Section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA), Public Law 107-171 established a program for the procurement of biobased products by Federal agencies and a voluntary program for labeling of biobased products. The Food, Conservation, and Energy Act of 2008, Public Law 110-246 continues the biobased markets program and adds provisions related to the program. USDA refers to the program for the Federal procurement of biobased products and the voluntary program for labeling of biobased products, collectively, as the BioPreferred Program (Program).

In an effort to make sure the Program continues to move forward and build demand for biobased products within the Federal government and commercially, management of the Program has been transferred from Office of the Chief Economist to Departmental Administration to enhance and strengthen the Program, as well as increase resources for research and analyses of emerging global energy issues and the necessary economic analysis of biobased products (that is, market identification, comparative costs with fossil energy derived product alternatives, and supply and demand estimations).

Section 1472 of the National Agriculture Research, Extension and Teaching Policy Act of 1977, Public Law 99-113 (7 U.S.C. 3318), grants the Secretary of Agriculture the authority to enter into cooperative agreements with Federal and State agencies and private organizations, to further research, extension, or teaching programs in the food and agricultural sciences of USDA. Because this authority does not extend to the Assistant Secretary for Administration, a delegation of the Secretary's authority is necessary. This document sets forth that delegation, as well as delegations to the Assistant Secretary for Administration relating to the biobased procurement and labeling programs included in the Farm Security and Rural Investment Act of 2002.

This rule relates to internal agency management. Therefore, pursuant to 5 U.S.C. 553, notice of proposed rule making and opportunity for comment are not required, and this rule may be made effective less than 30 days after publication in the Federal Register . Further, since this rule relates to internal agency management, it is exempt from the provisions of Executive Order 12988 and Executive Order 12866, amended by Executive Order 13258. In addition, this action is not a rule as defined by the Regulatory Flexibility Act, (5 U.S.C. 601 et seq. ), and thus, is exempt from the provisions of that Act. Finally, this action is not a rule as defined in the Small Business Regulatory Fairness Enforcement Act, (5 U.S.C. 801 et seq. ), and thus does not require review by Congress.

One of the FDIC's fundamental goals is to ensure that depositors and insured depository institution employees understand the FDIC's deposit insurance rules. That goal is essential in carrying out the FDIC's combined mission of helping to maintain public confidence and stability in the United States banking system and protecting insured depositors.

Despite the FDIC's efforts to simplify deposit insurance rules in recent years, there is still significant public and industry confusion about the insurance coverage of revocable trust accounts—particularly living trust accounts, one of the two types of revocable trust accounts. This continuing confusion about the insurance coverage of revocable trust accounts is evidenced by the tens of thousands of deposit insurance inquiries the FDIC has received following recent depository institution failures.

There are two types of revocable trust accounts insured under the FDIC's coverage rules: Informal trust accounts and formal trust accounts. Informal trust accounts are comprised simply of a signature card on which the owner designates the beneficiaries to whom the funds in the account will pass upon the owner's death. These are the most common type of revocable trust accounts and generally are referred to as “payable-on-death” (“POD”) accounts or in-trust-for (“ITF”) accounts or Totten Trust accounts. For purposes of this rulemaking, we will refer to all informal trust accounts as POD accounts.

The other type of revocable trust accounts are accounts established in connection with formal revocable trusts. Formal revocable trusts are trusts created for estate planning purposes. They are often referred to as: living trusts, family trusts, marital trusts, survivor's trusts, by-pass trusts, generation-skipping trusts, AB trusts or special needs trusts. For purposes of this rulemaking, we will refer to all formal revocable trusts as living trusts. Like an informal revocable trust, a living trust is a trust created by an owner (also known as a grantor or settlor) over which the owner retains control during his or her lifetime. Upon the owner's death, the trust generally becomes irrevocable. A living trust is an increasingly popular estate planning tool. Like a POD account, a deposit account held in connection with a living trust account at an FDIC-insured institution is insured under the FDIC's coverage rules for revocable trust accounts.

The FDIC's rules provide that all revocable trust accounts (both POD accounts and living trust accounts) are insured up to $100,000 per “qualifying beneficiary” designated by the owner of the account. 1 If there are multiple owners of a revocable trust account, coverage is available separately for each owner, per qualifying beneficiary as to each owner. Qualifying beneficiaries are defined as the owner's spouse, children, grandchildren, parents and siblings. 2

The per-qualifying beneficiary coverage available on revocable trust accounts is separate from the insurance coverage afforded to depositors in connection with other accounts they own in other ownership capacities at the same insured institution. That means, for example, if an individual has at the same insured depository institution a single-ownership account with a balance of $100,000 and a POD account (naming at least one qualifying beneficiary) with a balance of $100,000, both accounts would be insured separately for a combined coverage amount of $200,000.

Under our current rules, separate, per-beneficiary insurance coverage is available for revocable trust accounts only if the account satisfies certain requirements. First, the title of the account must include a term such as POD or ITF or family trust (or similar expression or acronym), evidencing an intent that the funds shall belong to the designated beneficiaries upon the owner's death. Second, as explained above, each beneficiary must be a qualifying beneficiary. And third, for POD accounts, the beneficiaries must be specifically named in the deposit account records of the depository institution. Under the current rules, the beneficiaries of a living trust need not be indicated in the institution's records. 3

If a revocable trust account owner names one or more non-qualifying beneficiaries in the account (or trust), the funds corresponding to those non-qualifying beneficiaries are considered the single-ownership funds of the depositor and insured under that category of coverage. For example, assume a depositor owns a POD account (and no other accounts at the same institution) naming his spouse and a friend as beneficiaries. The account has a balance of $200,000. The coverage would be $100,000 under the revocable trust coverage rules because he has named one qualifying beneficiary, and $100,000 would be insured under the single-ownership coverage rules because the funds attributable to the non-qualifying beneficiary (the friend) would be considered the owner's single-ownership funds and thus insured under that category of ownership. If the account owner in this example also has a single-ownership account with a balance of, say, $50,000, then the $100,000 (attributable to the non-qualifying beneficiary) from his POD account would be added to the funds held in the single-ownership account and be insured to a limit of $100,000. Thus, $50,000 would be uninsured.

As explained above, both POD accounts and living trust accounts are types of revocable trust accounts insured under the revocable trust account category in the FDIC's coverage rules. Consequently, all funds that a depositor holds in both living trust accounts and POD accounts naming the same beneficiaries are aggregated for insurance purposes and insured to the applicable coverage limits. For example, assume a depositor has a living trust account for $200,000 in connection with a living trust naming his children, A and B. If the depositor also has a $200,000 POD account naming A and B, the combined coverage on the two accounts would be $200,000—not $200,000 per account.

Prior to the late 1980s, when living trusts began to emerge, the coverage rules for revocable trust accounts were easy to understand and apply. Revocable trusts were almost exclusively in the form of POD accounts, and the coverage was determined based on the number of qualifying beneficiaries named on the signature card used to establish the account. In fact, the opening of the POD account (solely through the completion of the signature card) resulted in the formation of the trust.

In 1994, as living trusts became increasingly popular, the FDIC published guidelines on the insurance coverage of living trust accounts. 4 The guidelines addressed how the FDIC would insure living trust accounts amid the complicating factor that many living trusts contained clauses tying a beneficiary's entitlement to the trust assets to the satisfaction of specified conditions, known as defeating contingencies. Despite the issuance of these guidelines, bankers and depositors continued to be confused and uncertain about the insurance coverage of living trust accounts. This confusion and uncertainty was understandable, given the complex legal theory and analysis needed to determine the coverage of living trust accounts involving defeating contingencies. In 2004, the FDIC simplified the rules for living trust accounts by amending the regulations to provide coverage for the owners of living trust accounts, irrespective of defeating contingencies in the trust. The FDIC's objectives behind this rulemaking were to simplify the existing rules and to provide coverage for living trust accounts similar to POD account coverage. 5

Despite the FDIC's past efforts to simplify and clarify the coverage rules for living trust accounts, confusion and uncertainty continue to exist among bankers and depositors. One reason for this situation is that living trusts are becoming increasingly complex. A typical living trust is a trust with two grantors, husband and wife, who have full access to the trust assets during their lifetimes, with the trust providing for a life estate interest for the surviving spouse upon the death of the first spouse and then providing for a “family trust” (in the form of an irrevocable trust) for designated family members upon the death of the second spouse. It is also common for living trusts to provide for lump-sum payments to designated beneficiaries. The FDIC's coverage rules for living trust accounts, as the result of the 2004 revisions, in theory are fairly straightforward, but applying them to complex living trusts has resulted in significant continuing confusion and uncertainty among bankers and depositors. Also, upon an institution failure, because of the complexities of living trusts, FDIC determinations on the coverage available to owners of living trust accounts are often time consuming; thus, depositors are sometimes delayed in receiving their insured funds.

The FDIC's goals in this rulemaking are twofold. One is to make the coverage rules for revocable trust accounts easy to understand and easy to apply (in determining the applicable coverage amount), without decreasing coverage currently available for revocable trust account owners. The other is to retain reasonable limitations on coverage levels for revocable trust account owners. Under the new rules, a trust account owner with up to $500,000 in revocable trust accounts at one FDIC-insured institution is insured up to $100,000  6 per beneficiary. (This is the rule that will apply to the vast majority of revocable trust account owners.) Revocable trust account owners with more than $500,000 and more than five different beneficiaries named in the trust(s) are insured for the greater of either: $500,000 or the aggregate amount of all the beneficiaries' interests in the trust(s), limited to $100,000 per beneficiary.

Under the interim rule, coverage is based on the existence of any beneficiary named in the revocable trust, as long as the beneficiary is a natural person, or a charity or other non-profit organization. 7 As discussed below, under the interim rule the concept of “qualifying beneficiaries” is eliminated. For an account owner with combined revocable trust account balances of $500,000  8 or less, the maximum available coverage would be determined simply by multiplying the number of beneficiaries by $100,000.

A living trust account with a balance of $400,000, for example, would be insured for up to $400,000 as long as there are at least four beneficiaries named in the trust. 9 Different proportional ownership interests of the beneficiaries in the trust assets would not affect the deposit insurance coverage. So, in this example, the maximum coverage would be $400,000 even if the trust provided that beneficiaries A and B are entitled to twenty percent each of the trust assets and beneficiaries C and D are entitled to thirty percent each of the trust assets. As under the current rules, however, a depositor would receive a combined maximum coverage amount of $100,000 for the same beneficiary named in more than one revocable trust account he or she owns at one insured institution. 10

As explained above, currently revocable trust account coverage is based, in large part, on the number of qualifying beneficiaries named in the trust. Qualifying beneficiaries are defined as the revocable trust account owner's spouse, children, grandchildren, parents and siblings. 11 Prior to 1999, the definition included only the owner's spouse, children and grandchildren. The FDIC's rationale in 1999 for expanding the definition of qualifying beneficiaries to include the account owner's parents and siblings was to recognize other family members likely to be named in a person's revocable trust. The objective was to prevent depositors from losing money in an institution failure because of their misunderstanding of the coverage rules for revocable trust accounts. 12

Before and since the 1999 expansion of the definition of qualifying beneficiaries, depositors, consumer groups and bankers have questioned the fairness of limiting the coverage on revocable trust accounts to the naming of certain beneficiaries. Many have argued that the FDIC should expand the definition of qualifying beneficiaries to include, among others, an account holder's nieces and nephew, in-laws, great-grandchildren, cousins, friends and charities. Historically, the FDIC's response to such complaints has been that there must be a reasonable limitation of the amount of coverage available on revocable trust accounts; otherwise, there would be potentially unlimited coverage under this account category. Hence, the FDIC has been reluctant to amend the rules to provide coverage based on any beneficiary(ies) named in a revocable trust. Under the interim rule, however, the FDIC believes that it can achieve greater fairness under the revocable trust rules by basing coverage on the naming of any beneficiary in a revocable trust, but concurrently imposing coverage qualifications (discussed below) on accounts over $500,000.

In addition to addressing the fairness issue, eliminating the concept of “qualifying beneficiaries” makes the coverage rules easier to understand. Depositors and bankers no longer need to know who is a qualifying beneficiary and who is not. Also, this revision will obviate the need for FDIC claims agents, upon an institution's failure, to confirm that a beneficiary named in a revocable trust account is a qualifying beneficiary. Thus, under the interim rule, the FDIC anticipates being able to make quicker deposit insurance determinations on revocable trust accounts at institution failures.

One of the most confusing and complex aspects of determining revocable trust account coverage under the current rules is having to discern and consider unequal beneficial interests in revocable trusts. This issue typically arises in the context of a living trust that, for example, provides either varying lump-sum payments for designated beneficiaries or different percentage interests in trust assets to certain beneficiaries, or different remainder interests in the assets to the same or other beneficiaries. The method for determining coverage in some situations involving unequal beneficial interests necessitates the formulation and solving of simultaneous equations. Consumers and bankers alike find applying the current revocable trust account rules to complicated living trusts, especially ones involving unequal beneficial interests, far too complex. The FDIC agrees. Therefore, a key component of the interim rule is the ability to determine coverage available to account owners without regard to unequal interests of the beneficiaries named in the revocable trust(s). The FDIC believes this rule change, coupled with the recognition of all beneficiaries, will make the revocable trust account rules simpler and more transparent.

Based on our experience at recent institution failures, the FDIC believes that the vast majority of revocable trust account owners have less than $500,000 in revocable trust accounts at one FDIC-insured institution. Thus, under the interim rule coverage for an account owner's revocable trust accounts will be determined simply by multiplying the number of different beneficiaries named in the trust(s) by $100,000.

In order to retain reasonable limits on the maximum coverage available to revocable trust account owners and also to retain the coverage available to revocable trust account owners under the current coverage rules, the interim rule provides special treatment for depositors with revocable trust accounts over $500,000 naming more than five beneficiaries. Under the interim rule, revocable trust account owners with more than $500,000 and more than five beneficiaries named in the trusts are insured for the greater of either: $500,000 or the aggregate amount of all the beneficiaries' interests in the trusts(s), limited to $100,000 per beneficiary. This coverage is no less than the coverage afforded to such account owners under the current rules, particularly because under the interim rule the coverage is based on the number of beneficiaries, not the number of qualifying beneficiaries. Also, as discussed below, under the interim rule life-estate interest holders are deemed to have a $100,000 interest in the trust assets.

For example, assume an individual has a living trust account. The living trust provides a life estate interest for that individual's spouse, $15,000 for his college, $5,000 for each of three brothers and the remaining amount to his friend. The balance in the account is $600,000. Here the account balance exceeds $500,000 and the number of beneficiaries is more than five. Hence, under the interim rule, the maximum coverage would be the greater of either: $500,000 or the aggregate beneficial interests of all the beneficiaries (up to a limit of $100,000 per beneficiary). The beneficial interests are: $100,000 for the spouse's life estate interest, $15,000 for the college, $5,000 for each brother (totaling $15,000), and $100,000 for the friend (because of the per-beneficiary limitation of $100,000). The total beneficial interests, thus, would be $230,000. Hence, the maximum coverage afforded to the account owner would be $500,000, the greater of $500,000 or $230,000.

The FDIC believes that basing the coverage of trust accounts over $500,000 (with more than five different beneficiaries in the trust(s)) on the ownership interest of each beneficiary named in the applicable trust(s) would prevent the potential of providing unlimited coverage with respect to revocable trust accounts. Without such a limitation, an account owner could name a limitless number of beneficiaries each with a nominal interest in the trust and obtain coverage up to $100,000 for naming each such beneficiary. For example, a revocable trust account held in connection with a trust entitling one beneficiary to $1 million and entitling each of nine other beneficiaries to $1 would be insured for $1 million, without the limitation imposed under the interim rule.

Another complicating factor in determining the coverage for living trust accounts is determining the value of life estate interests. A life estate interest usually means the life-estate beneficiary is entitled to the income on the trust assets during his or her lifetime. A large percentage of living trusts provide a life estate interest for one or more beneficiaries. The most typical situation is where a married person creates a trust providing a life estate interest for his or her surviving spouse and a remainder interest for their children. The FDIC's current rules provide that, in such situations, each life-estate holder and each remainder-man (also known as residuary beneficiaries) is deemed to have an equal interest in the trust assets for deposit insurance purposes. 13 This rule has proven difficult to apply, especially where the living trust provides for lump-sum gifts for certain beneficiaries, life estate interests for others and different percentage interests for the remainder-men, who may be the same as or different from the other beneficiaries. In order to simplify the coverage rules, the interim rule revises the current valuation method for life estate interests by deeming each such interest to be $100,000, for purposes of determining deposit insurance coverage. The example above (involving a trust providing for a spousal life estate interest and bequests to the owner's college, brothers and friend) demonstrates how the interim rule would apply to a living trust providing for a life-estate interest.

Another current complexity in determining coverage for living trust accounts is that, when it is created, a living trust is a revocable trust but, when the owner dies, the trust becomes irrevocable. 14 At that stage in the lifecycle of the living trust, the funds corresponding to the irrevocable trust are insured under the FDIC's rules for irrevocable trust accounts. 15 Under those rules, coverage is based on the non-contingent interest of each beneficiary named in the trust. In effect, when a living trust evolves from a revocable trust to an irrevocable trust the insurance coverage available on the account is based on a different set of rules—the irrevocable trust account rules. As such, the coverage on the account often decreases from what it had been when the trust was insured solely under the revocable trust rules.

To eliminate this complexity and the confusion it generates, under the interim rule, the rules for determining the coverage of the living trust account will remain the same when the trust (or part of the trust) converts to an irrevocable trust. For example, a grantor has a living trust account held in connection with a trust naming three beneficiaries, each of whom receives a specified share of the trust assets if he or she graduates from college by age 25. Under the current insurance rules, when the grantor is alive (meaning that the trust is still a revocable trust) the maximum coverage on the account is $300,000—1 grantor times 3 beneficiaries times $100,000. Also under the current rules, upon the grantor's death (allowing for the six-month grace period during which coverage would remain the same), the coverage reduces to $100,000 (if none of the beneficiaries has graduated from college yet) because of the contingent nature of the beneficial interests provided for in the trust. Under the interim rule, contingencies would continue to be irrelevant for coverage purposes after the grantor's death, even though the trust has evolved into an irrevocable trust. In this example, under the interim rule the coverage would still be up to $300,000.

The FDIC believes that the continuity of coverage provided for under this component of the interim rule would greatly simplify the current rules for determining coverage for living trust accounts. It is important to note, however, that under the interim rule the coverage on a living trust account could still change during the lifecycle of the trust. For example, when both grantors in a co-grantor trust are alive, the maximum coverage on the account would be $1,000,000, because the formula for determining coverage would be: 2 (grantors) times 5 beneficiaries times $100,000. 16 If one of the grantors dies, then the maximum coverage would be 1 (grantor) times 5 beneficiaries times $100,000. 17 Coverage would likewise decrease if one or more of the beneficiaries named in the revocable trust died, assuming the death of the beneficiary(ies) would cause the total number of beneficiaries to drop below five.

Eliminating the concept of qualifying beneficiaries and disregarding unequal interests in a trust (for accounts with five or fewer beneficiaries) theoretically will increase coverage immediately. Since no industry-wide data are maintained on trust accounts, a definite determination of the extent of this effect on insurance coverage for existing accounts is difficult. Thus, the precise effect the proposal will immediately have on the Deposit Insurance Fund (“DIF”) reserve ratio can be estimated, as discussed below, but cannot be determined with precision. 18

In fifteen failures from 1999 to 2003 and three failures from the past year for which final insurance determinations have been made, approximately ninety-seven percent of the funds in revocable trust accounts were insured on average and approximately twenty-five percent of domestic deposits were in revocable trust accounts on average. If conclusions from these eighteen failed institutions can be generalized to the banking industry as a whole, then, even if all current revocable trust deposits were to become insured, the effect on total insured deposits and on the DIF reserve ratio would be small. Recognizing that this data does not provide a strong statistical basis for drawing conclusions, we welcome comments on the effect of the interim rule on the level of insured deposits.

In the long-term, eliminating the concept of qualifying beneficiaries could bring more insured deposits into the system. For example, since, under the interim rule, nieces and nephews are eligible beneficiaries, a depositor might add her niece and nephew to a trust account that previously had only a sister as the sole beneficiary. Anticipating future moves by depositors is even more difficult than estimating the immediate effect on deposit insurance coverage. Thus, the long-term effect of the interim rule on insured deposits and on the reserve ratio is even more uncertain, beyond the conclusion that over time the change can be expected to lower the reserve ratio to some (likely limited) degree.

The interim rule is effective on September 26, 2008, the date on which the FDIC Board of Directors approved the interim rule. It is also the date this interim rule was filed for public inspection with the Office of the Federal Register. In this regard, the FDIC invokes the good cause exception to the requirements in the Administrative Procedure Act  19 (“APA”) that, before a rulemaking can be finalized, it must first be issued for public comment and, once finalized, must have a delayed effective date of thirty days from the publication date. The FDIC believes good cause exists for making the interim rule effective immediately because, based on recent depository institution failures, it is evident that many depositors and depository institution employees misunderstand the insurance rules for revocable trust accounts. The interim rule simplifies and modernizes the coverage rules for revocable trust accounts and, hence, will provide greater certainty to depositors and depository institution employees about the extent to which revocable trust accounts are insured.

Importantly, under the interim rule, no depositor will be insured for an amount less than he or she would have been entitled to under the current revocable trust account rules. Some depositors will be entitled to greater coverage under the interim rule than under the current rules, especially because under the interim rule a beneficiary need no longer be a qualifying beneficiary for the account owner to be insured on a per-beneficiary basis. Moreover, the FDIC believes that the interim rule will result in faster deposit insurance determinations after depository institution closings and will help improve public confidence in the banking system.

For these reasons, the FDIC has determined that the public notice and participation that ordinarily are required by the APA before a regulation may take effect would, in this case, be contrary to the public interest and that good cause exists for waiving the customary 30-day delayed effective date. Nevertheless, the FDIC desires to have the benefit of public comment before adopting a permanent final rule and thus invites interested parties to submit comments during a 60-day comment period. In adopting the final regulation, the FDIC will revise the interim rule, if appropriate, in light of the comments received on the interim rule.

The FDIC requests comments on all aspects of the proposed rulemaking. We solicit specific comments on: (1) Whether “over $500,000” is the proper threshold for determining coverage for revocable trust account owners based on the beneficial interests of the trust beneficiaries; (2) whether the FDIC's irrevocable trust account rules should be revised so that all trusts are covered by substantially the same rules; and (3) what effect the interim rule will have on the level of insured deposits.

The interim rule will revise the FDIC's deposit insurance regulations. It will not involve any new collections of information pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ). Consequently, no information collection has been submitted to the Office of Management and Budget for review.

The Regulatory Flexibility Act requires an agency that is issuing a final rule to prepare and make available a regulatory flexibility analysis that describes the impact of the final rule on small entities. 5 U.S.C. 603(a). The Regulatory Flexibility Act provides that an agency is not required to prepare and publish a regulatory flexibility analysis if the agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities.

Pursuant to section 605(b) of the Regulatory Flexibility Act, the FDIC certifies that the interim rule will not have a significant impact on a substantial number of small entities. The interim rule simplifies the deposit insurance rules for revocable trust accounts held at FDIC-insured depository institutions.

The FDIC has determined that the proposed rule would not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681). The interim should have a positive effect on families by clarifying the coverage rules for revocable trust accounts, a popular type of consumer bank account.

The Office of Management and Budget has determined that the interim rule is not a “major rule” within the meaning of the relevant sections of the Small Business Regulatory Enforcement Act of 1996 (“SBREFA”) (5 U.S.C. 801 et seq. ). As required by SBREFA, the FDIC will file the appropriate reports with Congress and the General Accounting Office so that the interim rule may be reviewed.

The FDIC has sought to present the interim rule in a simple and straightforward manner. The FDIC invites comment on whether it could take additional steps to make the rule easier to understand.

I. Background

On July 30, 2008, the President signed the Federal Housing Finance Regulatory Reform Act of 2008 (Act) (Pub. L. 110-289, 122 Stat. 2564). Among other things, the Act transferred the supervisory and oversight responsibilities over the Banks, Fannie Mae, and Freddie Mac to a new independent executive branch agency known as the Federal Housing Finance Agency. To fund the operations of the FHFA, the Act amended section 1316 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act), codified at 12 U.S.C. 4516. The Act also removed the provisions of section 38 of the Federal Home Loan Bank Act, which were codified at 12 U.S.C. 1438(b), that had authorized the Federal Housing Finance Board (FHFB) to impose assessments on the Banks in an amount sufficient to provide for the payment of the FHFB's estimated expenses for the period covered by the assessment. This final rule will implement the FHFA's authority to establish and collect assessments from the Regulated Entities and will also remove the regulatory provisions that had implemented the authority of the Office of Federal Housing Enterprise Oversight (OFHEO) to assess Fannie Mae and Freddie Mac (12 CFR part 1701) and the authority of the FHFB to assess the Banks (12 CFR 906.1-2).

In accordance with section 1316A of the Act, part 1206 of the final rule authorizes the FHFA to impose assessments on the Regulated Entities to pay its estimated costs and expenses. See 12 U.S.C. 4516. The rule recognizes and addresses the differences between the Banks and the Enterprises, where appropriate.

The final rule authorizes the FHFA to establish annual assessments for the Regulated Entities to provide for the payment of the FHFA's costs and expenses and maintain a working capital fund. The final rule provides for the allocation of the annual assessments between the Enterprises and the Banks, with the Enterprises paying proportional shares sufficient to provide for payment of the costs and expenses relating to the Enterprises, and the Banks paying proportional shares sufficient to provide for payment of the costs and expenses relating to the Banks. The shares paid by the Enterprises will be based on the proportions of total exposure for the Enterprises, and the shares paid by the Banks will be based on the proportions of their minimum required regulatory capital, a measure based on the capital that the Banks are required to hold by their regulator, rather than a measure of actual capital held. Under this rule, each Regulated Entity must pay an amount equal to one-half of its annual assessment twice each year. This represents a significant change to the assessment procedure of the FHFB, under which the FHFB made an assessment annually and the Banks made payments in monthly installments.

This final rule also establishes the procedure for the FHFA to increase or adjust the amount of the semiannual payment for a Regulated Entity or to make additional assessments for a Regulated Entity, under certain circumstances.

This final rule also implements another significant change in establishing the procedures for collecting funds for a working capital fund for the FHFA, under which the FHFA shall collect those assessments deemed necessary to establish an operating reserve that is intended to provide for the payment of large or multiyear capital and operating expenditures, as well as unanticipated expenses.

The final rule also implements notice and review provisions for the FHFA under which the FHFA will provide to each Regulated Entity written notice of the projected budget for the FHFA for the upcoming year, and the assessments and semiannual payments to be collected under this rule.

The notice and comment procedure required by the Administrative Procedure Act is inapplicable to this final rule because it is a rule of agency procedure. See 5 U.S.C. 553(b)(3)(A).

The regulation does not contain any information collection requirement that requires the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ).

Because the FHFA is promulgating part 1206 in the form of a final rule and not as a proposed rule, the provisions of the Regulatory Flexibility Act do not apply. See 5 U.S.C. 601(2), 603(a).

On June 22, 2007, interim regulations were promulgated to implement the duty-free provisions of the Haitian Hemispheric Opportunity through Partnership Encouragement (“HOPE I”) Act of 2006. The regulatory amendments adopted as a final rule in this document include changes necessitated by the June 18, 2008 enactment of the Haitian Hemispheric Opportunity through Partnership Encouragement (“HOPE II”) Act of 2008. Detailed information on both the HOPE I and HOPE II Acts follows.

On December 20, 2006, the President signed into law the Tax Relief and Health Care Act of 2006 (“the 2006 Act”), Public Law 109-432, 120 Stat. 2922. Title V of the Act concerns the extension of certain trade benefits to Haiti and is referred to in the Act as the “Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006” (“HOPE I Act”).

Section 5002 of the Act amended the Caribbean Basin Economic Recovery Act (the CBERA, also referred to as the Caribbean Basin Initiative, or CBI, statute codified at 19 U.S.C. 2701-2707) by adding a new section 213A, entitled “Special Rules for Haiti” and codified at 19 U.S.C. 2703A, to authorize the President to extend additional trade benefits to Haiti for a five-year period (ending on December 19, 2011) if the President determines that the country meets certain specified eligibility conditions and requirements. As created by the HOPE I Act, section 213A of the CBERA consisted of six principal subsections, each of which is summarized below.

Subsection (a) of section 213A of the CBERA set forth definitions of several terms used in section 213A. Subsection (b) of section 213A specified the conditions and requirements that must be met for certain apparel articles from Haiti to receive duty-free treatment. Subsection (c) of section 213A of the CBERA provided for the duty-free treatment of any article classifiable in subheading 8544.30.00 of the Harmonized Tariff Schedule of the United States (HTSUS) (wiring sets), as in effect on December 20, 2006, that is the product or manufacture of Haiti and is imported directly from Haiti into the customs territory of the United States, provided a specified value-content requirement is met.

Subsection (d) of section 213A set forth certain eligibility requirements that Haiti must meet as a prerequisite for articles to receive duty-free treatment under this section. This subsection required that the President determine whether Haiti met these requirements within 90 days after the date of enactment of the HOPE Act (or by March 20, 2007).

Subsection (e) of section 213A (redesignated as subsection (f) by HOPE II Act) provided that preferential tariff treatment for apparel articles under this section shall not apply unless the President certifies to Congress that Haiti is meeting certain conditions, such as the adoption of an effective visa system, that are primarily intended to avoid illegal transshipment situations.

Subsection (f) of section 213A (redesignated as subsection (g) by HOPE II Act) provided that the President shall issue regulations to carry out this section not later than 180 days after the date of enactment of the HOPE Act. Section 213A(f) further provided that the President shall consult with the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate in preparing such regulations. CBP consulted with the Committee on Ways and Means and the Committee on Finance regarding the implementing interim regulations.

For a more detailed description of the statutory provisions set forth in the HOPE I Act, please see CBP Dec. 07-43.

On March 19, 2007, the President signed Proclamation 8114 to implement the provisions of the HOPE I Act, among other purposes. The Proclamation, which was published in the Federal Register on March 22, 2007 (72 FR 13655), included determinations by the President that Haiti (1) meets the eligibility requirements set forth in section 213A(d) of the CBERA and (2) is meeting the conditions set forth in section 213A(e) (redesignated as section 213A(f) by HOPE II). The Proclamation also modified subchapter XX of Chapter 98 of the Harmonized Tariff Schedule of the United States (“HTSUS”) as set forth in Annex 1 to the Proclamation. The modifications to the HTSUS included the creation of new subheadings encompassing the various articles that are eligible for duty-free treatment under the HOPE Act.

On June 22, 2007, Customs and Border Protection (“CBP”) published in the Federal Register (72 FR 34365) as CBP Dec. 07-43 an interim rule setting forth amendments to title 19 of the Code of Federal Regulations (“CFR”) to implement the duty-free provisions of the HOPE I Act set forth in subsections (a) through (c) of section 213A of the CBERA. As the HOPE Act was signed on December 20, 2006, implementing regulations were due on June 20, 2007 by subsection (f) of section 213A of the CBERA. In order to provide transparency and facilitate their use, the interim implementing regulations were included within new subpart O in part 10 of the CBP regulations (19 CFR part 10, subpart O). Action to adopt these interim regulations as a final rule was withheld pending anticipated action on the part of Congress to amend the underlying statutory provisions in the Food, Conservation and Energy Act of 2008 (Haiti HOPE II Act).

Although the interim regulatory amendments were promulgated without prior public notice and comment procedures and took effect on June 22, 2007, CBP Dec. 07-43 provided for the submission of public comments that would be considered before adopting the interim regulations as a final rule. The prescribed public comment period closed on August 21, 2007. A discussion of the comments received by CBP is set forth below.

On May 21, 2008, the Food, Conservation and Energy Act of 2008 (Pub. L. 110-234) (“2008 Act”) became law when Congress overrode the President's veto of this legislation. Part I, Subtitle D, Title XV of the 2008 Act, referred to in the Act as the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II Act), amended certain provisions of section 213A of the CBERA. The HOPE II Act amendments that require implementation through regulation by CBP are set forth in section 15402 of the 2008 Act, which amended subsections (a) and (b) of section 213A of the CBERA concerning the textile and apparel articles to which preferential tariff treatment applies under this program. A summary of the principal substantive amendments to section 213A(b) effected by section 15402 of the 2008 Act are set forth below.

1. Section 213A(a) was amended by adding definitions of the terms “imported directly from Haiti or the Dominican Republic”, “knit-to-shape”, and “wholly assembled”. It is noted that the statutory “knit-to-shape” definition requires no change to the interim regulatory text as this definition is nearly identical to the definition of the same term set forth in the interim regulations ( see 19 CFR 10.842(j)). The remaining two new statutory definitions referenced above require changes to the interim regulatory text.

2. Re-designated section 213A(b)(1)(A) (formerly 231A(b)(1) under the HOPE I Act) was amended to provide that apparel articles of a producer or entity controlling production may be imported directly from Haiti or the Dominican Republic. Under the HOPE I Act, such articles were required to be imported directly from Haiti.

3. Re-designated section 213A(b)(1)(B)(iv)(IV) (formerly 213A(b)(2)(D)(iv) under the HOPE I Act), was amended by deleting references to specific apparel articles ( i.e. , woven articles and brassieres) that may or may not be included in the annual aggregation calculation for purposes of meeting the applicable value-content requirement for apparel articles of a producer or entity controlling production. This provision now states, more generally, that entries of apparel articles receiving preferential treatment under any provision of law (other than under section 213A(b)(1)) or are subject to the “General” subcolumn of column 1 of the HTSUS are not included in the annual aggregation calculation unless the producer or entity controlling production elects to include those entries.

4. Re-designated section 213A(b)(1)(C) (formerly section 213A(b)(3) under the HOPE I Act), was amended by revising the annual quantitative limits for the third through the fifth applicable 1-year periods that apply to apparel articles of a producer or entity controlling production. The amendments to this provision do not require changes to the interim regulatory text.

5. Former section 213A(b)(4), which set forth the conditions and requirements that must be met for certain woven apparel articles of chapter 62 of the HTSUS from Haiti to receive duty-free treatment, was removed and a new section 213A(b)(2) was added. This new provision provides for the duty-free treatment of any knit article of chapter 61 (subject to certain exclusions) or any woven article of chapter 62 of the HTSUS that is wholly assembled, or knit-to-shape, in Haiti from any combination of fabrics, fabric components, components knit-to-shape, or yarns and is imported directly from Haiti or the Dominican Republic, without regard to the source of the fabric, fabric components, components knit-to-shape, or yarns from which the article is made, subject to certain specified quantitative limitations. The exclusions from the special rule for articles of chapter 61 of the HTSUS include certain T-shirts, singlets, sweatshirts, and pullovers for men or boys. The duty-free treatment provided for in new section 213A(b)(2) is effective from October 1, 2008, through September 30, 2018.

6. Former section 213A(b)(5), which set forth the conditions and requirements that must be met for articles of subheading 6212.10, HTSUS (brassieres), to receive duty-free treatment was removed and a new section 213A(b)(3) was added, which provides for the duty-free treatment of certain apparel articles (including brassieres) and other articles set forth below. The duty-free treatment provided for in new section 213A(b)(3) is effective from October 1, 2008, through September 30, 2018, and is not subject to quantitative limitations. The articles to which this provision applies are as follows:

a. Articles of subheading 6212.10, HTSUS (brassieres), that are wholly assembled, or knit-to-shape, in Haiti from any combination of fabrics, fabric components, components knit-to-shape, or yarns and are imported directly from Haiti or the Dominican Republic, without regard to the source of the fabric, fabric components, components knit-to-shape, or yarns from which the article is made;

b. Any of the following apparel articles that is wholly assembled, or knit-to-shape, in Haiti from any combination of fabrics, fabric components, components knit-to-shape, or yarns and is imported directly from Haiti or the Dominican Republic, without regard to the source of the fabric, fabric components, components knit-to-shape, or yarns from which the article is made:

(i) Any apparel article that is of a type listed in chapter rule 3, 4, or 5 for chapter 61 of the HTSUS (as such chapter rules are contained in section A of the Annex to Presidential Proclamation 8213 of December 20, 2007) as being excluded from the scope of such chapter rule, except that, for purposes of this provision, reference in such chapter rules to subheading 6104.12.00, HTSUS, is deemed to refer to subheading 6104.19.60, HTSUS; and

(ii) Any apparel article (other than articles of subheading 6212.10 of the HTSUS) that is of a type listed in chapter rule 3(a), 4(a), or 5(a) for chapter 62 of the HTSUS, as such chapter rules are contained in paragraph 9 of section A of the Annex to Presidential Proclamation 8213 of December 20, 2007;

c. Articles of subheading 4202.12, 4202.22, 4202.32, or 4202.92, HTSUS that are wholly assembled in Haiti and are imported directly from Haiti or the Dominican Republic, without regard to the source of the fabric, components, or materials from which the article is made;

d. Articles of heading 6501, 6502, or 6504, or subheading 6505.90, HTSUS, that are wholly assembled, knit-to-shape, or formed in Haiti from any combination of fabrics, fabric components, components knit-to-shape, or yarns and are imported directly from Haiti or the Dominican Republic, without regard to the source of the fabric, fabric components, components knit-to-shape, or yarns from which the article is made; and

e. Any of the following apparel articles that is wholly assembled, or knit-to-shape, in Haiti from any combination of fabrics, fabric components, components knit-to-shape, or yarns and is imported directly from Haiti or the Dominican Republic, without regard to the source of the fabric, fabric components, components knit-to-shape, or yarns from which the article is made:

(i) Pajama bottoms and other sleepwear for women and girls, of cotton, of subheading 6208.91.30, HTSUS, or of man-made fibers, of subheading 6208.92.00, HTSUS; and

(ii) Pajama bottoms and other sleepwear for girls, of other textile materials, of subheading 6208.99.20 HTSUS.

7. Section 213A(b) was amended by adding a new paragraph (4) which provides for the duty-free treatment of apparel articles that are wholly assembled, or knit-to-shape, in Haiti from any combination of fabrics, fabric components, components knit-to-shape, or yarns, without regard to the source of the fabric, fabric components, components knit-to-shape, or yarns from which the articles are made, if such apparel articles are accompanied by an earned import allowance certificate issued by the Department of Commerce reflecting the amount of credits equal to the total square meter equivalents of such apparel articles and the articles are imported directly from Haiti or the Dominican Republic. The duty-free treatment provided for in new section 213A(b)(4) is effective from October 1, 2008, through September 30, 2018, and is not subject to quantitative limitations.

8. Section 213A(b) was further amended by adding a new paragraph (5) that provides for the duty-free treatment of apparel articles that are wholly assembled, or knit-to-shape, in Haiti from any combination of fabrics, fabric components, components knit-to-shape, or yarns, without regard to the source of the fabrics, fabric components, components knit-to-shape, or yarns from which the article is made, if the fabrics, fabric components, components knit-to-shape, or yarns comprising the component that determines the tariff classification of the article are of any of the fabrics or yarns set forth below and the articles are imported directly from Haiti or the Dominican Republic. The duty-free treatment provided for in new section 213A(b)(5) is effective from October 1, 2008, through September 30, 2018, and is not subject to quantitative limitations.

a. Fabrics or yarns, to the extent that apparel articles of such fabrics or yarns would be eligible for preferential treatment, without regard to the source of the fabrics or yarns, under Annex 401 of the North American Free Trade Agreement (NAFTA); or

b. Fabrics or yarns, to the extent that such fabrics or yarns are designated as not being available in commercial quantities for purposes of:

(i) Section 213(b)(2)(A)(v) of the CBERA (19 U.S.C. 2703(b)(2)(A)(v));

(ii) Section 112(b)(5) of the African Growth and Opportunity Act (19 U.S.C. 3721(b)(5));

(iii) Section 204(b)(3)(B)(i)(III) or 204(b)(3)(B)(ii) of the Andean Trade Preference Act (19 U.S.C. 3203(b)(3)(B)(i)(II) or 3203(b)(3)(B)(ii)); or

(iv) Any other provision, relating to determining whether a textile or apparel article is an originating good eligible for preferential treatment, of a law that implements a free trade agreement entered into by the United States that is in effect at the time the claim for preferential tariff treatment is made.

As noted earlier, this final rule incorporates in the regulatory text certain statutory changes made to section 213A of the CBERA by the HOPE II Act. Because these changes to the interim regulatory text, described below, are not interpretative in nature but closely reflect the language of the statute, they are included in this final rule without need for comment. Section 15407 of the 2008 Act provides that regulations necessary to carry out section 15402 must be issued not later than September 30, 2008, and section 15412 of the 2008 Act provides that section 15402 shall take effect on October 1, 2008, and shall apply to articles entered, or withdrawn from warehouse for consumption, on or after that date.

1. The heading to 19 CFR part 10, subpart O has been revised to add a reference to the HOPE II Act;

2. Section 10.841, regarding the applicability of subpart O, has been revised to add a reference to the HOPE II Act;

3. In § 10.842(p), the definition of “wholly assembled in Haiti” has been revised to conform to the statutory definition of the term set forth in the HOPE II Act;

4. As a result of the amendments to section 213A of the CBERA effected by the HOPE II Act, all of the textile and apparel articles to which duty-free treatment applies under this program must be “imported directly from Haiti or the Dominican Republic.” Under the HOPE I Act, all eligible articles were required to be “imported directly from Haiti”. However, no change was made by the HOPE II Act to the “imported directly” requirement for articles eligible for duty-free treatment under section 213A(c) of the CBERA (wiring sets). Therefore, those articles must continue to be “imported directly from Haiti”. Accordingly, the introductory text to § 10.843, which sets forth a list of the articles to which duty-free treatment applies under this program, has been revised to reflect this disparity in treatment between textile and apparel articles on the one hand and wiring sets on the other with regard to the “imported directly” requirement;

5. Section 10.843 has been further amended to reflect the new and revised categories of textile and apparel articles that are eligible for duty-free treatment under the HOPE II Act;

6. In § 10.844, relating to the value-content requirement for apparel articles of a producer or entity controlling production:

a. Paragraph (a)(2)(iii) has been revised to reflect the new statutory language ( see section 213A(b)(1)(B)(iv)(IV) of the CBERA) concerning exclusions from the annual aggregation calculation;

b. Paragraph (a)(5)(ii)(D) has been revised to replace the words “under the Bipartisan Trade Promotion Authority Act of 2002” with the words “with respect to the United States” to conform to an amendment to re-designated section 213A(b)(1)(B)(vii)(I)(bb)(DD) of the CBERA (formerly section 213A(b)(2)(G)(i)(II)(dd)) by the HOPE II Act; and

c. Paragraph (c)(2) has been revised to replace the words “under the Bipartisan Trade Promotion Authority Act of 2002 (19 U.S.C. 3801 et seq. )” with the word “thereafter” to conform to an amendment to re-designated section 213A(b)(1)(B)(iii)(II) of the CBERA (formerly section 213A(b)(2)(C)(ii)) by the HOPE II Act;

7. Section 10.846, relating to the “imported directly” requirement, has been revised to reflect the statutory definition of the term “imported directly from Haiti or the Dominican Republic” created by the HOPE II Act ( see section 213A(a)(3) of the CBERA). As noted previously, while the “imported directly from Haiti or the Dominican Republic” requirement applies to all textile and apparel articles eligible for duty-free treatment under this program, it does not apply to articles eligible for duty-free treatment under section 213A(c) of the CBERA (wiring sets). Those articles must continue to be “imported directly from Haiti”. Therefore, § 10.846 has been further revised to clarify that wiring sets are subject to the “imported directly from Haiti” requirement, as those words are currently defined in § 10.846 of the interim rule. However, consistent with the statutory definition of “imported directly from Haiti or the Dominican Republic”, the definition of “imported directly from Haiti” has been altered by removing the words “provided that the articles are imported as a result of the original commercial transaction between the importer and the producer or the producer's sales agent”, as set forth in current § 10.846(a)(3)(ii) of the interim rule; and

8. Section 10.847(a), concerning the filing of claims for duty-free treatment for articles described in § 10.843, has been revised to set forth the new subheadings within Subchapter XX of Chapter 98 of the HTSUS under which the new categories of textile and apparel articles created by HOPE II are classified.

This final rule document addresses the comments submitted in response to the interim rulemaking published as CBP Dec. 07-43 and adopts, as a final rule, the HOPE I Act implementing regulations contained in the interim rule document with changes reflecting the statutory amendments made by the HOPE II Act as well as other changes identified below in the discussion of public comments received.

A total of 8 commenters responded to the solicitation of public comments on the interim regulations set forth in CBP Dec. 07-43. It is noted that these comments were received prior to the recent statutory changes effected by the HOPE II Act. To the extent that the comments received were unaffected by these subsequent changes, CBP has responded. References in this comment discussion to the “HOPE Act” are intended to refer to the HOPE program in general.

1. Comment: Five commenters pointed out that section 5004 of the Act expresses the “sense of the Congress that the executive branch * * * should interpret, implement, and enforce” the preference provisions under the HOPE Act for textile and apparel articles “broadly in order to expand trade by maximizing opportunities for imports of such articles from Haiti.” In view of this statement of the intent of Congress, these commenters urged that the HOPE Act final regulations be interpreted and issued in a manner that will expand, and not restrict, trade with Haiti.

CBP's Response: CBP is cognizant of Congressional desire that the HOPE Act benefit Haiti to the maximum extent possible and that the executive branch, in matters subject to interpretation, choose the interpretation most beneficial to Haiti that is legally supportable. CBP endeavored to adhere to this mandate while drafting regulations to implement the specific language of the statute which created special tariff preference provisions for Haiti within the existing framework of the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2701 et seq. ).

2. Comment: One commenter indicated that as “the textile and apparel trade has the highest fraud content of any manufactured good”, it is imperative that the regulations implementing the HOPE Act be written in a way that provides for meaningful and effective customs enforcement while allowing for the flow of legitimate trade. The commenter stated that the interim regulations are a reasonable approach to achieving this objective and commended CBP for its efforts in this regard. This commenter also stated that it was very encouraged to see an emphasis on importer requirements throughout the HOPE regulations as importers of textile products should be held more accountable for their transactions and the preference claims made on goods they import into the United States. In addition, this commenter expressed strong support for the “penalty provisions” set forth in the HOPE I Act implementing regulations ( e.g. , denial of duty-free treatment for failure to meet applicable requirements and the imposition of an increased value-content percentage requirement under certain circumstances) and stated that, through these provisions, CBP has built in very strong incentives for compliance.

CBP's Response: CBP appreciates the comment as it always strives to balance the goals of effective enforcement while facilitating the flow of legitimate commerce.

3. Comment: One commenter noted that the interim regulations were issued some months after the commencement of the first statutory applicable year and urged CBP to issue the final regulations on an expeditious basis so that companies may rely on clear, transparent, and predictable rules to conduct business with Haiti.

CBP's Response: CBP notes that the date of enactment of the HOPE I Act (December 20, 2006) marked the beginning of the first of five one-year periods during which certain apparel articles from Haiti may be eligible for duty-free treatment under the Act. However, the Haiti Act preference program for apparel articles was implemented by Presidential Proclamation effective with respect to goods entered, or withdrawn from warehouse, on or after March 20, 2007 ( see Proclamation 8114 dated March 19, 2007, published in the Federal Register on March 22, 2007 (72 FR 13655)). CBP awaited the publication of Presidential Proclamation 8114 so that its interim regulations would be complete. The interim regulations implementing the HOPE I Act were required to be issued not later than 180 days after December 20, 2006, and the interim regulations were published in the Federal Register on June 22, 2007.

CBP notes that issuance of this final rule was delayed pending anticipated action on the part of Congress to amend the underlying statutory provisions which resulted in the HOPE II Act.

4. Comment: One commenter urged that the visa system for the HOPE program be deployed in such a way that it facilitates trade and does not impose additional hurdles or burdens for Haitian exporters or U.S. importers. This commenter indicated that it had heard reports that, due to problems in the administration of the visa system, several companies have been unable to export goods to the United States.

CBP's Response: The HOPE Act requires the establishment of a visa system to ensure that only those apparel articles that meet the applicable requirements for preferential tariff treatment under the Act receive the benefits of that treatment. An effective visa system affords Haiti the ability to administer and enforce the program with respect to exports of apparel articles to the United States and allows the United States to monitor imports of such articles from that country. CBP does not believe that the HOPE Act visa system currently in place is too complex or imposes unreasonable burdens on Haitian exporters or U.S. importers. It is noted that the Haitian government has not communicated to CBP that it is experiencing difficulties in implementing the visa system.

5. Comment: Six of the commenters asserted that the definition of “wholly assembled in Haiti” set forth in § 10.842(p) of the interim regulations is overly restrictive in that it requires that all of the components of the article (including minor components) be joined together in Haiti. Five of these commenters stated that this phrase must be read in the light of the clear intent of the legislation to provide for non-origin conferring events and operations to be performed within HOPE Act eligible countries. Four commenters suggested that the definition of the phrase should follow the more liberal definition set forth in § 102.21(b)(6) of the CBP regulations, which would allow minor parts to be added in eligible countries other than Haiti. One of these commenters recommended that the HOPE Act preference provisions be more broadly applied to textile and apparel articles from Haiti or the designated beneficiary countries as long as the key assembly operations are performed in Haiti.

CBP's Response: The definition of “wholly assembled in Haiti” set forth in § 10.842(p) has been revised in this final rule document to conform to the statutory definition of that term set forth in the HOPE II Act ( see section 213A(a)(5) of the CBERA). CBP believes that this statutory and resulting regulatory change addresses these commenters' concerns.

6. Comment: One commenter stated that the definitions should make clear that not all cutting and sewing is required in Haiti and that, specifically, cutting and sewing operations performed in the United States would not disqualify a garment.

CBP's Response: Although the HOPE Act requires apparel articles of a producer or entity controlling production to be wholly assembled or knit-to-shape in Haiti (as those terms are defined in section 213A(a) of the CBERA), it allows the materials ( e.g. , fabric components) from which the articles are made to be produced anywhere. See section 213A(b)(1)(B)(i)(I) and section 213A(b)(1)(B)(ii)((I) of the CBERA. “Fabric component” is defined in § 10.842(g) of the HOPE Act implementing regulations as “a component cut from fabric to the shape or form of the component as it is used in the apparel article.” Therefore, CBP believes it is clear from the statute and the implementing regulations that cutting operations may be performed outside of Haiti.

In regard to sewing, CBP believes that the revised definition of “wholly assembled in Haiti” set forth in § 10.842(p) of this final rule document, which conforms to the statutory definition of that term set forth in the HOPE II Act, addresses the commenter's concerns.

7. Comment: Five commenters stated that the final regulations should clarify, through the use of specific examples, the application of the annual aggregation method in meeting the value-content requirement for apparel articles that are wholly assembled or knit-to-shape in Haiti. Three of these commenters raised certain specific issues regarding the annual aggregation method by offering the exact same scenarios and questions as follows:

a. Haitian Producer A elects to use the annual aggregation method in the initial applicable one-year period, and also elects, pursuant to § 10.844(a)(2)(iii)(C) of the interim regulations, to include in the aggregation calculation entries of apparel articles receiving preferential tariff treatment under other preference programs as well as articles subject to a Normal Trade Relations (NTR) rate of duty. Producer A ships to the United States four shipments during the initial applicable one-year period (all are entered during that period). The first shipment of apparel (qualifying for preference under the Caribbean Basin Trade Partnership Act (CBTPA)) has an appraised value of $100,000 and meets a value-content percentage (under § 10.844(a)) of 80%. The second shipment of apparel is wholly assembled in Haiti, has an appraised value of $100,000, and meets a value-content percentage of 40%. The third shipment is wholly assembled in Haiti, has an appraised value of $50,000, and meets a value-content percentage of 0%. The last shipment is wholly assembled in Haiti, has an appraised value of $20,000, and meets a value-content requirement of 80%. Taken together, the four shipments have an appraised value of $270,000 and meet a value-content percentage of 50.4%. Will all apparel goods that are shipped to the U.S. in the last three shipments by Producer A qualify for duty-free treatment under the HOPE Act?

b. Importer D, an entity controlling production, purchases apparel articles that are wholly assembled in Haiti from Producers A, B, and C and enters those articles during the initial applicable one-year period. Importer D elects to use the annual aggregation method during that period. The three producers also produce apparel for other U.S. importers and each producer elects to use the annual aggregation method. The total appraised value of the apparel purchased by Importer D from the three producers and entered during the initial applicable one-year period is $300,000, and these shipments meet a value-content percentage of 51.7%. However, the value-content percentage met by all the apparel that is wholly assembled in Haiti by Producer C and entered (including the apparel imported by Importer D) during the initial applicable one-year period is 49%. Does the failure of Producer C to meet the applicable value-content requirement for the apparel that it produces during this period affect the preferential status of the apparel articles produced by Producer C and imported by Importer D?

CBP's Response: Based on the facts presented in the first scenario, the apparel articles that were wholly assembled in Haiti and shipped to the U.S. in the last three shipments by Producer A would qualify for duty-free treatment under the HOPE Act, as the applicable value-content requirement for the initial applicable one-year period (50%) would be met. This conclusion assumes that: (1) The CBTPA-eligible apparel articles in the first shipment (that were included in the annual aggregation calculation at the election of the producer) were wholly assembled or knit-to-shape in Haiti, as required by § 10.844(a)(2)(iii)(C); and (2) the articles in the last three shipments satisfy all other applicable requirements set forth in subpart O, part 10, CBP regulations ( e.g. , declaration of compliance and “imported directly” requirements).

In regard to the facts set forth in the second scenario, pursuant to section 213A(b)(1)(iv)(I) of the CBERA and § 10.844(a)(2)(i) of the interim regulations, in determining whether apparel articles of a producer or entity controlling production that are entered under the annual aggregation method in the initial applicable one-year period satisfy the applicable value-content requirement (50%) in that period, “all apparel articles of that producer or entity controlling production that are wholly assembled or knit-to-shape in Haiti and are entered in the initial applicable one-year period” must be considered. Thus, for the entity controlling production in this scenario (Importer D), the apparel articles that must be considered are those that are purchased by Importer D from Producers A, B, and C and entered during the initial applicable one-year period. As all of the articles, in the aggregate, purchased by Importer D from the three producers and entered during the initial applicable one-year period satisfy the 50% value-content requirement, all of these articles are entitled to duty-free treatment under the HOPE Act, assuming all other applicable requirements are met.

With respect to Producer C, the apparel articles that must be considered in determining compliance with the 50% value-content requirement under the annual aggregation method are all those articles that are wholly assembled or knit-to-shape in Haiti by Producer C and entered in the initial applicable one-year period. In this scenario, all of the articles, in the aggregate, that are wholly assembled by Producer C and entered during the initial applicable one-year period (including the articles sold to Importer D) do not satisfy the 50% value-content requirement. However, the failure of Producer C to meet the value-content requirement under these circumstances should not and will not affect the duty-free status of the articles purchased by Importer D from Producer C since, as noted above, the cumulative total of all of the articles whose production is controlled by Importer D (an entity controlling production) meets the 50% value-content requirement. Therefore, the consequences of Producer C's failure to meet the 50% value-content requirement include the denial of duty-free treatment for all articles that are wholly assembled by Producer C and entered during the initial applicable one-year period, except for those articles sold by Producer C to Importer D. CBP is amending § 10.844(a)(4) in this final rule to clarify the circumstances under which this exception applies by adding a new paragraph (a)(4)(iii) to § 10.844, resulting in the re-designation of current paragraphs (a)(4)(iii) through (a)(4)(v) as paragraphs (a)(4)(iv) through (a)(4)(vi), respectively.

CBP notes that, pursuant to § 10.844(a)(4)(i)(C), an additional consequence of Producer C's failure to meet the value-content requirement in the initial applicable one-year period would be that articles wholly assembled by Producer C and entered during succeeding applicable one-year periods will be ineligible for duty-free treatment until the appropriate increased value-content requirement has been met, except to the extent the articles retroactively qualify for preference under § 10.845.

CBP agrees with the commenters that additional examples should be included in the HOPE Act implementing regulations to clarify the application of the annual aggregation method. Therefore, CBP is amending paragraph (a)(2)(iii) and new paragraph (a)(4)(iii) of § 10.844 by adding two examples (one in each paragraph) patterned after the two scenarios presented by the commenters.

8. Comment: Three commenters stated that the interim regulations (specifically, § 10.844(a)) are unclear regarding whether a producer or entity controlling production may elect to use the individual entry method during an applicable one-year period and then switch to the annual aggregation method for the following year. Assuming that a producer or entity controlling production may use the individual entry method during the first applicable one-year period and then elect to use the annual aggregation method during the second applicable one-year period, two of these commenters asked whether it would be necessary to submit a declaration of compliance following the end of the first applicable one-year period. One commenter stated that § 10.844(a)(3) “seems to imply” that once an election is made to use the annual aggregation method, use of the individual entry method is foreclosed for any subsequent one-year period.

CBP's Response: There is nothing in the HOPE Act or the implementing interim regulations (including § 10.844(a)(3)) that would preclude a producer or entity controlling production from electing to use either the annual aggregation or individual entry method during one applicable one-year period and then switching to the other method during the subsequent one-year period. This assumes, of course, that all applicable requirements are met during the applicable one-year period preceding the period in which the switch is to be made. The underlying purpose of § 10.844(a)(3), as set forth in the interim rule, is to make it clear that, regardless of the method chosen for a particular period, that method must be used for all articles of a producer or entity controlling production during that period. As recommended by these commenters, CBP is amending § 10.844(a)(3) in this final rule document to clarify that a producer or entity controlling production may elect to use the individual entry or annual aggregation method in any applicable one-year period and then switch to the other method during the next one-year period.

In response to the question posed by two of the commenters, CBP believes that a declaration of compliance must be submitted following the end of any applicable one-year period in which the individual entry method is used if an election is made to use the annual aggregation method during the next applicable one-year period. As section 203A(b)(1)(B)(iv)(II) of the CBERA and § 10.844(a)(2)(ii) of the interim regulations make clear, an election to use the annual aggregation method in the second, third, fourth, or fifth applicable one-year period is conditioned on compliance with the applicable value-content requirement by all apparel articles of the producer or entity controlling production, in the aggregate, that are entered during the previous applicable one-year period. Thus, an importer may enter articles under the annual aggregation method in each of the second through fifth applicable one-year periods only if it can assure CBP through the submission of a declaration of compliance, as set forth in § 10.848, that the aggregate total of all apparel articles of the producer or entity controlling production met the applicable value-content requirement during the previous applicable one-year period. This is true even if all articles of the producer or entity controlling production were entered under the individual entry method during that previous applicable one-year period. CBP is amending § 10.848 in this final rule document to specifically address this issue.

9. Comment: Five commenters noted that § 10.844(a)(2)(iii)(C) of the interim regulations permits apparel articles receiving preferential tariff treatment under any provision of law other than the HOPE Act to be included in the annual aggregation calculation (at the election of the producer or entity controlling production). However, these commenters objected to the requirement in the regulation that the apparel articles must be “wholly assembled” in Haiti. According to the commenters, this is an impermissible expansion of the statutory language “that sets another hurdle for Haitian goods for qualification of merchandise otherwise produced in Haiti.” Several of these commenters stated that this additional requirement seems excessive considering that these other preference programs ( e.g. , CBTPA) do not require “such a wholly assembled definition.”

CBP's Response: CBP notes initially that § 10.844(a)(2)(iii) has been amended in this final rule document to conform to an amendment to section 213A(b)(1)(B)(iv)(IV) of the CBERA by the HOPE II Act (deleting specific references to woven apparel articles and brassieres). However, amended § 10.844(a)(2)(iii) continues to require that the referenced apparel articles must be “wholly assembled or knit-to-shape” in Haiti.

CBP maintains that if the statute is read as a whole, the rationale for the “wholly assembled or knit-to-shape” requirement in § 10.844(a)(2)(iii) becomes clear. Annual aggregation applies to apparel articles of a producer or entity controlling production that enter during an applicable one-year period and is calculated by aggregating certain costs incurred with respect to all apparel articles of that producer or entity controlling production that are wholly assembled, or knit-to-shape, in Haiti and entered during the first year of the program or, for subsequent years, entered during the preceding year. See section 213A(b)(1)(B)(iv)(I) and (II) of the CBERA. Paragraph (IV) of section 213A(b)(1)(B)(iv) clarifies that the universe of apparel articles wholly assembled, or knit-to-shape, in Haiti to be included in the calculation of all apparel articles so produced in Haiti and entered during the year under consideration is not to include entries of apparel articles receiving preferential treatment under any provision of law other than section 213A(b)(1) or entries of apparel articles subject to the Normal Trade Relations “general” rate of duty, unless the producer or entity controlling production elects to include such entries. In other words, the phrase “all apparel articles” for purposes of section 213A(b)(1)(B)(iv)(I) and (II) is defined in section 213A(b)(1)(B)(iv)(IV). Defining the scope of “all apparel articles” does not relieve the articles from the requirements of section 213A(b)(1)(B)(iv)(I) and (II) that they be wholly assembled, or knit-to-shape in Haiti. The commenters are mistaken in their belief that CBP is expanding the statutory language to construct a “hurdle” for Haitian goods. CBP is merely reading the statute as a whole and recognizes that section 213A(b)(1)(B)(iv)(IV) serves to clarify Congressional intent regarding the scope of the words “all apparel articles”, as used in section 213A(b)(1)(B)(iv)(I) and (II).

10. Comment: One commenter stated that the final regulations should make it clear that an entity controlling production and a manufacturer will not both be penalized if one of the parties fails to meet its annual aggregation percentage requirement and they are not exclusively producing for or importing from each other. Another commenter indicated that the failure of a producer (electing to use the annual aggregation method) to meet the applicable value-content requirement in a particular year should not be “transferred” to U.S. importers who take appropriate steps to ensure that their imported goods satisfy the value-content requirement.

CBP's Response: CBP has previously addressed in this comment discussion the circumstances under which the failure of an entity controlling production and/or a producer to meet the applicable value-content requirement under the annual aggregation method in a particular one-year period will affect the duty-free status of the apparel articles that they control or produce in situations in which they do not exclusively produce for or import from each other. As previously indicated, CBP is amending § 10.844(a)(4) in this final rule to clarify this matter.

CBP disagrees with the second commenter's assertion that the failure of a producer to meet the applicable value-content requirement under the annual aggregation method should not be “transferred” to U.S. importers who take appropriate steps to ensure that their imported goods satisfy the value-content requirement. All U.S. importers of apparel articles for which preferential tariff treatment is sought under the HOPE Act are required to exercise reasonable care to ensure that those articles are in fact entitled to such treatment. Thus, if a producer fails to meet the applicable value-content percentage in a particular one-year period, all importers who purchase apparel articles from that producer will be subject to rate advances due to the failure of the articles to satisfy the applicable HOPE Act requirements.

11. Comment: One commenter stated that it was unable to find any Congressional intent or statutory language that supports the requirement in § 10.844(c) of the interim regulations that there be an “irreversible election” to use the annual aggregation method. It was this commenter's understanding, as the HOPE I Act bill was being drafted, that a producer or entity controlling production could choose to use the aggregate or individual entry method in such a way and at such time as to maximize the duty-free benefit of the program. In addition, this commenter complained that the interim regulations provide no information as to how such an election is to be made so that it may take legal effect, and that the regulations do not make clear that CBTPA-type operations count toward the aggregate value-content requirement, assuming the apparel product is wholly assembled in Haiti.

CBP's Response: CBP disagrees with the commenter's assertion that there is no statutory authority for the requirement in § 10.844(c) that a producer or entity controlling production that elects to use the annual aggregation method during an applicable one-year period must continue to use that method for all its qualifying apparel articles throughout that period. Section 203A(b)(1)(B)(iv) of the CBERA provides that the use of the annual aggregation method in an applicable one-year period involves aggregating costs with respect to “all apparel articles” of the producer or entity controlling production that are entered during the applicable one-year period (initial period for an election in that period and preceding period for an election in subsequent periods). Consequently, allowing a producer or entity controlling production to elect to use the annual aggregation method for some of its apparel articles that are entered during an applicable one-year period and use the individual entry method for other articles entered during the same period would be inconsistent with the clear wording of the statute.

Regarding the other points made by the commenter, paragraphs (a)(2) and (b) of § 10.847 set forth the procedure for filing a claim for duty-free treatment for apparel articles described in § 10.843(a) when an election has been made by the producer or entity controlling production (through the use of a certification to that effect) to use the annual aggregation method. Section 10.844(a)(2)(iii) addresses an election to include in the annual aggregation calculation an entry of apparel articles receiving duty-free treatment under another preference program (such as the CBTPA), provided the articles are wholly assembled or knit-to-shape in Haiti.

12. Comment: Three commenters objected to CBP's interpretation and application of the statutory increased value-content percentage requirement ( see section 213A(b)(1)(B)(vi)(II) of the CBERA), as reflected in § 10.844(a)(4)(iii) of the interim regulations (now § 10.844(a)(4)(iv)) and Example 1 under § 10.844(a)(4)(iv) (now § 10.844(a)(4)(v)). These commenters contend that the words “plus ten percent” in the statute mean that ten percent is to be applied against the applicable percentage to arrive at the increased value-content percentage ( e.g. , 50% + 10% of 50%= 55%). According to these commenters, CBP has adopted a more strict (and, in fact, an erroneous) interpretation of the words “plus ten percent” by actually adding 10 percentage points to the applicable percentage ( e.g. , 50% + 10%= 60%) in calculating the increased value-content percentage. Another commenter alleges, without further elaboration, that § 10.844(a)(4)(iii) (now § 10.844(a)(4)(iv)) is inconsistent in delineating the increased value-content percentages.

CBP's Response: CBP disagrees with the commenters' interpretation of section 213A(b)(1)(B)(vi)(II) of the CBERA, which sets forth the increased-value content percentage requirement. This provision states, in pertinent part, that if a producer or entity controlling production is not in compliance with the statutory requirements in an applicable one-year period, then apparel articles of that producer or entity controlling production shall be ineligible for preferential treatment during any succeeding period until the sum of the relevant costs “is not less than the applicable percentage under clause (v)(I), plus 10 percent, of the aggregate declared customs value of all apparel articles of that producer or entity controlling production * * *.” The words “plus 10 percent” are set off by commas and clearly refer to the words “the aggregate declared customs value”—not “the applicable percentage.” Therefore, in CBP's opinion, § 10.844(a)(4)(iii) (now § 10.844(a)(4)(iv)) and Example 1 under § 10.844(a)(4)(iv) (now § 10.844(a)(4)(v)) are correct in requiring that the increased value content percentage be determined by adding 10 percent to the applicable percentage—not by applying 10 percent against the applicable percentage and then adding that result to the applicable percentage. Had Congress intended the latter meaning, CBP believes that Congress would have used statutory language to clearly accomplish that intent.

In regard to the assertion that § 10.844(a)(4)(iii) (now § 10.844(a)(4)(iv)) is “inconsistent in delineating the increased value-content percentages”, CBP cannot discern any inconsistency in this provision, which CBP notes closely follows the statutory language in § 213A(b)(1)(B)(vi)(II) of the CBERA.

13. Comment: Five commenters disagreed with the requirement in § 10.844(a)(4)(iv) of the interim regulations (now § 10.844(a)(4)(v)) that a new producer or entity controlling production (one who did not participate in the program during the preceding applicable one-year period) that elects to use the annual aggregation method must first meet an increased value-content percentage during the first year of participation before beginning to receive duty-free treatment during the next applicable one-year period. These commenters maintained that this requirement unjustifiably and unfairly penalizes new entrants to the program and is inconsistent with the language and goals of the HOPE Act.

CBP's Response: CBP believes it is constrained by the statutory language to require that new entrants to the program (in the second through fifth applicable one-year periods) that elect to use the annual aggregation method must first meet an increased value-content percentage during the first year of participation before becoming eligible for preference during the next applicable one-year period. As noted previously in this comment discussion, section 213A(b)(1)(B)(vi)(II) of the CBERA conditions use of the annual aggregation method during each of the second through fifth applicable one-year periods on compliance with the applicable value-content requirement by all qualifying apparel articles of the producer or entity controlling production that are entered during the previous applicable one-year period. A new entrant obviously cannot meet the applicable value-content requirement during the previous applicable one-year period if there was no production (and therefore no entries) during that previous year. As a result of a new entrant's inability to meet the applicable value-content requirement during the previous year, section 213A(b)(1)(B)(vi)(II) of the CBERA requires that apparel articles of the producer or entity controlling production be treated as ineligible for preferential treatment until the year after those articles meet the increased value-content percentage requirement. The statute sets forth no exception to the increased value-content percentage requirement for articles of a new producer or entity controlling production.

CBP notes that in the context of somewhat similar statutory language in section 213(b)(2)(A)(iv)(II) and (III) of the CBERA (19 U.S.C. 2703(b)(2)(A)(iv)(II) and (III)), relating to the preferential treatment of brassieres from designated Caribbean Basin countries under the United States-Caribbean Basin Trade Partnership Act (CBTPA), CBP determined that a new producer or entity controlling production must first establish compliance with a higher value-content percentage (85% rather than 75%) as a prerequisite to receiving preferential treatment ( see § 10.228(b)(2)(i)(G) and Example 7 under § 10.228(b)(2)(ii) of the CBP regulations (19 CFR 10.228(b)(2)(i)(G) and 10.228(b)(2)(ii))). Thus, § 10.844(a)(4)(iv) of the HOPE I Act implementing regulations (now § 10.844(a)(4)(v)) and § 10.228(b)(2)(i)(G) of the CBTPA implementing regulations are consistent in their treatment of new producers and entities controlling production under those programs.

14. Comment: One commenter stated that in the final regulations, § 10.844(a)(4)(iv) (now § 10.844(a)(4)(v)) should clarify that a new producer or entity controlling production that elects to use the individual entry method is not subject to an increased value-content percentage requirement.

CBP's Response: Although Example 2 under § 10.844(a)(4)(iv) (now § 10.844(a)(4)(v)) indirectly addresses this issue, CBP agrees with the commenter that the text of the regulation itself should be amended to reflect that apparel articles of a new producer or entity controlling production electing to use the individual entry method are not subject to the requirement of first meeting the increased value-content percentage as a prerequisite to receiving preferential treatment during the first year of participation in the program or in succeeding years. Therefore, § 10.844(a)(4)(iv) (now § 10.844(a)(4)(v)) is being amended in this final rule document to clarify this point.

15. Comment: Four commenters suggested that § 10.844(c)(3) of the interim regulations should specify the designated beneficiary countries (under the Andean Trade Preference Act, African Growth and Opportunity Act, and Caribbean Basin Trade Partnership Act) that qualify as “eligible countries” for purposes of the HOPE program, rather than merely referring the reader to the HTSUS General Notes under which the designated beneficiary countries are listed. In addition, these commenters stated that this regulation should clarify whether qualifying inputs from these designated beneficiary countries will continue to be eligible under the HOPE program should these other preference programs subsequently expire.

CBP's Response: Section 213A(b)(1)(B)(iii) of the CBERA specifies that certain material and processing costs incurred in the following countries may be counted toward meeting the applicable value-content percentage requirement: (1) The United States; (2) any country that is a party to a free trade agreement with the United States that is in effect on the date of the enactment of the HOPE Act, or that enters into force thereafter; (3) any country designated as a beneficiary country under the CBTPA; (4) any country designated as a beneficiary country under the African Growth and Opportunity Act (AGOA); and (5) any country designated as a beneficiary country under the Andean Trade Preference Act (ATPA).

Only the countries referenced in (2) above (parties to a free trade agreement in effect as of the date of enactment of the HOPE Act) are subject to a specific effective date insofar as determining whether qualifying material or processing costs from such countries may be counted under the HOPE Act. As the countries referenced in (3), (4), and (5) above (relating to CBTPA, AGOA, and ATPA) are not subject to an effective date, CBP believes it was the intent of Congress that a determination regarding a country's status as a beneficiary country under these programs should be made at the time a claim for preferential tariff treatment is filed under the HOPE Act. For example, if a country loses its designated beneficiary country status under one of these programs as of July 1, 2008, material and processing costs incurred in that country may no longer be counted toward meeting the applicable HOPE Act value-content requirement effective for apparel articles entered on or after that date.

With respect to these commenters' suggestion that § 10.844(c)(3) of the HOPE I Act implementing regulations should specify the designated beneficiary countries under the CBTPA, AGOA, and ATPA, CBP prefers not to identify each of these countries in this regulatory provision as changes in their status as beneficiary countries would require repeated amendments to the regulation. CBP believes that the regulation's cross-reference to the listings of designated beneficiary countries in General Notes 11 (ATPA), 16 (AGOA), and 17 (CBTPA) of the HTSUS is sufficient as these listings are easily accessible at http://www.usitc.gov/tata/hts/bychapter/0800gntoc.htm.

16. Comment: One commenter stated that § 10.844(e) of the interim regulations should be amended to include as a “direct cost of processing operation” the cost of packaging materials (such as labels, hangtags, and bags) if such materials are required to be included with the article. This commenter also asked that “direct costs of processing operations” include the cost of any post production procedures, such as mending or finishing that may be needed to present the finished article for sale. According to this commenter, the definition of the term “wholly assembled” in § 10.842(p) of the interim regulations could be interpreted as precluding such operations, contrary to the intent of the statute.

CBP's Response: Because the HOPE Act includes no definition of the words “direct costs of processing operations”, CBP based the definition set forth in § 10.844(e) of the interim regulations on the definition of the same term found in section 213(a)(3) of the CBERA (19 U.S.C. 2703(a)(3)) and § 10.197 of the CBP's CBERA implementing regulations (19 CFR 10.197). CBP believes that determinations regarding whether specific costs not mentioned in § 10.844(e), such as those referenced by the commenter, qualify as “direct cost of processing operations” should best be made on a case-by-case basis pursuant to CBP's administrative rulings program (see part 177 of the CBP regulations (19 CFR part 177)).

17. Comment: Six commenters maintained that § 10.846 of the interim regulations sets forth an unnecessarily strict construction of the statutory “imported directly” requirement, thereby placing untenable restrictions on the process of shipping goods to the United States via intermediary countries, contrary to the intent of Congress. Five of these commenters noted that the “imported directly” rules set forth in § 10.846 are similar to rules applied to certain other preference programs, and that interpretative rulings issued by CBP have concluded that the prohibition relating to the “entry into commerce” of an intermediate country means that the goods may not be “manipulated” in that country. These commenters stated that, by so doing, CBP has not permitted operations (other than loading or unloading or other activities necessary to preserve the goods in good condition) even in a bonded warehouse and even where “the invoices, bills of lading, and other shipping documents show the United States as the final destination.” According to these commenters, this is an incorrect interpretation under the other preference programs and would be particularly so under the HOPE program.

CBP's Response: Although the HOPE I Act included no definition of the term “imported directly”, the HOPE II Act included a definition of “imported directly from Haiti or the Dominican Republic” (see section 213A(a)(3) of the CBERA). Section 10.846 has been amended to conform to this statutory definition.

With respect to the concerns expressed by some of the commenters regarding the correctness of certain administrative rulings issued by CBP interpreting the “imported directly” requirement under the CBERA and other preference programs, CBP does not believe it is appropriate to address these concerns in the context of the HOPE Act implementing regulations. In CBP's opinion, these concerns should properly be addressed through the CBP administrative rulings process (see part 177 of the CBP regulations (19 CFR part 177)).

18. Comment: Three commenters urged that CBP broaden the “imported directly” concept, at least with respect to apparel articles subject to value-added provisions, to permit passage through, and permit operations in, the territory of other HOPE “eligible countries”(as enumerated in § 10.844(a)), as long as the origin-conferring operations are performed in Haiti. These commenters indicated that Congress's intent in setting up this program was to create linkages between Haiti and other HOPE “eligible countries.” Two of these commenters stated that, alternatively, CBP should permit HOPE eligible goods to be exported from the Dominican Republic because of its geographic proximity to, and existing co-production agreements with, Haiti. As an example, one commenter stated that § 10.846 should not be interpreted as prohibiting activities such as screen printing, repairing, and embellishing articles, as well as “warehouse/pack/sticker” activities in the Dominican Republic.

CBP's Response: The HOPE II Act amended the HOPE program to allow eligible textile and apparel articles to be imported directly from Haiti or the Dominican Republic. CBP believes that this change, along with the statutory definition of “wholly assembled in Haiti” included in the HOPE II Act, addresses these commenters' concerns.

19. Comment: Four commenters complained that the declaration of compliance requirement in § 10.848 of the interim regulations is overly restrictive in that it requires that value information be provided with line number and line value specificity. These commenters allege that this is unduly burdensome for the producer when it is filing its own declaration of compliance as the entity controlling production.

CBP's Response: Under the HOPE Act preference program relating to certain apparel articles, meeting the applicable value-content requirement is a prerequisite to qualifying for duty-free treatment. For CBP to be able to properly verify that a producer or entity controlling production has met the applicable value-content requirement when the annual aggregation method is used, it is critical that CBP have access to pertinent value information with respect to all affected entries (and all affected apparel articles covered by those entries) that are filed during the applicable one-year period. Without the information required by the declaration of compliance ( e.g. , entry numbers, line number and value), CBP would be unable to determine, on the basis of submitted documentation, that an annual aggregation calculation satisfies the applicable value-content requirement. If a producer or entity controlling production finds that providing the information required by the declaration of compliance is unduly burdensome, the entry-by-entry method may be used for purposes of satisfying the value-content requirement.

20. Comment: One commenter stated that the requirement in § 10.848 that the declaration of compliance be filed with CBP within 30 days of the end of the applicable one-year period is overly restrictive. This commenter maintained that it will be extremely difficult to obtain actual values within the 30-day time period with respect to entries subject to reconciliation, especially when a fiscal year fails to coincide with the end of the applicable one-year period. Therefore, this commenter asked that § 10.848 include an exception or provisional treatment for filing the declaration of compliance for entries that are subject to reconciliation.

CBP's Response: CBP recognizes that there may be situations in which an importer may not have access to actual values within the 30-day period required for submission of the declaration of compliance in § 10.848(a) of the HOPE Act implementing regulations. In these situations, the declaration of compliance filed with CBP during the 30-day period may reflect estimated values until more accurate value-content figures are known, at which time the importer may amend the declaration. Again, if a producer or entity controlling production finds that providing the information necessary for the submission of a declaration of compliance is unduly burdensome, the entry-by-entry method is available as an alternative to the annual aggregation method.

21. Comment: One commenter was troubled that § 10.848 places the responsibility for submitting the declaration of compliance on the importer, considering that compliance is measured at the level of the producer or entity controlling production. This commenter indicated that it could envision a situation in which an importer is required to certify compliance for a producer “when the producer's total production is not compliant but when the product the importer bought from the producer is.” This commenter inquired regarding what CBP would do if the producer elected to use the individual entry method but the importer used the annual aggregation method, or vice-versa. The commenter urged that CBP shift the responsibility for preparing and filing the declaration of compliance on the producer or entity controlling production “so the importer has greater certainty he is relying upon a known quantity.”

CBP's Response: The commenter is correct that, under the HOPE Act, compliance with the requirements for preferential treatment for apparel articles is addressed in the context of the producer or entity controlling production. However, as is the case with respect to all preferential tariff treatment programs, it is the responsibility of the U.S. importer of the articles for which preference is sought to file the entry with CBP and to make the claim for duty-free treatment under the HOPE Act (see § 10.847 of the HOPE Act implementing regulations). Consequently, it is the importer's responsibility to file the declaration of compliance with CBP under the circumstances set forth in § 10.848 of the implementing regulations.

In regard to the situation envisioned by the commenter in which a producer's total production is not in compliance with the applicable value-content requirement although the portion purchased by the importer is, § 10.848(c)(2)(v) requires that the declaration of compliance include “[t]he value-content percentage that was met during the applicable one-year period with respect to each producer or entity controlling production.” Thus, the importer must obtain and provide to CBP information regarding the value-content percentage that was met with respect to all apparel articles of each producer or entity controlling production that were entered during the applicable one-year period—not just the articles purchased by the importer.

In answer to the commenter's question concerning what CBP would do if the producer elects to use one method for purposes of meeting the value-content requirement but the importer uses the other method, § 10.847(b) of the interim regulations was drafted to prevent such an occurrence. Under this provision, an importer may enter articles using the annual aggregation method only if the importer is in possession of a copy of a certification by the producer or entity controlling production setting forth its election to use the annual aggregation method. In the absence of such a certification, the importer is required to enter the articles using the individual entry method.

22. Comment: One commenter expressed concern that, as currently written, §§ 10.848 and 10.849 would impose upon a customs broker serving as nominal importer of record the responsibility for certifying the eligibility of articles for duty-free treatment under the HOPE Act. According to this commenter, a broker acting as nominal importer of record would be unable to certify or verify the accuracy of the information provided. The commenter stated that the actual importer is the party most knowledgeable regarding the facts and circumstances of the importation and, as such, should be solely responsible for making HOPE Act claims and submitting the declaration of compliance. The commenter recommended that CBP clarify the regulations to distinguish between a broker serving as a nominal importer of record in an import transaction and the actual importer.

CBP's Response: As indicated previously in this comment discussion, it is the responsibility of the importer of record of articles for which preference is sought under the HOPE Act to obtain sufficient information concerning the transaction to know whether the articles meet all applicable requirements and, therefore, are entitled to duty-free treatment. If the importer does not possess that information, no claim for preference under the HOPE Act should be made. In a situation in which a broker serves as nominal importer of record, the broker should either obtain all necessary information from the consignee or other parties regarding whether the articles qualify for preference under the HOPE Act or insist that the owner or producer of the goods act as importer of record for the transaction and be the party responsible for certifying that the articles qualify for preference.

Accordingly, based on the analysis of comments received as set forth above and the additional considerations discussed above, CBP is adopting as a final rule the interim regulations published as CBP Dec. 07-43 with certain changes as discussed above and as set forth below.

Section 553(d)(3) of the Administrative Procedure Act (“APA”) (5 U.S.C. 553(d)(3)), permits agencies to make a rule effective less than 30 days after publication if the rule grants or recognizes an exemption or relieves a restriction, or when the agency finds that good cause exists for dispensing with a delayed effective date. As these regulations implement the tariff preference provisions of the HOPE Act and thus grant an exemption from normal duty rates for qualifying articles, a delayed effective date is not required. Moreover, for this reason, CBP finds that good cause exists to make these regulations effective without a delayed effective date.

This document does not meet the criteria for a “significant regulatory action” as specified in Executive Order 12866 of September 30, 1993 (58 FR 51735, October 1993). In addition, because a notice of proposed rulemaking is not required under section 553(b) of the APA for the reasons described above, CBP notes that the provisions of the Regulatory Flexibility Act, as amended (5 U.S.C. 601 et seq. ), do not apply to this rulemaking. Accordingly, CBP also notes that this rule is not subject to the regulatory analysis requirements or other requirements of 5 U.S.C. 603 and 604.

The collections of information contained in these regulations have previously been reviewed and approved by the Office of Management and Budget in accordance with the requirements of the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1651-0129.

The collections of information in these regulations are in § 10.847 (claim for duty-free treatment) and §§ 10.844(a)(4)(vi) and 10.848 (declaration of compliance). This information is required in connection with certain claims for duty-free treatment under the HOPE Act and will be used by CBP to determine eligibility for preferential tariff treatment under that Act. The likely respondents are business organizations including importers, exporters and manufacturers.

The estimated average annual burden associated with the collection of information in this final rule is 39.2 hours per respondent or record keeper. Under the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number.

This document is being issued in accordance with § 0.1(a)(1) of the CBP regulations (19 CFR 0.1(a)(1)) pertaining to the authority of the Secretary of the Treasury (or his/her delegate) to approve regulations related to certain customs revenue functions.

On July 29, 2008, the President signed into law the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008, Public Law 110-286, authorizing a broad range of new measures against the Burmese regime. Among these measures is a new category of visa inadmissibility, detailed in Section 5(a) of the Act. However, the Act permits the Secretary of State to issue, by regulation, exceptions to Section 5(a), in order for the United States and Burma to operate their diplomatic missions, to allow United States citizens to visit Burma, to permit authorized Burmese to conduct business at the United Nations, or as required by other applicable international agreements. Since diplomatic travel must often be approved in a short time frame, it would be impractical to issue a new regulation for each instance of Burmese diplomatic travel. This rule, then, will allow the Secretary to comply with the regulatory requirement set out in Section 5(f)(2) of the Act while making exceptions to Section 5(a) in accordance with Department of State regulations.

This regulation involves a foreign affairs function of the United States and, therefore, in accordance with 5 U.S.C. 553(a)(1), is not subject to the rule making procedures set forth in 5 U.S.C. 553.

Because this final rule is exempt from notice and comment rulemaking under 5 U.S.C. 553, it is exempt from the regulatory flexibility analysis requirements set forth at sections 603 and 604 of the Regulatory Flexibility Act (5 U.S.C. 603 and 604). Nonetheless, consistent with section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 605(b)), the Department certifies that this rule will not have a significant economic impact on a substantial number of small entities. This rule regulates individual aliens who seek consideration for nonimmigrant visas and does not affect any small entities, as defined in 5 U.S.C. 601(6).

Section 202 of the Unfunded Mandates Reform Act of 1995 (UFMA), 2 U.S.C. 1532, generally requires agencies to prepare a statement before proposing any rule that may result in an annual expenditure of $100 million or more by State, local, or tribal governments, or by the private sector. This rule will not result in any such expenditure, nor will it significantly or uniquely affect small governments.

This rule is not a major rule as defined by 5 U.S.C. 804, for purposes of congressional review of agency rulemaking under the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104-121. This rule will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based companies to compete with foreign based companies in domestic and import markets.

Although this rule is not subject to Executive Order 12866, the Department has reviewed it to ensure its consistency with the regulatory philosophy and principles set forth in the Executive Order, and has determined that the benefits of the rule justify its costs.

This regulation will not have substantial direct effects on the States, on the relationship between the national government and the States, or the distribution of power and responsibilities among the various levels of government. Nor will the rule have federalism implications warranting the application of Executive Orders No. 12372 and No. 13132.

This rule does not impose information collection requirements under the provisions of the Paperwork Reduction Act, 44 U.S.C., Chapter 35.

I. Regulatory History

On May 22, 2006, the Department of Homeland Security (DHS) through the United States Coast Guard (Coast Guard) and the Transportation Security Administration (TSA) published a joint notice of proposed rulemaking entitled “Transportation Worker Identification Credential (TWIC) Implementation in the Maritime Sector; Hazardous Materials Endorsement for a Commercial Driver's License” in the Federal Register (71 FR 29396). This was followed by a 45-day comment period and four public meetings. The Coast Guard and TSA issued a joint final rule, under the same title, on January 25, 2007 (72 FR 3492) (hereinafter referred to as the original TWIC final rule). The preamble to that final rule contains a discussion of all the comments received on the NPRM, as well as a discussion of the provisions found in the original TWIC final rule, which became effective on March 26, 2007.

On May 7, 2008, the Coast Guard and TSA issued a final rule to realign the compliance date for implementation of the Transportation Worker Identification Credential. 73 FR 25562. The date by which mariners need to obtain a TWIC, and by which owners and operators of vessels and outer continental shelf facilities must implement access control procedures utilizing TWIC, is now April 15, 2009 instead of September 25, 2008. Owners and operators of facilities that must comply with 33 CFR part 105 will still be subject to earlier, rolling compliance dates, as set forth in 33 CFR 105.115(e). The Coast Guard will continue to announce rolling compliance dates, as provided in 33 CFR 105.115(e), at least 90 days in advance via notices published in the Federal Register . The final compliance date for all COTP Zones will not be later than April 15, 2009.

Title 33 CFR 105.115(e) currently states that “[f]acility owners and operators must be operating in accordance with the TWIC provisions in this part by the date set by the Coast Guard in a Notice to be published in the Federal Register .” Through this Notice, the Coast Guard informs the owners and operators of facilities subject to 33 CFR 105.115(e) located within COTP Zones Honolulu, Prince William Sound, Southeast Alaska, and Western Alaska that the deadline for their compliance with Coast Guard and TSA TWIC requirements is February 12, 2009.

The TSA and Coast Guard have determined that this date provides sufficient time for the estimated population required to obtain TWICs for these COTP Zones to enroll and for TSA to complete the necessary security threat assessments for those enrollment applications. We strongly encourage persons requiring unescorted access to facilities regulated by 33 CFR part 105 and located in one of these COTP Zones to enroll for their TWIC as soon as possible, if they haven't already. Additionally, we note that the TWIC Final Rule advises owners and operators of MTSA regulated facilities of their responsibility to notify employees of the TWIC requirements. Specifically, 33 CFR 105.200(b)(14) requires owners or operators of MTSA regulated facilities to “[i]nform facility personnel of their responsibility to apply for and maintain a TWIC, including the deadlines and methods for such applications.” Information on enrollment procedures, as well as a link to the pre-enrollment Web site (which will also enable an applicant to make an appointment for enrollment), may be found at https://twicprogram.tsa.dhs.gov/TWICWebApp/ .

You may also visit our Web site at homeport.uscg.mil/twic for a framework showing expected future compliance dates by COTP Zone. This list is subject to change; changes in expected future compliance dates will appear on that Web site. The exact compliance date for COTP Zones will also be announced in the Federal Register at least 90 days in advance.

The NFIP enables property owners to purchase flood insurance which is generally not otherwise available. In return, communities agree to adopt and administer local floodplain management aimed at protecting lives and new construction from future flooding. Section 1315 of the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage as authorized under the NFIP, 42 U.S.C. 4001 et seq. ; unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed in this document no longer meet the statutory requirement for compliance with program regulations, 44 CFR Part 59. Accordingly, the communities will be suspended on the effective date in the third column. As of that date, flood insurance will no longer be available in the community. However, some of these communities may adopt and submit the required documentation of legally enforceable floodplain management measures after this rule is published but prior to the actual suspension date. These communities will not be suspended and will continue their eligibility for the sale of insurance. A notice withdrawing the suspension of the communities will be published in the Federal Register .

Previously, FEMA identified the Special Flood Hazard Areas (SFHAs) in these communities by publishing a Flood Insurance Rate Map (FIRM). The date of the FIRM, if one has been published, is indicated in the fourth column of the table. No direct Federal financial assistance (except assistance pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act not in connection with a flood) may legally be provided for construction or acquisition of buildings in identified SFHAs for communities not participating in the NFIP, if they have been identified as having floodprone areas on the initial FEMA flood map for the community for more than a year (section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against certain types of Federal assistance becomes effective for the communities listed on the date shown in the last column. The Administrator finds the notice and public comment under 5 U.S.C. 553(b) are impracticable and unnecessary because the communities listed in this final rule have been adequately notified.

Each community receives 6-month, 90-day, and 30-day notification letters addressed to the Chief Executive Officer stating the community will be suspended unless the required floodplain management measures are met prior to the effective suspension date. Since these notifications were made, this final rule may take effect within 30 days.

National Environmental Policy Act. This rule is categorically excluded from the requirements of 44 CFR Part 10, Environmental Considerations. No environmental impact assessment has been prepared.

Regulatory Flexibility Act. The Administrator has determined this rule is exempt from the requirements of the Regulatory Flexibility Act because the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed no longer comply with the statutory requirements, and after the effective date, flood insurance will no longer be available in the communities unless remedial action takes place.

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

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

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

Paperwork Reduction Act. This rule does not involve any collection of information for purposes of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

The modified BFEs are not listed for each community in this interim rule. However, the address of the Chief Executive Officer of the community where the modified BFE determinations are available for inspection is provided.

Any request for reconsideration must be based on knowledge of changed conditions or new scientific or technical data.

The modifications are made pursuant to section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq. , and with 44 CFR part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required to either adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified BFEs, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by the other Federal, State, or regional entities. The changes BFEs are in accordance with 44 CFR 65.4.

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

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

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

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

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

The Capital Construction Fund allows a deferral of federal income tax provided that the amount of the tax deferral is deposited into a fund to be used for the purpose of acquiring, constructing or reconstructing U.S.-built, U.S.-documented vessels. Such vessels are called “qualified vessels,” and they must be operated in the United States foreign, Great Lakes or noncontiguous domestic trade. On December 19, 2007, the President signed Public Law 110-140, the Energy Independence and Security Act of 2007, which contains Title XI—Energy Transportation and Infrastructure, Subtitle C—Department of Transportation, authorizing the creation of a new Short Sea Transportation Program. The Short Sea Transportation Program establishes an expanded definition of a qualified vessel under the Capital Construction Fund. Public Law 110-140 also expands the trade permitted to qualified vessels by allowing qualified vessels to operate in the short sea transportation trade in addition to the other trades presently permitted. Since Public Law 110-140 specifically defines “short sea transportation trade,” this final rule merely amends the existing regulation by including the statutory definition and making other conforming changes. Separately, Congress enacted Public Law 109-304 to complete the codification of Title 46, United States Code. This statute restated section 607 of the Merchant Marine Act, 1936, without substantive change. Section 607 is now section 53501, et seq. This final rule updates the statutory references in the regulation to conform to the new codification.

This rulemaking is not significant under section 3(f) of Executive Order 12866 and as a consequence, OMB did not review the rule. This rulemaking is also not significant under the Regulatory Policies and Procedures of the Department of Transportation (44 FR 11034; February 26, 1979). It is also not considered a major rule for purposes of Congressional review under Public Law 104-121. The Maritime Administration believes that the economic impact of this rulemaking is so minimal as to not warrant the preparation of a full regulatory evaluation. This rulemaking amends the definition of a qualified vessel to conform to the newly enacted statute.

We have analyzed this rulemaking in accordance with the principles and criteria contained in Executive Order 13132 (“Federalism”) and have determined that it does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. The regulations have no substantial effects on the States, the current Federal-State relationship, or the current distribution of power and responsibilities among various local officials. Therefore, consultation with State and local officials was not necessary.

Executive Order 13175—Consultation and Coordination with Indian Tribal Governments, dated November 6, 2000, seeks to establish regular and meaningful consultation and collaboration with tribal officials in the development of Federal policies that have tribal implications, to strengthen the United States government-to-government relationships with Indian tribes, and to reduce the imposition of unfunded mandates upon Indian tribes. Executive Order 13175 does not apply to this regulation as it does not affect, directly or indirectly, Indian tribes.

The Regulatory Flexibility Act requires us to assess the impact that regulations will have on small entities. After analysis of this final rule, the Maritime Administrator certifies that this final rule will not have a significant economic impact on a substantial number of small entities.

This final rule will not impose an unfunded mandate under the Unfunded Mandates Reform Act of 1995. It will not result in costs of $100 million or more, in the aggregate, to any of the following: State, local, or Native American tribal governments, or the private sector, and is the least burdensome alternative that achieves this objective of U.S. policy. Department of Transportation guidance requires the use of a revised threshold figure of $136.1 million, which is the value of $100 million in 2008 after adjusting for inflation.

We have analyzed this final rule for purposes of compliance with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq. ) and we have concluded that, under the categorical exclusions provision in section 4.05 of Maritime Administrative Order (MAO) 600-1, “Procedures for Considering Environmental Impacts,” 50 FR 11606 (March 22, 1985), neither the preparation of an Environmental Assessment, an Environmental Impact Statement, nor a Finding of No Significant Impact for this rulemaking is required. This final rule does not change the environmental effects of the current Capital Construction Fund program. This final rule implements a definition of a qualified vessel for the Capital Construction Fund. This rulemaking will not result, either individually or cumulatively, in a significant impact on the environment.

This rule does not establish a new requirement for the collection of information. Thus, the Office of Management and Budget (OMB) will not be requested to review and approve the information collection requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq. ).

A regulation identifier number (RIN) is assigned to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. The RIN number contained in the heading of this document can be used to cross-reference this action with the Unified Agenda.

You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (Volume 65, Number 70; Pages 19477-19478) or you may visit http://www.regulations.gov.

Background

The Commission published a document in the Federal Register on November 9, 2006, 71 FR 65743, summarizing the Commission's Report and Order in WC Docket No. 02-313, released August 21, 2006. The Report and Order included drafting errors regarding where to send comments on the proposed discontinuance, reduction, or impairment of domestic service by a common carrier. On September 17, 2008, the Commission published an erratum correcting the drafting errors.

As published, the final regulations contain errors in the Commission's zip code.

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. Where there is no substantially similar U.S.-certified motor vehicle, 49 U.S.C. 30141(a)(1)(B) permits a nonconforming motor vehicle to be admitted into the United States if its safety features comply with, or are capable of being altered to comply with, all applicable FMVSS based on destructive test data or such other evidence as the Secretary of Transportation decides to be adequate.

Under 49 U.S.C. 30141(a)(1), import eligibility decisions may be made “on the initiative of the Secretary of Transportation or on petition of a manufacturer or importer registered under [49 U.S.C. 30141(c)].” The Secretary's authority to make these decisions has been delegated to NHTSA. The agency publishes notice of eligibility decisions as they are made.

Under 49 U.S.C. 30141(b)(2), a list of all vehicles for which import eligibility decisions have been made must be published annually in the Federal Register . On October 1, 1996, NHTSA added the list as an appendix to 49 CFR part 593, the regulations that establish procedures for import eligibility decisions (61 FR 51242). As described in the notice, NHTSA took that action to ensure that the list is more widely disseminated to government personnel who oversee vehicle imports and to interested members of the public. See 61 FR 51242-43. In the notice, NHTSA expressed its intention to annually revise the list as published in the appendix to include any additional vehicles decided by the agency to be eligible for importation since the list was last published. See 61 FR 51243. The agency stated that issuance of the document announcing these revisions will fulfill the annual publication requirements of 49 U.S.C. 30141(b)(2). Ibid.

Executive Order 12866, “Regulatory Planning and Review” (58 FR 51735, October 4, 1993), provides for making determinations about whether a regulatory action is “significant” and therefore subject to Office of Management and Budget (OMB) review and to the requirements of the Executive Order. The Executive Order defines a “significant regulatory action” as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or Tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. This rule will not have any of these effects and was not reviewed under Executive Order 12866. It is not significant within the meaning of the DOT Regulatory Policies and Procedures. The effect of this rule is not to impose new requirements. Instead it provides a summary compilation of decisions on import eligibility that have already been made and does not involve new decisions. This rule will not impose any additional burden on any person. Accordingly, the agency believes that the preparation of a regulatory evaluation is not warranted for this rule.

We have not conducted an evaluation of the impacts of this rule under the National Environmental Policy Act. This rule does not impose any change that would result in any impacts to the quality of the human environment. Accordingly, no environmental assessment is required.

Pursuant to the Regulatory Flexibility Act, we have considered the impacts of this rule on small entities (5 U.S.C. 601 et seq. ). I certify that this rule will not have a significant economic impact upon a substantial number of small entities within the context of the Regulatory Flexibility Act. The following is our statement providing the factual basis for the certification (5 U.S.C. 605(b)). This rule will not have any significant economic impact on a substantial number of small businesses because the rule merely furnishes information by revising the list in the Code of Federal Regulations of vehicles for which import eligibility decisions have previously been made. Accordingly, we have not prepared a Final Regulatory Flexibility Analysis.

Executive Order 13132 requires NHTSA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” Executive Order 13132 defines the term “Policies that have federalism implications” to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under Executive Order 13132, NHTSA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or NHTSA consults with State and local officials early in the process of developing the regulation.

This rule will have no 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 as specified in Executive Order 13132. Thus, the requirements of section 6 of the Executive Order do not apply to this rule.

The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies to prepare a written assessment of the costs, benefits and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local or tribal governments, in the aggregate, or by the private sector, of more than $100 million annually. This rule will not result in additional expenditures by State, local or tribal governments or by any members of the private sector. Therefore, the agency has not prepared an economic assessment pursuant to the Unfunded Mandates Reform Act.

Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ), a person is not required to respond to a collection of information by a Federal agency unless the collection displays a valid OMB control number. This rule does not impose any new collection of information requirements for which a 5 CFR Part 1320 clearance must be obtained. DOT previously submitted to OMB and OMB approved the collection of information associated with the vehicle importation program in OMB Clearance No. 2127-0002.

Pursuant to Executive Order 12988, “Civil Justice Reform,” we have considered whether this rule has any retroactive effect. We conclude that it will not have such an effect.

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

Under the National Technology and Transfer and Advancement Act of 1995 (Pub. L. 104-113), “all Federal agencies and departments shall use technical standards that are developed or adopted by voluntary consensus standards bodies, using such technical standards as a means to carry out policy objectives or activities determined by the agencies and departments.” This rule does not require the use of any technical standards.

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

This rule is not subject to Executive Order 13045 because it is not “economically significant” as defined under Executive Order 12866, and does not concern an environmental, health, or safety risk that NHTSA has reason to believe may have a disproportionate effect on children.

NHTSA finds that prior notice and opportunity for comment are unnecessary under 5 U.S.C. 553(b)(3)(B) because this action does not impose any regulatory requirements. This rule merely revises the list of vehicles not originally manufactured to conform to the FMVSS that NHTSA has decided to be eligible for importation into the United States since the last list was published in September 2007.

In addition, so that the list of vehicles for which import eligibility decisions have been made may be included in the next edition of 49 CFR parts 400 to 599, which is due for revision on October 1, 2008, good cause exists to dispense with the requirement in 5 U.S.C. 553(d) for the effective date of the rule to be delayed for at least 30 days following its publication.