 appeal briefs filed by large entities. Assuming 3% of the appeal briefs filed by small entities contained sections for the grounds of rejection and argument exceeding 30 pages (see final paragraph of Appeal Brief (1) section), this provides an estimate of 144 small entities that would find it necessary to petition to exceed the appeal brief page limitation. Similarly, in FY 2007, the Office processed 1,341 reply briefs filed by small entities and 3,606 reply briefs filed by large entities. Assuming 1% of the reply briefs filed by small entities contained sections for a statement of additional facts and argument exceeding 20 pages (see final paragraph of Reply Brief (2) section), this provides an estimate of 14 small entities that would find it necessary to petition to exceed the reply brief page limitation. Finally, in FY 2007, the Office processed 33 requests for rehearing filed by small entities and 90 requests for rehearing filed by large entities. Assuming 23% of the requests filed by small entities contained argument sections exceeding 10 pages (see final paragraph of Request for Rehearing (3) section), this provides an estimate of eight small entities that would find it necessary to petition to exceed the request for rehearing page limitation. Thus, at most, the maximum number of small entities affected by the $400.00 petition fee is 166 small entities. When this number is compared to the 5,977 small entities that filed a notice of appeal with the Office in FY 2007 (21,653 notices of appeal were filed by large entities in the same period), it demonstrates that the petition fee has the potential to affect only 2.8% of the small entities filing an appeal. An effect on 2.8% of the small entities filing an appeal is not a disproportionate impact on small entities, nor is the actual number of 166 impacted small entities a substantial number.
For these reasons, the Office has concluded that the changes in the Final Rules will not have a significant economic impact on a substantial number of small entities.
This rulemaking does not contain policies with federalism implications sufficient to warrant preparation of a Federalism Assessment under Executive Order 13132 (Aug. 4, 1999).
This rulemaking has been determined to be not significant for the purpose of Executive Order 12866 (Sept. 30, 1993).
This rulemaking includes requirements for structuring information submitted to the USPTO by practitioners in order to process
The USPTO will be submitting to OMB the following items associated with this rule making for inclusion in a new collection specific to the Board of Patent Appeals and Interferences: appeal brief, petition for extension of time for filing a paper after the brief, petition to increase the page limit, reply brief and request for rehearing before the BPAI. Per the requirements of submission of an information collection request to OMB, the USPTO will publish a 60-Day
Interested persons are requested to send comments regarding this information collection, including suggestions for reducing this burden, to Kimberly Jordan, Chief Trial Administrator, Board of Patent Appeals and Interferences, United States Patent and Trademark Office, PO Box 1450, Alexandria, VA 22313-1450, (marked: Information Collection Comment) or to the Office of Information and Regulatory Affairs, OMB, 725 17th Street, NW., Washington, DC 20503, (Attn: PTO Desk Officer).
Notwithstanding any other provision of law, no person is required to respond to nor shall a person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act unless that collection of information displays a currently valid OMB control number.
Administrative practice and procedure, Inventions and patents, Lawyers.
35 U.S.C. 2(b)(2), 3(a)(2)(A), 21, 23, 32, 132, 133, 134, 135, 306, and 315.
(1) For a final Board action in an appeal or contested case, a panel of the Board.
(2) For non-final actions, a Board member or employee acting with the authority of the Board.
(a)
(b)
(1) Issues committed by statute to a panel.
(2) In pending contested cases, procedural issues. See § 41.121(a)(3) and § 41.125(c).
(b)
(2) A late filing that does not result in an application becoming abandoned or a reexamination proceeding becoming terminated under §§ 1.550(d) or 1.957(b) or limited under § 1.957(c) of this title may be excused upon a showing of excusable neglect or a Board determination that consideration on the merits would be in the interests of justice.
(c)
(1) Extensions during prosecution (
(2) Filing of a notice of appeal and an appeal brief (see §§ 41.31(c) and 41.37(c)).
(3) Seeking judicial review (
(a)
(1)
(2)
(3)
(4)
(5)
(b)
(a)
(b)
(c)
(d)
(e)
(a)
(b)
(1)
(2)
(c)
(d)
(1) The examiner determines that the evidence overcomes at least one rejection under appeal and does not necessitate any new ground of rejection, and
(2) appellant shows good cause why the evidence was not earlier presented.
(e)
(a)
(b)
(1) The Board mails a remand order (
(2) The Board mails a final decision (
(3) An express abandonment is filed which complies with § 1.138 of this title, or
(4) A request for continued examination is filed which complies with § 1.114 of this title.
(c)
(a)
(b)
(c)
(d)
(e)
(1) Statement of the real party in interest (
(2) Statement of related cases (
(3) Jurisdictional statement (
(4) Table of contents (
(5) Table of authorities (
(6) [Reserved.]
(7) Status of amendments (
(8) Grounds of rejection to be reviewed (
(9) Statement of facts (
(10) Argument (
(11) An appendix containing a claims section (
(f)
(g)
(h)
(i)
(j)
(k) [Reserved.]
(l)
(m)
(n)
(o)
(1)
(2)
(3)
(p)
(q) [Reserved.]
(r)
(s)
(t)
(1)
(2) [Reserved.]
(3) [Reserved.]
(4) [Reserved.]
(5)
(6)
(7)
(u)
(v)
(1)
(2)
(3) [Reserved.]
(4)
(5)
(6)
(a)
(b)
(a)
(b)
(c)
(d)
(1) Table of contents—
(2) Table of authorities—
(3) [Reserved.]
(4) Statement of additional facts—
(5) Argument—
(e) [Reserved.]
(f)
(g)
(h) [Reserved.]
(i)
(a)
“REQUEST FOR ORAL HEARING”.
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(a)
(b)
(1)
(2)
(c)
(d)
(1)
(2)
(e)
(f)
(g)
(a)
(b)
(c)
(d)
(1) Table of contents—
(2) Table of authorities—
(3) [Reserved.]
(4) Argument—
(e) [Reserved.]
(f)
(1)
(2)
(g)
(h)
After a decision by the Board and subject to appellant's right to seek judicial review, the application or reexamination proceeding will be returned to the jurisdiction of the examiner for such further action as may be appropriate consistent with the decision by the Board.
(a)
(1) Failure to comply with an order entered in the appeal or an applicable rule.
(2) Advancing or maintaining a misleading or frivolous request for relief or argument.
(3) Engaging in dilatory tactics.
(b)
(1) An order declining to enter a docket notice.
(2) An order holding certain facts to have been established in the appeal.
(3) An order expunging a paper or precluding an appellant from filing a paper.
(4) An order precluding an appellant from presenting or contesting a particular issue.
(5) An order excluding evidence.
(6) [Reserved.]
(7) An order holding an application on appeal to be abandoned or a reexamination proceeding terminated.
(8) An order dismissing an appeal.
(9) An order denying an oral hearing.
(10) An order terminating an oral hearing.